Author Topic: Need Expert Financial advice moving forward $600k  (Read 2295 times)

Mjkzeus

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Need Expert Financial advice moving forward $600k
« on: February 16, 2018, 01:11:35 AM »
Hi. First post ever. I'm confused and beating my brain to death past year contemplating what moves to do. I have unsuccessfully tried to dabble in the market past 12 months and experienced an issue of selling stocks I purchase after a day or 2 due to anxiety of losing money.
My information is as follows:
40 year old contractor with 2 kids and a working wife.
$175k left on mortgage - House valued at over 350k
$450k in saving account with crap interest.
$50k in physical precious metals.
My wife is 37 and has $110k in her Tiaa account with employer contribution. She makes 40k a year.
My kids both have college funds with that 5 series thing, can't remember but they have about $160k.

I was thinking about paying off my mortgage and buying some Vanguard funds. Maybe allocating $10k per fund. I've done very well as a contractor using my physical and technical skills to prosper so far but am lacking in how to properly proceed forward with my current assets. I was thinking the vanguard mutual funds would be a great way to just purchase and not look at them every darn second of the day. My stock purchases this year were pathetic. I would buy say Apple for example for 167 a share and unload it a day later in a panic if it went down a dollar. Probably sounds ridiculous but it's impacted my way of investing with this fear. Thanks for any suggestions you can over with the info I provided.
Last, my wife was thinking that we could start maxing out her employer contributions with tiaa since we have good amount saved and aren't really that dependent pay check to pay check.

gggggg

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Re: Need Expert Financial advice moving forward $600k
« Reply #1 on: February 16, 2018, 01:57:01 AM »
I would definitely max out the retirement account if you are able to do so. Also think about an IRA if you qualify. You don't sound like the trader type, going by your jitteriness with the market. Most of the advice you'll find on this site will point you towards putting most of your taxable investment money in a S&P 500 fund (perhaps with some total bond market and total international stock thrown in), and just letting it ride through thick and thin. You can also take some investor quizzes on vanguard and other sites that will recommend funds for you, based on your answers.

rxmurphy

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Re: Need Expert Financial advice moving forward $600k
« Reply #2 on: February 16, 2018, 04:47:12 AM »
Please check out the Investment Order sticky at the top of the Investor Alley forum.  https://forum.mrmoneymustache.com/investor-alley/investment-order/. With a family and kids heading to college you need to secure your retirement before dabbling in the market. Only do that with FU money.

Finallyunderstand

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Re: Need Expert Financial advice moving forward $600k
« Reply #3 on: February 16, 2018, 05:48:14 AM »
If youíre that risk averse then almost certainly the best thing for you in my opinion is to pay off your house.  People will say itís not the best way to use your money but clearly you donít like risk.  Nothing wrong with being cautious.  When we paid off our house I found I was not worried about investment gains or losses nearly as much as I was before that.  I realized I had a ton of security and would never not be able to keep a roof over my families head as long as I could cover costs of taxes and utilities. Itís a great feeling and really does provide priceless peace of mind for us.  Iím sure other people have different opinions but that is mine.

Then maybe go into the market a little at a time. 

bwall

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Re: Need Expert Financial advice moving forward $600k
« Reply #4 on: February 16, 2018, 06:59:19 AM »
If youíre that risk averse then almost certainly the best thing for you in my opinion is to pay off your house.  People will say itís not the best way to use your money but clearly you donít like risk.Nothing wrong with being cautious.  When we paid off our house I found I was not worried about investment gains or losses nearly as much as I was before that.  I realized I had a ton of security and would never not be able to keep a roof over my families head as long as I could cover costs of taxes and utilities. Itís a great feeling and really does provide priceless peace of mind for us.

+1

Having a paid off house is great peace of mind.
You are risk averse, which is just fine.

By paying off your house, you get an immediate return of the rate of interest of your mortgage (4%?) on your money. Plus, the added psychological boost of knowing that it belongs to YOU, not the bank. You'll always be able to live there, forever! (or, as long as you want to, whichever comes first).

