Author Topic: Need advice on how to invest 85K cash  (Read 1796 times)

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Need advice on how to invest 85K cash
« on: September 03, 2016, 02:04:37 PM »
Hello everyone. I'm looking for some opinions on the best way to handle 85K I've managed to save up. I realize this is way too much cash to have on hand, but I've been in an uncertain work scenario the past year and a half. I'm still in the same situation (doing consulting work on temporary contracts) but, have enough of a cash buffer that I'm comfortable getting some/most of it invested. I have already maxed out my IRA and 401K contributions for the year. I was thinking of taking about 50K and opening a Vanguard account, allocating about 60% to US stock 30% International, 10% Bonds. Sound like a good plan? Any opinions and advice are appreciated.

MustacheAndaHalf

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Re: Need advice on how to invest 85K cash
« Reply #1 on: September 03, 2016, 03:09:33 PM »
Allocating 10% bonds could be extreme (age 50-60) or reasonable (age 20-30).  It also depends on when you plan to retire, with 10% bonds being appropriate for decades away from retirement.

You suggested $50,000 invested at Vanguard.  I'd suggest dividing that so you're comfortable with each chunk, and plan on investing regularly until you've bought it.  Something has you waiting on the sidelines already, so getting started is very important.  The question is would you invest $25,000 at once (2 chunks)?  Or $10,000 (in 5 chunks)?   Pick the amount you feel comfortable investing at once, then keep doing it.

Vanguard has lots of low cost funds, and it's hard to make mistakes there.  I'd definitely go with Vanguard.  You can also find low expense ratio funds at Schwab or Fidelity, but they are mixed in with expensive, active funds.

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Re: Need advice on how to invest 85K cash
« Reply #2 on: September 03, 2016, 03:22:56 PM »
Allocating 10% bonds could be extreme (age 50-60) or reasonable (age 20-30).  It also depends on when you plan to retire, with 10% bonds being appropriate for decades away from retirement.

You suggested $50,000 invested at Vanguard.  I'd suggest dividing that so you're comfortable with each chunk, and plan on investing regularly until you've bought it.  Something has you waiting on the sidelines already, so getting started is very important.  The question is would you invest $25,000 at once (2 chunks)?  Or $10,000 (in 5 chunks)?   Pick the amount you feel comfortable investing at once, then keep doing it.

Vanguard has lots of low cost funds, and it's hard to make mistakes there.  I'd definitely go with Vanguard.  You can also find low expense ratio funds at Schwab or Fidelity, but they are mixed in with expensive, active funds.

Thanks for the reply. A little more information: I'm 33 years old, most of my net worth is in this cash. I also have an IRA with Fidelity in the FSTVX fund sitting around 43K right now. No house, no debt, low monthly expenses with and a pretty high income at the moment (though that could change pretty quickly). So all in all, not lighting the early retirement world on fire, but could be worse.

Kwill

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Re: Need advice on how to invest 85K cash
« Reply #3 on: September 03, 2016, 04:45:52 PM »
If you go the Vanguard route, it might not be bad to start with most of the savings in one index fund. That way, you can keep it at admiral shares even if the market drops a little or if you need to withdraw a big chunk at some point (say for a downpayment on a house or else to fund some time between jobs). Admiral shares have lower fees, but you need $10,000 in the fund.

With Vanguard -- probably other places too -- your account there can be linked to your checking account at your bank. So if you want to put more in or take some out, you can transfer it online and have it done in a few days.

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Re: Need advice on how to invest 85K cash
« Reply #4 on: September 03, 2016, 05:08:50 PM »
If you go the Vanguard route, it might not be bad to start with most of the savings in one index fund. That way, you can keep it at admiral shares even if the market drops a little or if you need to withdraw a big chunk at some point (say for a downpayment on a house or else to fund some time between jobs). Admiral shares have lower fees, but you need $10,000 in the fund.

With Vanguard -- probably other places too -- your account there can be linked to your checking account at your bank. So if you want to put more in or take some out, you can transfer it online and have it done in a few days.

Thanks. Any fund in particular or just the VSTAX? I've looked at the Vanguard Target Retirement Funds before, but I'm not sure on what the consensus on them is around here. I like the idea of having a mix of assets in one fund and the rebalancing done automatically, but the expenses may be a little higher on those and I'm not sure if the admiral shares apply to those funds?

Kwill

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Re: Need advice on how to invest 85K cash
« Reply #5 on: September 03, 2016, 05:24:03 PM »
Look first at this page of their top picks: https://investor.vanguard.com/mutual-funds/list#/select-funds/asset-class/month-end-returns

If you look on the right, the average returns over various periods of time are listed. The expense ratio column shows you how much fees are built in. A lot of people here would be looking at VTSAX (total stock market index) or VFIAX (500 index). Those two have the lowest fees, and they also have higher returns than most of the other funds.

The target retirement funds will have higher fees than index funds. Generally here I think most people would recommend index funds instead because those give you more growth and still balance out risk over a range of stocks rather than a few companies.