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22 years old and just inherited $20,000
Old 01-28-2016, 12:40 PM   #1
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22 years old and just inherited $20,000

A 22 year old (recent college graduate) comes up to you and tells you he just inherited $20,000 and asks you your advice on what to do with the money. He explains that he wants to invest it, but with the recent drops in the stock market, he is unsure if he should wait for a while to see what happens, put it in slowly (IE, $1,000/month) or just invest it all at once (ya know, since he is young). He doesn't want to mess with individual stocks and wants to only invest in either active or passive mutual funds.

What's your advice for him?

My advice is to put in $5k NOW into Vanguard S&P 500 index and DCA the rest in $1k increments monthly until it's gone.

Anyone else?
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Old 01-28-2016, 12:50 PM   #2
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I'd just say put 3/4 into the S&P500 fund all at once and put the rest into an online savings account for emergencies.


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Old 01-28-2016, 01:19 PM   #3
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Put it in some front loaded funds I recommend and pay me 1.5% wrap fee, for life.
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Old 01-28-2016, 02:07 PM   #4
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Put $3k in a global equity fund like Vanguard Global Equity. A month later, add whatever you need to increase the balance to $5k. A month later, add whatever you need to increase the balance to $7k. A month later, add whatever you need to increase the balance to $9k. Repeat until the $20k is totally invested.
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Old 01-28-2016, 02:08 PM   #5
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buy a used 04/05 STI
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Old 01-28-2016, 02:40 PM   #6
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First decide what the AA will be. If it is 100% equities, so be it. I like the Vanguard 500 Index. Put in $10K now and 2K/mo until its gone.
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Old 01-28-2016, 03:17 PM   #7
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Does he have any other investments? Set the AA, then go from there.


I'd probably DCA over a few months into an 80/20 AA. And maybe spend a few thousand? I mean, really - at 22, you can have a LITTLE fun too!
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Old 01-28-2016, 03:30 PM   #8
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He has a staggering 1.134% chance of being a millionaire if he sets it all on Black and lets it ride for 6 spins... getting to the point, I think the odds of a 22 year old not touching this money for the 40-ish years it'd take to grow to a million are far worse.
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Old 01-28-2016, 03:36 PM   #9
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Originally Posted by EvrClrx311 View Post
He has a staggering 1.134% chance of being a millionaire if he sets it all on Black and lets it ride for 6 spins... getting to the point, I think the odds of a 22 year old not touching this money for the 40-ish years it'd take to grow to a million are far worse.
that's why he should get the STI - live a little, the stock 04/05 models are actually quite collectible now
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Old 01-28-2016, 03:51 PM   #10
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buy a used 04/05 STI
An STI? He can get those easily enough for free. It's trying to deal with them afterward that might cost him.

Ha
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Old 01-29-2016, 12:59 AM   #11
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Depending on the temperament of the person in question either:
  • Invest 100% in Vanguard VT right now, or ..
  • Invest $1k per month in the next 20 months


If the person never invested before, definitely option #2. It's less optimal but emotionally more bearable.
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Old 01-29-2016, 05:30 AM   #12
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I'm assuming he has no student loan debt?
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Old 01-29-2016, 06:05 AM   #13
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Quote:
Originally Posted by moneymaker View Post
A 22 year old...just inherited $20,000...wants to invest it, but with the recent drops in the stock market, he is unsure if he should wait....
What's your advice for him?...
If he's worried about the short term in the stock market, then my advice is to stay out of the market. This college grad needs more education about volatility and the foolishness of trying to time the market. My advice: take some of the $20K and buy a book or two about how to invest for long term success.
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22 years old and just inherited $20,000
Old 01-29-2016, 11:07 AM   #14
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22 years old and just inherited $20,000

If it was me, i would have needed some good suits, a reliable car, apartment security deposit, moving costs for new job.

Poof.


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Old 01-29-2016, 12:50 PM   #15
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History tells us that DCA under performs lump sum investment 2/3 of the time.
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Old 01-29-2016, 01:07 PM   #16
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Same thing he should do with all money going forward, 25% retirement, 25% savings (for stuff like houses and cars), and spend the rest.

Or something like that. Retirement should go 100% stocks in a Roth IRA.
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Old 01-29-2016, 03:33 PM   #17
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An STI? He can get those easily enough for free. It's trying to deal with them afterward that might cost him.

Ha
I thought that was an STD.
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Old 01-29-2016, 04:08 PM   #18
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Set aside 1/3 for frivolous nonsense. He is, after all, 22. Put the rest in Vanguard S&P 500 or total U.S. stock market, some total global stock market (15%?) and maybe 10% total bond market.

Look at it once a year and rebalance. Done.
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Old 01-29-2016, 05:12 PM   #19
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History tells us that DCA under performs lump sum investment 2/3 of the time.
I believe this, but that 1/3 of the time can be absolutely brutal. As in, lump sum in the summer of 2008. The odds say DCA underperforms, but it also protects you from an all-in investment at the worst possible time.

That DCA underperforms 2/3 of the time (I don't have the stats but for this purpose I'll take you at your word) doesn't say how badly it underperforms 2/3 of the time, or how much it overperforms the other 1/3 of the time.
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Old 01-29-2016, 06:13 PM   #20
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My advice, crap table - $20,000 on the Don't Pass line, and lay the odds.
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