BTDretire

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Re: Need Expert Financial advice moving forward $600k
« Reply #5 on: February 16, 2018, 07:49:39 AM »
At 40yrs old you still have 45 or 50 years of life.
 If you put 1/2 , or $300,000 in the market and earn 5%, a very conservative number,
you will have $1,300,000 when you are 70yrs old.
 If you leave it at 1% growth, you only have $400,000 after 30 yrs.
 This is even if you add no more money, which you would.
 Maybe you should figure out why you are so risk averse.
 Also most here would not want you to buy individual stocks,
and instead buy total stock market index funds with very low costs.
  I don't know that anyone is an expert re: financial advice,
because the market does what the market does. The only thing you
can show, is that over time, the market has always been always up.
 In 2008/09 I was down over $230,000, I'm sure glad I stayed in the
market. VTSAX specifically.
 Best of luck to you.

 

ChpBstrd

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Re: Need Expert Financial advice moving forward $600k
« Reply #6 on: February 16, 2018, 08:10:15 AM »
Given the years it took to accrue that nest egg, it is almost certainly the case you would be a millionaire by now had you been investing in the stock market rather than a savings account and gold. However, given your "investor psychology" it is also likely the case you would have traded your gains away, buying high and selling low on a roller coaster of emotion. That is a common theme on this forum.

Here are some first steps to either make peace with risk or understand what you should do next:

1) Think about your personality. Do you feel a need to have complete control over your affairs? Is fear your dominant emotion, and do you organize other aspects of life around avoiding it? Do you consume media that stimulate fear - apocalyptic or horror movies, gold advertisements, internet forums predicting doom, etc? Also, what does money mean to you? When your investments' price went down, did you perceive hours of labor wasted? Are you terrified of returning to a "broke" time in your life?

2) Read Benjamin Graham's "The Intelligent Investor", particularly the part about "Mr. Market". This book is ancient, but its continued relevance demonstrates how nothing has really changed in a long time. That's comforting. It's available as an audiobook too.

3) You need a mentor. Consider attending an investment meetup or investing club. For me, it was my grandfather. In my teens and 20's I'd run to the old man during every little correction and ask him what stocks would do next. He always just said, "they'll go back up." My 20 y/o self thought he was bullshitting me, but the thing is, he was never wrong. Even in 2009 on his deathbed, his advice was consistent and correct. It steels my nerves to this day. You need such a person.

4) Dip a toe in. Set aside some "fun money" and put it in VTI, and write yourself a note: "I am willing to lose literally 100% of this money, so I will stay invested no matter what." If that's too much volatility, try the bond funds AGG or LQD, with the same note. Check market prices no more than once a week. Slowly get used to this low-stakes situation over months or years.

5) Observe the non-investment losses all around you. Dinner at a restaurant -$50. Cable -$70. Excess vehicle depreciation -$125. Manufactured trash-of-the-future purchased from the store -$250. If your cell phone (which is also bleeding capital) quoted these losses daily and the financial media talked about these "wipeouts" your financial fear would be oriented elsewhere. Perhaps the funds are as safe or safer in out-of-reach investments than being a debit swipe from loss?

6) A lot of people on this forum who don't deal well with market volatility get into rental properties. As a contractor, this might be a good fit for you too, although the yields are much lower when you consider the time investment. The main benefit is not watching your real estate oscillate in market value. Still, the risks are more controllable and understandable. Analyze your options using the spreadsheet provided in the sticky post of the landlording section.

NoStacheOhio

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Re: Need Expert Financial advice moving forward $600k
« Reply #7 on: February 16, 2018, 08:29:21 AM »
You have a lot of cash sidelined.

