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As you noticed the title of this thread. My query is how much of one's net worth should one invest in the stock market. I am in my late 30's and have currently invested $500,000 in the US index fund(S&P) and have about $100K in my banks savings account. The 100K earns very little to no interest.
I am on the fence if i should invest the rest and keep say only $25-30K for emergency?
I am also wondering if I should go into real estate as well. I am currently renting an apartment but not sure how long would I stay in this place so that is preventing me from purchasing a house or a condo. I am somewhat indecisive as if I were to put the rest in the stock market then I would be all in the stock market but purchasing a property psychologically anchors me down to the location and have to fore go other opportunities that may come. On a side note, house prices are falling/stagnant were I am located currently.
I'd leave the $100k as cash, but look at using most of it to build a CD ladder to get a higher interest rate. I'd put any additional future savings into the market, though, rather than adding to your cash reserves.
If housing prices are stable where you are and you're not 100% sure you're ready for home ownership or are going to stay in the area long-term, I'd suggest continuing to rent. You can always buy a house later, and home ownership comes with its share of headaches and can be a money suck as well as a time suck.
I would say money you might need to spend should be in "cash" and money you do not have a need for in the next five years should be invested. "Cash" can be short term bond funds, CD's etc to get a little extra interest. Should not be in a checking account or savings/mm account.
I do not look at a home as an investment so I would make the decision to buy or not to buy on your life style.
As you noticed the title of this thread. My query is how much of one's net worth should one invest in the stock market. I am in my late 30's and have currently invested $500,000 in the US index fund(S&P) and have about $100K in my banks savings account. The 100K earns very little to no interest.
I am on the fence if i should invest the rest and keep say only $25-30K for emergency?
I am also wondering if I should go into real estate as well. I am currently renting an apartment but not sure how long would I stay in this place so that is preventing me from purchasing a house or a condo. I am somewhat indecisive as if I were to put the rest in the stock market then I would be all in the stock market but purchasing a property psychologically anchors me down to the location and have to fore go other opportunities that may come. On a side note, house prices are falling/stagnant were I am located currently.
please advise.
The stock market is pretty liquid and as long as you aren't invested in high risk or volatile positions, I think it's fine to have the vast majority invested. You just need to be watching it and know when you will sell. For me, I can sell something, call Scottrade, and the next day I'll have a check that I can deposit into my bank account.
If you want to be extra safe, I think you can have 6 month reserve and open an FDIC online savings account such as Ally. I have an account with them and it pays 1.3% which is great, it's almost the same as a CD, but I can take it out whenever.
Whether to buy or property or not is a more challenging question though.
Best to have 6 months of living expenses in cash and invest the rest.
As for real estate, if you're not sure you'll stay in your area then it's best to not buy property. Paperwork alone is a headache and if you want to sell in less than 2 years, you'll have to pay hefty taxes. Another option would be to hire a property manager if you want to rent it out and not live there but that also has its issues.
I would keep 6 months to a year of expenses in an emergency fund depending on how hard you think it would be to find a new job if you lost the one you have now. Unemployment is low, but you are the only one who knows what your employment prospects would look like in the event you lost your job. Fund your emergency account to your comfort level.
At your age, I would be comfortable with the rest in stocks.
Reevaluate when you hit 50 or later.
Don't buy real estate until you are sure you want to stay in the same place for 5 years or longer imo. There could be some places that are exceptions, but presumably you are smart enough to know if you are in one of those places.
The stock market is pretty liquid and as long as you aren't invested in high risk or volatile positions, I think it's fine to have the vast majority invested. You just need to be watching it and know when you will sell. For me, I can sell something, call Scottrade, and the next day I'll have a check that I can deposit into my bank account.
If you want to be extra safe, I think you can have 6 month reserve and open an FDIC online savings account such as Ally. I have an account with them and it pays 1.3% which is great, it's almost the same as a CD, but I can take it out whenever.
Whether to buy or property or not is a more challenging question though.
I agree the stock market is pretty liquid and now is a good time to withdraw but tomorrow may not be(nobody really knows). Depending on the market, it can be down 20-30% and may be that way for many years. I work in oil & gas and currently there are people who have been out of work for more than two years and depending on what goes on in the economy the stock market maybe down as well at that time.
Some make an argument that $20-25K as emergency fund will be enough doesn't hold well with me. I think sometimes end of a job may also be a beginning of a new business idea- again which may require capital so I want to have relatively quick and easy access to my cash.
The question really is about the $100K sitting in my saving account that earns a measly 0.5%. I have seen some online accounts that offer up to 2% but they aren't a lot either. Maybe I think I should just leave things as is and not bother.
I agree the stock market is pretty liquid and now is a good time to withdraw but tomorrow may not be(nobody really knows). Depending on the market, it can be down 20-30% and may be that way for many years. I work in oil & gas and currently there are people who have been out of work for more than two years and depending on what goes on in the economy the stock market maybe down as well at that time.
Some make an argument that $20-25K as emergency fund will be enough doesn't hold well with me. I think sometimes end of a job may also be a beginning of a new business idea- again which may require capital so I want to have relatively quick and easy access to my cash.
The question really is about the $100K sitting in my saving account that earns a measly 0.5%. I have seen some online accounts that offer up to 2% but they aren't a lot either. Maybe I think I should just leave things as is and not bother.
Open an Ally Online Savings Account. There is no minimum and no fees and they pay 1.3% and you can do a direct deposit or withdrawal from any checking account with your primary bank. It's better than sitting in an account getting 0.5%. Ally is also FDIC. I spoke more about this on a different thread, but if you are afraid of losing 20-30% and own a market index/fund like SPY, then just get out when it closes below the 200 day moving average, which as of now is about 8%.
As you noticed the title of this thread. My query is how much of one's net worth should one invest in the stock market. I am in my late 30's and have currently invested $500,000 in the US index fund(S&P) and have about $100K in my banks savings account. The 100K earns very little to no interest.
I am on the fence if i should invest the rest and keep say only $25-30K for emergency?
I am also wondering if I should go into real estate as well. I am currently renting an apartment but not sure how long would I stay in this place so that is preventing me from purchasing a house or a condo. I am somewhat indecisive as if I were to put the rest in the stock market then I would be all in the stock market but purchasing a property psychologically anchors me down to the location and have to fore go other opportunities that may come. On a side note, house prices are falling/stagnant were I am located currently.
please advise.
Depends what your monthly nut is. The generic advice is 3-6 months, some people say a year. $100,000 is likely excessive but it all depends. I'm not worried about losing my job. I can just go across the street and get another one tomorrow, after all, but there's things like sickness/injuries and at any given time I've also got around $5,000-$10,000 in receivables in the pipeline. I stick to around $10,000 in the savings account plus whatever there's Uncle Sam's quarterly payments.
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