Author Topic: What would you do with 10k?  (Read 2757 times)

Snartch90

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What would you do with 10k?
« on: February 14, 2017, 05:29:40 PM »
Hello!

I'm Brian, 27, about to move to Boulder, CO. I am new to investing and was hoping to get some advice to get me along the way! I just inherited 10k and I have no clue what to do with it. I just opened a Vanguard account. What would your next steps be?

Thanks!
Brian

Snartch90

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What would you do with 10k?
« Reply #1 on: February 14, 2017, 05:33:02 PM »
MOD NOTE: Duplicate threads merged.
« Last Edit: February 27, 2017, 03:15:57 AM by arebelspy »

FIRE me

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Re: What would you do with 10k?
« Reply #2 on: February 14, 2017, 06:11:55 PM »
Hello!

I'm Brian, 27, about to move to Boulder, CO. I am new to investing and was hoping to get some advice to get me along the way! I just inherited 10k and I have no clue what to do with it. I just opened a Vanguard account. What would your next steps be?

Thanks!
Brian

Hi. Welcome to the forum.

Do you have any high interest debt? If so you should probably pay that off before investing. And take care not to get back into debt.

If you are ok with locking the money up until your 50's, you could put it in VTSAX and have your Traditional IRA funded at $5,000 per year for tax years 2016 and 2017. (That is assuming you qualify for an IRA.) If you're in the 15% tax bracket, you will save $750 in tax both years. Plus possible additional state tax savings.

If you already filed taxes this year, you could file a corrected return and get the extra refund back.

If you plan to FIRE well before your 50's, you could put the $10k into a taxable account at Vanguard. VTSAX would be the standard choice.

DailyGrindFree

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Re: Beginner Investor
« Reply #3 on: February 14, 2017, 06:38:13 PM »
I would start with 100% VTSAX assuming that you are not planning on touching it for a long time. Expense ratio is 0.05%.
I am sure some others would jump in and make suggestions also.
 

nereo

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Re: What would you do with 10k?
« Reply #4 on: February 14, 2017, 06:55:12 PM »
MDM's "investment order" is a good boilerplate for what to do with money (whether it's an inheritance or monthly surplus cashflow)

Quote
WHAT           
0. Establish an emergency fund to your satisfaction           
1. Contribute to your 401k up to any company match           
2. Pay off any debts with interest rates ~5% or more above the 10-year Treasury note yield.           
3. Max HSA             
4. Max Traditional IRA or Roth (or backdoor Roth) based on income level           
5. Max 401k (if 401k fees are lower than available in an IRA, or if you need the 401k deduction to be eligible for a tIRA, swap #4 and #5)           
6. Fund mega backdoor Roth if applicable           
7. Pay off any debts with interest rates ~3% or more above the 10-year Treasury note yield.           
8. Invest in a taxable account with any extra.           
           
WHY           
0. Give yourself at least enough buffer to avoid worries about bouncing checks           
1. Company match rates are likely the highest percent return you can get on your money           
2. When the guaranteed return is this high, take it.           
3. HSA funds are totally tax free when used for medical expenses, making the HSA better than either traditional or Roth IRAs.           
4. Rule of thumb: traditional if current marginal rate is 25% or higher; Roth if 10% or lower; flip a coin in between. See also Traditional versus Roth.
   See Credits can make Traditional better than Roth for lower incomes and other posts in that thread about some exceptions to the rule.
   The 'Calculations' tab in the Case Study Spreadsheet can show marginal rates for savings or withdrawals.
5. See #4 for choice of traditional or Roth for 401k           
6. Applicability depends on the rules for the specific 401k           
7. Again, take the risk-free return if high enough           
8. Because earnings, even if taxed, are beneficial           

ETA: the full thread can be found here.

SwordGuy

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Re: Beginner Investor
« Reply #5 on: February 14, 2017, 07:27:01 PM »
I would start with 100% VTSAX assuming that you are not planning on touching it for a long time. Expense ratio is 0.05%.
I am sure some others would jump in and make suggestions also.
 

Unless I need that money in the next couple of years for some valid purpose, I would google the "JL Collins Stock Series" and read it all the way thru, paying especial attention to the inevitability of major stock market declines.

Then, I would look into the mirror, straight into my eyes, and recite these words from the heart,

"I swear before all-mighty God that I will not panic and sell my stock like a dumbass when the stock market values plummet."

If I realize I actually MEAN what I just said, I would put all 10k in Vanguard's VTSAX fund.


And no, I'm not joking.   

I remember reading that one investment company did a study to determine the demographic characteristics of its most successful investors.

It wasn't male or female, black or white, etc.  It was dead people.   2nd most successful group was people who bought the stock and then forgot about it.  The things both groups have in common are (a) they don't panic and sell when prices drop and (b) they hold the stock for a long time.

Enjoy your new investment!

Oh, if you can put it into a tax sheltered account, even better.   


Aggie1999

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Re: Beginner Investor
« Reply #6 on: February 14, 2017, 08:01:25 PM »
If you haven't already done an traditional IRA or Roth IRA for 2016 and/or 2017 then that is where you should put the money.

MDM

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Re: Beginner Investor
« Reply #7 on: February 14, 2017, 08:54:39 PM »
I just inherited 10k and I have no clue what to do with it. I just opened a Vanguard account. What would your next steps be?
Go through Investment Order to see where I am in that prioritization, then put the $10K to the indicated use.

aschmidt2930

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Re: Beginner Investor
« Reply #8 on: February 14, 2017, 09:17:51 PM »
Hello!

I'm Brian, 27, about to move to Boulder, CO. I am new to investing and was hoping to get some advice to get me along the way! I just inherited 10k and I have no clue what to do with it. I just opened a Vanguard account. What would your next steps be?

Thanks!
Brian

My next steps would be reading everything on this link: http://jlcollinsnh.com/stock-series/

Excellent advice, and you'll be able to follow the forum discussions a lot more accurately after.

soccerluvof4

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Re: Beginner Investor
« Reply #9 on: February 15, 2017, 07:16:27 AM »
^+1 and would likely if not need the money put it all in the VTSAX as well. With that you can get the discounted Admiral shares.

runewell

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Re: Beginner Investor
« Reply #10 on: February 15, 2017, 07:32:12 AM »
The question is a bit more complicated than that.
Will you need this money in the next couple of years as a down payment on a house?  If so I would NOT be throwing it in a mutual fund like VTSAX if you can't afford to lose the money anytime soon.
Also, do you want to have the money on hand as an emergency fund?  That might call for conservative investing.
Do you want to put the money away for retirement?  Then you have to decide if you want to put it in a Roth IRA or something pre-tax.

The decision doesn't have to be complicated, but I think we should know a little more about your situation before doling out advice.

lthenderson

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Re: Beginner Investor
« Reply #11 on: February 15, 2017, 07:54:44 AM »
The best book to answer your question no matter how complex your life is. It reviews various investing strategies depending on your life circumstances. I wish I had read it back when I was your age.

https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore/dp/0470067365