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We have a bit over $100k sitting around collecting dust. The majority of it can be invested for a long term (10+ yrs). Is this the best time to invest or is it better to wait for a correction?
Thanks
Generally speaking, lump sum investing will beat waiting for a "good time" to invest or dollar cost averaging over time. Of course, the problem with that is there are no guarantees.
I think the standard boring advice I always gives applies here...invest in a balanced mutual fund that owns a mix of stocks and bonds. The bond portion of the fund will cushion the blow if stocks tank.
Any of the below funds would be great. Below average expenses and excellent returns.
T. Rowe Price Capital Appreciation
Mairs & Power Balanced
Vanguard Wellington
Dodge & Cox Balanced
Turning your money over to an investment house may not be a wise decision. They will collect a fee and have no losses if your investments don't work out. As a group, investment advisors have repeatedly proven themselves to be idiots. You chances of picking a good one are minimal.
Next I wonder about the $100k you have sitting around and don't need. I hope this was some sort of recent inheritance or other windfall. If this is money you have had for quite a while, well you missed lots of appreciation. There is no reason to miss more but this is also starting to again become a risky time for investors. The stock market has done really well. For many of us, this is the time to start selling back. The best strategy is usually to sell when the market rises and buy when it sinks. In the past when it was time to sell stocks, that usually meant converting those investments into bonds. Unfortunately the bond market is very risky at this time. Interest rates have been very low and bond yields are low. Even worse, eventually interest rates will go up and that will lower the value of bonds. If you keep towards short term or very short term bond funds, the risk will be minimal. Unfortunately the returns will also be minimal.
Of course there are other investment choices including gold, other metals and commodities. All are much riskier than stocks and bonds and it is much harder to understand this and much harder to invest wisely.
Collect investment options from a variety of sources. Diversify. Don't buy individual stocks and bonds, buy diversified mutual funds. I would recommend heavily weighting towards low risk investments such as short term bond funds. Also include stock funds. If the stock market continues to advance, don't get greedy. Leave your investments alone. If the stock market starts a significant and consistent downward trend, that will be the time to start buying. Think about buying at the rate of about 5% of your available funds per month. Consistently buying when the market declines and/or selling when it increases, has been called rebalancing. You can also buy "balanced" funds which are rebalanced automatically. These funds often have low management fees. Don't pay additional money to have an investment house manage your portfolio.
Turning your money over to an investment house may not be a wise decision. They will collect a fee and have no losses if your investments don't work out. As a group, investment advisors have repeatedly proven themselves to be idiots. You chances of picking a good one are minimal.
Next I wonder about the $100k you have sitting around and don't need. I hope this was some sort of recent inheritance or other windfall. If this is money you have had for quite a while, well you missed lots of appreciation. There is no reason to miss more but this is also starting to again become a risky time for investors. The stock market has done really well. For many of us, this is the time to start selling back. The best strategy is usually to sell when the market rises and buy when it sinks. In the past when it was time to sell stocks, that usually meant converting those investments into bonds. Unfortunately the bond market is very risky at this time. Interest rates have been very low and bond yields are low. Even worse, eventually interest rates will go up and that will lower the value of bonds. If you keep towards short term or very short term bond funds, the risk will be minimal. Unfortunately the returns will also be minimal.
Of course there are other investment choices including gold, other metals and commodities. All are much riskier than stocks and bonds and it is much harder to understand this and much harder to invest wisely.
Collect investment options from a variety of sources. Diversify. Don't buy individual stocks and bonds, buy diversified mutual funds. I would recommend heavily weighting towards low risk investments such as short term bond funds. Also include stock funds. If the stock market continues to advance, don't get greedy. Leave your investments alone. If the stock market starts a significant and consistent downward trend, that will be the time to start buying. Think about buying at the rate of about 5% of your available funds per month. Consistently buying when the market declines and/or selling when it increases, has been called rebalancing. You can also buy "balanced" funds which are rebalanced automatically. These funds often have low management fees. Don't pay additional money to have an investment house manage your portfolio.
I agree with most of what you wrote except stocks and bonds being less risky than gold. I have the completely opposite view and look at gold and silver as the safest investments period.
bonds = backed by the country that issues it, is not limited in qty, and the architecture of the system always ends in failure because of the design of the money system. bonds are debt, a future promise to pay. Cash is a debt instrument, and a promise to pay in the future. It is also increased at an exponential rate because of bonds paying interest.
gold and silver ARE FINAL PAYMENTS. They settle debt, like that of other products. A bond and cash when given to someone are nothing, they seek something else in the future for this promise to pay. gold and silver are final payments and money chosen by the free market. Its not traded like it used to in the past, but it might perhaps in the future.
Just step back and do a little research.
100X paper market to physical market.
Stocks and bonds manipulated up. (interest rates low, governments buying debt)
China is buying physical bullion, india was, but government outlawed it, why would they do that?
China's government is buying physical bullion, no more government debt. they are going to move 2-4 trillion dollars to buy gold, the gold market is measured in billions.
Gold leasing, how much is leased?
All these countries are asking for their gold back.
Germany is one of them, takes 7 years to get it back?
8,000 tons of gold is worth $308.6 billion dollars (at current price), if we do have this gold. we have close to $4 trillion in M0 base money, it was only 800 billion in 2007/8. This is a signal of the end of a currency?
many many more.
