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Do you think it's a bad idea to invest your nest egg? I'm probably going to have about $10K in savings (up from nothing) in the next 6 months with my future bonus and my tax refund and what I'm putting away right now. I'm not really scared of market fluctuations, and I know better than to take money off the table just because the market is down. I do not market time. I invest in index funds and tend to hold them for the long term. Given it's so easy to access one's account, I was thinking it would make sense to invest say 75% of my nest egg (leave myself a few thousand in my savings for emergencies).
I just like the idea of putting my money to work if I have a nice chunk of it. And yeah, I know about tax consequences for trading - my nest egg, beyond the first few thousand dollars that I'll keep in cash, will not be touched for ANY reason that falls short of a massive disaster in my life. I'm not really looking to play in the market - I just want to add a little oomph to things. I've already got a pretty healthy 401k, so this isn't my retirement fund.
So I guess I have two questions:
1) Should I put it in a bond fund or a stock fund? I'd probably either go with a total market equity ETF or a Treasury ETF, and maybe target a particular maturity segment depending on where risk sentiment is. And yes, I prefer ETFs because if I do have a genuine emergency, I want to be able to exit it quickly. Or do you think munis would be a good idea, given the tax-free income? I think the diversification into munis might be a good idea given they don't make sense in a tax-advantaged account.
2) What type of account would be best? Something like TD Ameritrade or something more like the Acorn app? My dad's TD Ameritrade account came with checks that he could write on the account, but I don't know if that's standard.
And yes, I know $10K isn't a huge amount of savings, but if I suddenly lost my job, it would be enough to keep me afloat for a while once I went into austerity mode. Putting $7K of that (and any future savings) into a trading account where I wouldn't do much trading seems like a good place to start regarding non-retirement investments.
I am 100% in equities. I own my house free and clear, have a home equity line of credit that I look at as my "emergency fund" that I have never tapped into. Am I out of line with this thinking?
I would wait to invest until you have at least six months of living expenses saved up. What if you lose your job during a market downturn? You may not have as much in your taxable account as you need.
Once you've got that emergency fund, I'd probably invest the rest into a blended fund such as Wellington or Welsley (Vanguard) depending on what AA makes sense for you. You could also go all stocks with one of their market index funds.
Do you think it's a bad idea to invest your nest egg? I'm probably going to have about $10K in savings (up from nothing) in the next 6 months with my future bonus and my tax refund and what I'm putting away right now. I'm not really scared of market fluctuations, and I know better than to take money off the table just because the market is down. I do not market time. I invest in index funds and tend to hold them for the long term. Given it's so easy to access one's account, I was thinking it would make sense to invest say 75% of my nest egg (leave myself a few thousand in my savings for emergencies).
I just like the idea of putting my money to work if I have a nice chunk of it. And yeah, I know about tax consequences for trading - my nest egg, beyond the first few thousand dollars that I'll keep in cash, will not be touched for ANY reason that falls short of a massive disaster in my life. I'm not really looking to play in the market - I just want to add a little oomph to things. I've already got a pretty healthy 401k, so this isn't my retirement fund.
So I guess I have two questions:
1) Should I put it in a bond fund or a stock fund? I'd probably either go with a total market equity ETF or a Treasury ETF, and maybe target a particular maturity segment depending on where risk sentiment is. And yes, I prefer ETFs because if I do have a genuine emergency, I want to be able to exit it quickly. Or do you think munis would be a good idea, given the tax-free income? I think the diversification into munis might be a good idea given they don't make sense in a tax-advantaged account.
2) What type of account would be best? Something like TD Ameritrade or something more like the Acorn app? My dad's TD Ameritrade account came with checks that he could write on the account, but I don't know if that's standard.
And yes, I know $10K isn't a huge amount of savings, but if I suddenly lost my job, it would be enough to keep me afloat for a while once I went into austerity mode. Putting $7K of that (and any future savings) into a trading account where I wouldn't do much trading seems like a good place to start regarding non-retirement investments.
I echo the others: if thats all you're going to have, build it up more till you've got 6 mos emergency fund totally liquid between your brick and mortar account and online savings or mm account. Easy access. Your efund should NOT be concerned with building equity, its going to be lower interest bearing because you may need to lay your hands on it ASAP in the event of an emergency or losing your job. 6 mos is minimum, if you go austerity, it will stretch perhaps to a year. You want it totally liquid.
Then, #1 if you want more or less 100% "safe" invest in bond funds. If you want growth then go to stocks, ETFs (your choice) in stocks for growth.
#2 i would stay away from acorn. If you can come up with $10k per year the way you are now, you dont need acorn. I understand acorn has high fees, as do other such accounts. Fees can eat up your investments.
I would go to fidelity. TDAmeritrade may be fine.
Yes, there used to be investment accounts like your father's where you get checks you can write against the account, like 6 checks per mont; still could be those accounts. I used to have a mm account that way, and would put my BIG bills monies into ( rent, car payment), each weekly paycheck, earn some interest and write the check out each month. I would ONLY do something like that for large amounts, not use it for for everyday checking, unless you typically only write those few checks per month.
Good luck as you plan.
I personally go with aggressive growth stock mutual funds.
But only after efund of 6 months is in place. And dont take from efund unless it IS an emergency situation.
Put the funds in a CD ladder and build it so that you are in the optimal interest rate tier (usually 12-14 months) with one CD maturing every 3 months. The funds will grow about as fast as they can in this low-return era, be 100% safe, can be tapped with only a moderate penalty if needed and can be tapped with no penalty if you can wait until the next rollover.
We did this from about $10k-150k before moving it into a more aggressive investment structure - although to be fair, the money was coming in fairly fast and rates were much better at the time. Still a good "middle step" growth strategy, though.
well, i use the old "80-20" rule when i have extra money.
1. 80% into my emergency fund at my credit union.
2. 20% into my index fund.
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