If you haven't read it yet.  Please take a look at the JL Collins stock series.

http://jlcollinsnh.com/stock-series/

This.

jc4

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Re: Need Expert Financial advice moving forward $600k
« Reply #8 on: February 16, 2018, 09:50:25 AM »
Simple answer: Open a betterment account. Dump all your savings (except the tiaa) there. Use the allocation they reccomend. They'll handle all the diversification you need, and you can be VERY hands off. That's what you need. As far as investments go, betterment's going to be at the safe end of the decent return options.

Some other notes:

$175k left on mortgage - House valued at over 350k
What's the interest rate? If it's under 4% you're probably better off keeping it. If you're at 5%-7%, paying it off could be a good financial decision (along with the obvious emotion benefit)
Quote
$450k in saving account with crap interest.
Plan to invest almost all of this over the course of 2018. Consider this year the year you get comfortable with investments. Don't stress over making a decision tomorrow. Maybe leave $50k in savings if you need to, to be able to not stress. 
Quote
$50k in physical precious metals.
Plan to sell these. Most here agree that they're not a good savings vehicle. Gold is touted as safe when money fails. But if we hit a worldwide situation where somehow money's no longer valuable, you're gonna want stuff like grain and water stocked up, not gold.
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My wife is 37 and has $110k in her Tiaa account with employer contribution. She makes 40k a year.
Well done. MAX THIS is the right answer. As a phase 2 effort: look at the expense ratios of the funds in the account. A vanguard or target date fund are probably your best bets. You can make a seperate post to ask whether you're making the best use of this.
Quote
My kids both have college funds with that 5 series thing, can't remember but they have about $160k.
You may want to stop funding this soon. Unless your kids are going to go to high-tier, out of state, private, etc colleges, you're getting close to the max they can pull. $20k/yr for college should be plenty. But if you have an idea of where your kids would go, check the cost, and set an upper bound on this. From what I understand, there are problems once you over-contribute to these.

Don't worry about spreading it across a lot of funds. The point of a fund is that you're already buying a variety. More funds will raise your anxiety. Pick 1-2 and stick with it.


MustacheAndaHalf

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Re: Need Expert Financial advice moving forward $600k
« Reply #9 on: February 16, 2018, 10:07:16 AM »
I'd suggest getting your wife involved with these decisions.  I've seen at least two studies that show women, because they don't meddle with investments as much, actually do better in the market.  Buying and selling often is usually the wrong move.

Where are you getting your information about the stock market?  It sounds like you're buying individual stocks, which are not well diversified.  It's much better to buy the entire market.  Even if you lost some money - so is everyone else, because you own a piece of the entire market.  Vanguard Total Stock Market is a good example.

There's a very short book called "The Investment Answer" that you might benefit from reading.  It covers the basics and uses a lot of stock market history for it's main points.  Whatever book or information you decide to use, I'd suggest this be a shared activity with your spouse.  You need someone to calm your nerves when you're about to sell - otherwise it will almost certainly take you longer to accumulate a retirement nest egg.

You might even consider buying a "target date" fund in your taxable account.  Right now you're about 27 years from retirement or so, so you might buy Vanguard Target 2045.  You need something that you can trust, and that doesn't fluctuate so much that it triggers anxiety.

Paying off the mortgage is probably a better idea than keeping your assets in cash.  It may also reduce your expenses - and your anxiety level.  If you see that you can pay the bills with less money, you might not be as anxious about the market movements.

And try and avoid watching the market too often.  It's a very bad practice, and could contribute to your anxiety.  That includes shows about stocks and markets.

Rob_bob

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Re: Need Expert Financial advice moving forward $600k
« Reply #10 on: February 16, 2018, 11:51:38 AM »
I would be more concerned with the gold than stocks, stock funds not individual stocks mind you.  Using rough numbers I owned some gold years ago.  It went down about 50% and took about 20 years to break even, not counting the cost of inflation.

How would you feel about that?