Gold isn't as golden as boosters like to say it is. Gold is just any other commodity. It is only worth as much as the market deems it to be. And the market has not been kind to gold the past year. I expect gold to drop to 900 USD / oz before the end of next year. The market's appetite for risk has clearly shifted to stocks the past year, specifically domestic stocks of all stripes (basically even if you invested in the bluest of the blue chips you would have seen a healthy appreciation this year). I don't care if there's 10^23 dollars in circulation, if the market deems it worth only $500 / oz, it's only $ 500 / oz, inflation or not.
Anyway, that said, a lump sum investment in one market probably not the wisest course of action. Here is what I would do:
Open a Roth IRA and contribute to the maximum for 2013 and wait a month and a half for the new year, then max out 2014's as well. Not just for you, but you and your spouse. Invest in a S&P500 fund, an emerging markets fund, a bond fund, and that's it. Reinvest dividends. And just let it SIT. Contribute to the IRAs with your own money from then on out.
If you can, also open up a traditional IRA and follow a similar strategy.
Then pay down your debts. 78k (after the 22k for the Roth is taken into account) will go an awful long way to paying down a house. That is interest you save when you go to sell. Don't own a home? Consider buying now as Millennials and Boomers alike are moving into smaller homes (Boomers to downsize, Millennials for their first homes) which will push up their prices. That's roughly 190 million people of the USA - more than half the population. So either buy a smaller home in a nice stable area and flip it or live in it yourself. Or you can buy a larger home and bank that one day Millennials will need yards for their kids and dogs, and move to the burbs (I suspect the recent "move back to the city" trend will reverse itself).
Regardless of your house situation, if you choose not to dump it into that, the remainder you can invest in a taxable account, and invest in the same funds.
If you do want to invest in gold, or silver, or any commodity, as I think any portfolio should, ask yourself how much risk are you willing to carry? I'd invest no more than 5000 into all commodities combined, especially ones that move a lot like silver or oil.
G-fused- expect to pay a management fee of at least 1% at Merrill. A $100K account is very small for Merrill, doubtful you will receive the kind of management your expecting. Bale002 is exactly correct about the timing issue- now would be a good time to average in rather than lump sum. With the dollar amount you are talking about and obviously not knowing your entire situation, you may want to investigate setting up a proper asset allocated portfolio based on index funds and dollar cost average in to the folio. It will be a lower expense and typically indexing beats the majority of money managers out there, if your going to pay higher fees than you better receive higher returns although that does not always happen.
My own 2cents about the market- valuations are higher/ expectations are greater/ odds of the bull going higher is less and less and fed tapering will have to begin at some time. At some point in time we will discover whether this experiment has truly worked or not.
Personally, I think the signs are there for a market correction around the 1st Q of 2014. There's a lot of irrational exhuberance that I don't like. If it were me, I'd wait until after the correction to invest...buy low, sell high. Stocks right now are very high without any real basis for their prices. You'd be buying high..right now feels a lot like 2008 right before the crash.
Personally, I think the signs are there for a market correction around the 1st Q of 2014. There's a lot of irrational exhuberance that I don't like. If it were me, I'd wait until after the correction to invest...buy low, sell high. Stocks right now are very high without any real basis for their prices. You'd be buying high..right now feels a lot like 2008 right before the crash.
For there to be a real correction in Q1, holiday sales would have to miss targets. I don't see that happening because this season so far has been the busiest I have ever seen. I'm not sure about other areas around the country, which is why I started a thread about it.
How does it feel like 2008? I work as a real estate agent and a loan officer. People are buying with cash, large down payments and with good savings and income that is actually verified. It is night and day compared to 2008. If another crash happens in the short term, it won't be from another housing bubble.
Chinese are buying property left and right in various towns and they tend to flock together and stick to the coasts. I'd avoid that.
Car debt swaps are the new boogeyman in the debt markets. That and student debt. Aircraft too (looking at Airbus and Boeing).
Those are probably the next bubbles to burst.
But agree that none of them are as big or gnarly as the housing bubble in 2006. However, be careful - the 5% down payment is back with a vengeance. If it looks like zero down + risky bets are back, then the housing market is in a bubble. Sustainable is another word though ... doubtful it's sustainable, not with millennials having more debt out of college than any other prior generation.
For there to be a real correction in Q1, holiday sales would have to miss targets. I don't see that happening because this season so far has been the busiest I have ever seen. I'm not sure about other areas around the country, which is why I started a thread about it.
How does it feel like 2008? I work as a real estate agent and a loan officer. People are buying with cash, large down payments and with good savings and income that is actually verified. It is night and day compared to 2008. If another crash happens in the short term, it won't be from another housing bubble.
People including renowned investors have been warning about a market correction for at least a year now. Funny how this played out. The only real bubble in the stock market right now is with futuristic/speculative stocks where P/E is either infinity or several hundred. Think Yelp, Zynga, Tesla, etc. Despite people saying stock prices are not supported by earnings, many industries are posting healthy profits and reasonable P/E. Think blue chips, tech, banks, travel services.
And despite any kind of correction, the future trend of the stock market is going up. So instead of losing sleep over the timing of your investment which is more likely to fail than succeed, a more sensible approach would be to put your money in there and forget about it until you have to liquidate your positions which isn't until many years from now. Or you can do what I do, investing a portion of my cash in the stock market, saving the other half for a future market correction. If correction happens, I can increase my positions for cheap, and if it doesn't happen, I still get a portion of the returns which since the beginning of the year has been too high for people that missed the run to dare checking.
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