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What to do with $25 THOUSAND extra dollars? Please advise.
Old 04-10-2010, 09:44 PM   #1
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What to do with $25 THOUSAND extra dollars? Please advise.

Hi - I would greatly appreciate your investing advice. Here is a brief intro of my financial situation....I am 26 with about $130k total invested in the following: I have a 401k with Vanguard, an older 401k with American Funds, a few Roth IRAs with Vanguard and a few with T Rowe Price. I have a large CD, some individual stocks and lots of cash. (no my parents didn't give me any of it

For 2010, I already maxed out a Roth IRA ($5k - and maxed out 2009 too) with T Rowe Price and my 401k will be maxed out ($16.5k) by August with Vanguard.

I still have a lot of cash that I would like to invest - at least $25k that I don't know what to do with. So here are my questions...

1) Should I open a new account with Fidelity, Schwab, etc. etc. or continue to invest more with Vanguard or T Rowe Price? In other words, where would you invest this money?

2) What should I invest this money in? Recently I saw Fidelity is offering commission-free trades on 25 ETFs - would you recommend these? If so, which ones?......or would you recommend any other mutual funds, ETFs, etc? (so if you recommended Schwab in question 1, what would you recommend AT Schwab?)

3) Any other investing ideas? I am not interesting in rentals - I have seen what a hassle that can be. Also, don't recommend I need to travel or something...I do enough traveling!

Thank you and feel free to ask q's.
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Old 04-11-2010, 04:17 AM   #2
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You are fairly young and could become FI if you are diciplined, do not make too many investment mistakes, LBYM, and save.

If I were 26, I would invest my money in a VG target fund and let them rebalance and adjust.

IMO - For most people, those type of funds are probably the best route. They rebalance and adjust the risk exposure automatically. One of the biggest challenges for most investors (assuming they are not making bad risky investments) is to rebalance and adjust for market risk as they age. Those target funds seem to help solve that problem.
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Old 04-11-2010, 09:21 AM   #3
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You are fairly young and could become FI if you are diciplined, do not make too many investment mistakes, LBYM, and save.

If I were 26, I would invest my money in a VG target fund and let them rebalance and adjust.
Yes, you are ahead of the game at 26. But since you seem interested in investing it would be worthwhile reading up on portfolio management and developing your own "target fund." Many of us here would recommend that you stick with a diversified group of index funds, but you need to make your mind up yourself. Just a general thought, there is nothing wrong with having your funds distributed in more than one company but the more you scatter them about the harder it can be to track the whole. At some point you may be best evaluating the companies and consolidating your funds in a couple. That is relatively easy to do with 401Ks/IRAs but harder with taxable funds (if you can't transfer the holdings intact you will incur capital gains taxes). So put your taxable in a company you like dealing with.
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Old 04-11-2010, 09:58 AM   #4
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Yes, you are ahead of the game at 26. But since you seem interested in investing it would be worthwhile reading up on portfolio management and developing your own "target fund." Many of us here would recommend that you stick with a diversified group of index funds, but you need to make your mind up yourself. Just a general thought, there is nothing wrong with having your funds distributed in more than one company but the more you scatter them about the harder it can be to track the whole. At some point you may be best evaluating the companies and consolidating your funds in a couple. That is relatively easy to do with 401Ks/IRAs but harder with taxable funds (if you can't transfer the holdings intact you will incur capital gains taxes). So put your taxable in a company you like dealing with.

Those target funds are a fund of funds containing index funds.

But the slice and dice method using index funds is good idea if you really do stick with rebalancing the portfolio through thick and thin over 30 to 40 years
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Old 04-11-2010, 10:11 AM   #5
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Hookers and tequila (not necessarily in that order) should be considered in this situation .
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Old 04-11-2010, 10:39 AM   #6
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What is your defined asset allocation? Have you decided? If not, pick up All About Asset Allocation by Rick Ferri.

Advertisements for free commission trades are designed to appeal to those who like to trade stocks and ETFs. Are you a trader or a buy and holder? Pick up any book by John Bogle and ready about the power of index funds and keeping trading costs low.

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Old 04-11-2010, 11:35 AM   #7
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If I were 26, I'd put the whole $25k into AAPL stock. Because it would be 1989.