CorpRaider

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Re: Need Expert Financial advice moving forward $600k
« Reply #11 on: February 16, 2018, 12:05:33 PM »
You might need to pay a financial advisor to help keep you from making rash/poor decisions.  If that would work for you, the fee might be worth the weight in bitcoin.  Alternatively, some people are better able to hang in target date funds, versus other options.  Maybe because they believe the funds are allocated and rebalanced to roughly fit an age/profile. 

I think it helps also to try and orient yourself to real (after inflation returns).  If there is inflation, sitting in cash is guaranteed to lose you purchasing power over time.  It makes that option a bit less attractive.

Or you might need to just be a real estate investor.  You're a contractor and can't stand quotation volatility so that might be a good fit. 

You could also get some savings bonds to at least try and keep up with inflation. 

Even an annuity might be a decent option for you if you cannot deal with volatility.  I think you can get some through vanguard that probably won't rip you off as badly as some other options.
« Last Edit: February 16, 2018, 12:14:33 PM by CorpRaider »

Bicycle_B

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Re: Need Expert Financial advice moving forward $600k
« Reply #12 on: February 20, 2018, 07:20:06 PM »
Hi, Mjkzeus.  Well done on reaching out, and accumulating money in a society where millions of people's jobs are basically to suck that money right back out of your bank account.

You've been getting great advice.  I support all of it!

Fwiw, there are studies that show real estate on average does get returns roughly equal to the stock market, and does also go up and down less.  It's a business, though - if you invest in it, you have risk there too unless you learn the business as well as the other guy, or better. 

In your shoes, I'd:
1. Pay off the mortgage, that's a hell of a lot better than $ sitting in the bank.
2. Leave $100,000 in the bank and invest the rest in mutual funds at the investment company Vanguard.  Cheap, trustworthy - I'm a customer.  I'd put 2/3 in a basic stock fund like VTSAX (they have a bunch of choices, this is a very middle of the road one) and 1/3 in a basic bond fund like VTIIB (again middle of the road).  You can Google these.
3. Make a pledge to your wife not to make changes more than once a year.  Never make changes because of news that the market is up or down, only because of changes in your own life.  This will keep you from making fearful mistakes.  Financially it's a very efficient strategy.
4. Every year, "rebalance."  This means add up the value of both funds, and then buy or sell whatever amount is needed to bring them back to where they are 2 parts stock to 1 part bonds.  This trick gives you a systematic way to always have a reasonable balance of each.  In the long run, you buy cheap and sell high, very safely. 
5. After 5 years, when I became more confident, I'd take $75,000 of the $100,000 and add it to the Vanguard funds.  You should really do this now, but slower steps will feel safer and work out fine.

If you get a paid financial advisor, here are a couple of suggestions.
6. Get a "fee paid" one.  You pay them a fixed fee, such as $600 or $1000 or whatever, instead of them getting commissions from products that they sell you.  The commissions and hidden fees on "free" advice from investment professionals would probably cost more than the fixed fee.  Example - I have a parent whose accounts were at Edward Jones.  Edward Jones' commissions and fees on the parent's accounts were more than $2,000 per year. 
7.  Ask the advisor if are a fiduciary, and would have a fiduciary relationship with you.  A fiduciary is someone who is legally bound to act in your best interest.  Many advisors are not fiduciaries.  A non-fiduciary can legally rip you off!
« Last Edit: February 20, 2018, 07:23:28 PM by Bicycle_B »

Car Jack

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Re: Need Expert Financial advice moving forward $600k
« Reply #13 on: February 21, 2018, 12:35:57 PM »
You sound like me years ago.  I "dabbled in stocks" until I lost my shirt in them.  That cured me but also made me ultra conservative.  Fortunately, I didn't see my 401k as "stocks" and randomly chose some from every fund, which isn't the best way to go about it but worked better than all in stable value fund.

I paid off all of my debts and then my mortgage.  That free'd up a lot of extra money.  With all this extra money, I started buying US Savings bonds.  That actually has worked out for me as I've now got a son in college and can cash some in every year tax free.

Beyond that, I'd recommend reading any of the books by John Bogle and learn about the "3 fund portfolio".