Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Where to invest 30k for aging novice?
Old 10-04-2003, 04:03 AM   #1
Early-Retirement.org Founder
Developer of FIRECalc
dory36's Avatar
 
Join Date: Jun 2002
Posts: 1,826
Where to invest 30k for aging novice?

Someone with zero experience in the market asked me where to invest $30k for "growth, not income". He is 76, and says he has all his investments in CDs now (no idea how much). A friend of his sells load funds and rightly said not to buy from him unless it was for 5 years or more.

Thoughts?

Dory36
__________________

__________________
Often uninformed, seldom undecided.

Twenty years from now you will be more disappointed by the things you didn't do than by the ones you did do. So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover. Mark Twain
dory36 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Re: Where to invest 30k for aging novice?
Old 10-05-2003, 09:57 AM   #2
Confused about dryer sheets
 
Join Date: Oct 2003
Posts: 6
Re: Where to invest 30k for aging novice?

If it is for less than 5 years, it doesn't belong in the stock market. I assume he doesn't want to invest it longer than that or he'd have given it to his friend. If it is longer, I'd have to parrot the party line and go for a S&P 500 index. Less than 5, split it into 5 pieces and by 1 each 1 year, 2 year 3 year 4 year and 5 year CDs. At each years end, buy another CD for either the term that got cashed in (buy another 1yr if it was a 1 year cd, 2 yr if it was a 2 yr, etc) or buy a CD that matures at the end of the 5th year if the maturity of the cashed in CD would put the maturity of the new bond later than the 5 year term.

Or spend it when it matures.
__________________

__________________
Wind In The Willows: "Believe me, there is nothing, absolutely nothing, half so much worth doing as messing about in boats."
JimLy is offline   Reply With Quote
Re: Where to invest 30k for aging novice?
Old 10-06-2003, 05:35 AM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2003
Location: Kansas City
Posts: 7,408
Re: Where to invest 30k for aging novice?

Hey Dory
The first question is why? Is this 'hobby' money, for educational purposes, what does he consider 'growth' 5%, 10%, higher? Is he contrarian - willing to bet on a real estate fund, foreign fund, gold fund, etc. - are you comfortable with 20% or higher NAV swings?

I go round and round with my sister on this over the years - I've given her the 'read these books' mantra to no avail.
__________________
unclemick is offline   Reply With Quote
Re: Where to invest 30k for aging novice?
Old 10-14-2003, 10:46 AM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2003
Location: Kansas City
Posts: 7,408
Re: Where to invest 30k for aging novice?

The second question is - what percent of your total portfolio is this 'mad money' ? Suppose you are successful. To paraphrase Peter Lynch (One Up On Wall Street) is it a big enough percentage to be meaningful if you hit a ten bagger.
I periodically get the same twinge with my 'hobby' money - until I calculate how big a bet is required - then I usually buy another utility or REIT.
__________________
unclemick is offline   Reply With Quote
Re: Where to invest 30k for aging novice?
Old 10-15-2003, 07:26 AM   #5
Recycles dryer sheets
 
Join Date: Nov 2002
Posts: 398
Re: Where to invest 30k for aging novice?

It's pretty unusual for an older person to suddenly express an interest in "growth" investing, unless they are desperate for money. If that is the case, they are apt to make their financial predicament worse by investing most or all of their assets in a single high risk investment -- the financial equivalent of the "drowning man grasping for a straw."

If he really needs the $30k, he had better not invest it in anything riskier than a short term bond fund and perhaps a TIPs fund.

On the other hand, if he really doesn't need the money and is looking for some investment excitement, he could try putting it into one or more no load small cap stock funds that have good track records and moderate expenses , such as CGM Focus or Heartland Value.
__________________
Ted is offline   Reply With Quote
Re: Where to invest 30k for aging novice?
Old 10-16-2003, 04:17 AM   #6
Early-Retirement.org Founder
Developer of FIRECalc
dory36's Avatar
 
Join Date: Jun 2002
Posts: 1,826
Re: Where to invest 30k for aging novice?

I finally got face-to-face with him instead of trying to do it via email. He had a long CD just mature, and wasn't excited about the current CD rates. He's never invested in the market, and felt like he should, probably due to the load fund salesman's advice. But he wants a very high probability of a good return - whatever that is - and very limited risk.

I found that he could pay off his mortgage in full with the money coming out of the CDs. I suggested he pay off the 6.5% mortgage, and also arrange for a home equity line of credit (at an even lower rate), should he later find an urgent need for the cash.

Don't know if he will be doing that, but he certainly seemed more comfortable with that solution than any market investment.

Thanks for the comments.

Dory36
__________________
Often uninformed, seldom undecided.

Twenty years from now you will be more disappointed by the things you didn't do than by the ones you did do. So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover. Mark Twain
dory36 is offline   Reply With Quote
Re: Where to invest 30k for aging novice?
Old 10-16-2003, 06:48 AM   #7
Recycles dryer sheets
 
Join Date: Nov 2002
Posts: 398
Re: Where to invest 30k for aging novice?

Dory36,

Your advice is excellent. This illustrates why it is important to understand a person's complete financial status before recommending investments.

The man is fortunate that his friend was honest and did not try to sell him a mutual fund with a big load (or something like an annuity that would have been even more profitable for the salesman at the man's expense).
__________________
Ted is offline   Reply With Quote
Re: Where to invest 30k for aging novice?
Old 10-16-2003, 07:49 AM   #8
 
Posts: n/a
Re: Where to invest 30k for aging novice?

Another alternative would be to invest in an equity indexed annuity or CD. These things have interest rates tied to what the indexes do, subject to certain minimums and maximums, and the principal is secure.
__________________
  Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
pay off the rental mortgage or refinance and invest the difference? WM FIRE and Money 19 02-12-2007 06:32 PM
Really need your advice- $20K to invest, Munis, ETFs,REITS, or Index Funds Foodeefish FIRE and Money 5 01-06-2007 03:34 PM
How to invest trust funds???? RE2Boys FIRE and Money 10 11-23-2006 12:50 PM
Ready to invest - but where accountingsucks FIRE and Money 9 07-14-2006 12:05 AM
How to invest in commodities? Spanky FIRE and Money 16 03-06-2005 10:13 AM

 

 
All times are GMT -6. The time now is 07:29 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.