Seriously, if I were 26, I'd put all my energy into educating myself about investing. I'd read everything in the "Investing" section of this list before I invested a dime.
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Old 04-11-2010, 12:00 PM   #8
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Hookers and tequila (not necessarily in that order) should be considered in this situation
LOL - I don't think my girlfriend would appreciate that, but thanks for the suggestion.

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Are you a trader or a buy and holder?
I am a buy and holder. I am interested in the Index funds for the low cost. Thank you for the book suggestion.

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If I were 26, I'd put the whole $25k into AAPL stock
hah - yeah I wish! Thank you for the reading list.
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Old 04-11-2010, 03:18 PM   #9
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Depends on how much work you want to do. A few funds in a taxable account at Vanguard or TRP would be fine, and probably easier to track than an account elsewhere. Watch out for required minimums with just $25k.

The ETF's at Fidelity are tempting if you want to be a little more hands on. I don't think it would be worth it if you just want one or two funds. But if you want to take advantage of a handful of them, there is effectively no minimum balance and no trading restrictions and fees to trip you up. I've been using them at Fidelity and it works as advertised.
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Old 04-11-2010, 04:09 PM   #10
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I wouldn't invest in a Target fund in a taxable account because it includes some bonds. I think I'd just go with a total stock market fund like VTSMX or the ETF equivalent, VTI.
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Old 04-12-2010, 12:20 PM   #11
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I'd continue with vanguard, no need to go with another broker. I'd also rollover your various ROTHs IRAs and 401ks to vanguard to make your book keeping simpler.

Now what to do with 25K. I'd put half in Vanguard Total Stock Market Index and the other half in an international equity fund...maybe Vanguard Emerging Markets as at your age you can take the risk.
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Old 04-12-2010, 12:29 PM   #12
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Since you mentioned cash and CD elsewhere, I'm assuming that you have at least 6 months in cash/CD for emergencies. That assumed, What do you have your 401k money invested in? Remember that you are looking at all of your investments when you talk about asset allocation. Parroting some of the others, I would ensure that the bond/dividend bearing portions of your portfolio are in the tax protected accounts, and investments where you can protect your tax liability in long-term investement returns in your taxable account. This begs the question of what you should do to some extent - I think that most here (including myself) think that you should invest the money into a taxable investment account (which does seem to be your intent).

Alternately, consider investing in yourself in some way - cooking lessons? upgrade your appliances to more efficient ones? Spend $1000 on efficient upgrades in your home (rental? - ones that you can take with you) that have a decent payback period, remembering that that form of payback is tax free. Spend some money on a kit to learn to brew beer - pays for future gifts, is an interesting skill/hobby, and reduces your spending on beer in the future.
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Old 04-12-2010, 12:54 PM   #13
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I still have a lot of cash that I would like to invest - at least $25k that I don't know what to do with. So here are my questions...
Do you have any significant emergency savings? If not, I know where I'd put it, especially if you don't rock-solid job security.
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Old 04-12-2010, 01:24 PM   #14
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If you want to play it safe, put the $25k into Vanguard's Total World Stock Index.

If you want to roll the dice a little bit, put 1/3rd into Vanguard's Small Cap Value Index, 1/3rd into Vanguard's Emerging Markets Index, and the last 1/3rd in Vanguards All World Ex-US Small Cap Index.
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Old 04-14-2010, 07:33 AM   #15
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I'm assuming that you have at least 6 months in cash/CD for emergencies. That assumed, What do you have your 401k money invested in?
Yes, I have plenty of extra cash and CDs in addition. $25k is actually really conservative - I certainly could invest more.

Thank you for all the other suggestions everyone!!
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Old 04-15-2010, 10:25 PM   #16
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If you have plenty of extra cash please put it in an envelope and send it to me.
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Old 04-15-2010, 11:05 PM   #17
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Yes, I have plenty of extra cash and CDs in addition. $25k is actually really conservative - I certainly could invest more.
Are you planning to buy a personal residence in the next five years?
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Old 04-17-2010, 11:56 AM   #18
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If you have plenty of extra cash please put it in an envelope and send it to me.
Umm no. Enough money is already taken from me and redistributed against my will to people who feel entitled and don't want to work.

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Are you planning to buy a personal residence in the next five years?
Maybe in 5-10 years. I don't want to lock myself into a mortgage in my current city. I can't see myself living here forever. Also, depends on getting married/wanting kids,etc. I am happy renting right now for only $200 per month!!!
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