I know nothing about investing...

madrone

Dryer sheet wannabe
Joined
Aug 9, 2005
Messages
11
This is a little embarrassing to admit - but I know nothing about investing. I only know real estate and we now have 570K sitting in our Schwab account (from our most recent sale) waiting for us to figure out what to do with it. We were going to buy more real estate, but I want to wait to see what the market does, and I'm wondering if we should diversify more than we already have. My husband does have 400K in his 401K and 100K in stocks. He knows a bit more than I do, but not much.

My question is, where do I start? When I read through your posts, I have no idea what you are all talking about. I'm also VERY right brain and to be honest, have avoided the investing world. But I think it's time to figure this all out. Any suggestions on a first step?

Also, any suggestions on where to put this 570K until we know enough to figure out what to do with it?
 
Just leave the money in the Schwab account and let it earn a little interest while you bone up. It won't make much, but you also will save yourself from any sef-inflicted injuries.
 
Buy the Vanguard Target Retirement Series appropriate for your age and planned retirement date. Run enough calcs to determine what part of your retirement the portfolio will fund. Then let Vanguard's computers do the rest.

Then get back to the horse you rode in on - if you know and like RE - stick with it.

People make it hard(it's hormonal,probably incurable)). One fund is all that's necessary - run the calc to see how much you need to put in.
 
unclemick2 said:
Buy the Vanguard Target Retirement Series appropriate for your age and planned retirement date. Run enough calcs to determine what part of your retirement the portfolio will fund. Then let Vanguard's computers do the rest.

Then get back to the horse you rode in on - if you know and like RE - stick with it.

People make it hard(it's hormonal,probably incurable)). One fund is all that's necessary - run the calc to see how much you need to put in.
I like these funds as well. You may want to check out the below website for some additional info on investing.
http://www.coffeehouseinvestor.com/
 
Based on the 720k windfall thread, you are 48 and 51, husband pulls in a lot of money and doesn't mind working.

First thing I would do is figure out how much of the 570k you want to use for Real Estate. If you want to use all of it for real estate, then you don't actually want to invest in the stock market right now. Your time horizon would be probably be around 2 years, and I wouldn't want to have that much money at the whim of the stock market. For longer term investments, the stock market is the way to go.

Anyway, divide the money into 2 chunks.
1. Money for Real Estate
2. Money for Investing

Now, for the Real Estate money, you want very low/no risk. That'd generally be cash equivalents (money markets, CDs, maybe a short term bond fund). Or you can reduce debt. If you have a 6% mortgage, that is a guaranteed 6% rate of return, which is awfully hard to beat. When you need money later, get a Home Equity Line of Credit. They are very flexible. Actually, get the Line of Credit right away, and you can write checks out of it whenever you need it.

As for the investing portion, a lot of people might be able to give better advice. I'm a fairly simplistic investor, and I'd put the bulk of it in an Index Fund. Vanguard S&P 500 Index Fund (VFINX) is low-cost, and will often outperform actively managed funds. There are other index funds available, too, and Vanguard is a good place to get one. If you don't want to spend a lot of time researching things, index funds are hard to beat. And I know that I for one don't know enough to choose the right individual stocks to beat the market.
 
madrone said:
Any suggestions on a first step?

Also, any suggestions on where to put this 570K until we know enough to figure out what to do with it?
At this point you're much more likely to do harm than good. As Brewer says, put the money in a MM account while you decide what you're going to do. I'd give yourselves until next March or even next August before you make any investing decisions.

Read library copies of "Investing for Dummies" and "Mutual Funds for Dummies". The series has a somewhat unfortunate name but the information is exactly what you need (no more, no less) in a format that's very easy to absorb. (I say this because when our daughter started dressage we read "Horses for Dummies" and we learned a tremendous amount on a subject that we actually don't care for.)

Decide how you want to invest your retirement portfolio. First you'll need to track your current expenses and project your retirement expenses using information in the other threads here. Then you'll need to decide how much to withdraw from your retirement portfolio (after pensions or before 401(k) withdrawals or whatever order you choose) to pay for those retirement expenses. Then you can fiddle around with FIRECalc to see what size of historical portfolio you would have needed to achieve those withdrawal rates. A quick rule of thumb is that a 4% withdrawal rate from your retirement portfolio is very survivable and so your retirement portfolio should be 25x your first year's expenses. If you invest more in stocks then the portfolio can be smaller, but the ride will be correspondingly more bumpy (volatile).

I'm guessing that you're less enamored of the stock market and the mutual-fund industry that many of us, or you'd have learned more about it before now. There's nothing wrong with that but you're likely to become a very conservative equities investor. You could elect to avoid the stock market altogether and stick with bonds/CDs if your portfolio is large enough. Coffeehouse is one good suggestion. Another is a library copy of Bud Hebeler's "J.K. Lasser's Your Winning Retirement Plan" and his "Analyze Now!" website.

At some point in your research you're going to encounter financial advisors. (I'm surprised that Schwab hasn't sent a limo to your house yet.) Please, we're begging you, don't engage with these people. You don't need to pay anyone to learn how to invest (although they usually need want you to pay them) and the sales-pressure doubletalk is going to cause more harm than good. No matter how rich, smart, or well-recommended they are, get their information in writing and run it by us before you let go of your wallet. I think that the 1500 other posters here have collectively seen it all before and have already made all of your mistakes for you to learn from. We'll suggest additional questions to analyze advisor's proposals and to avoid paying good money for bad investments.
 
(I'm surprised that Schwab hasn't sent a limo to your house yet.)

Yes - schwab has been calling. We haven't met with them yet and we may listen to what they have to say. But we're not paying anyone to make our decisons - we're definitely "do-it-your-self-ers."

Thank you Nords for the book suggestions. I think that is where I'll start. I'll go to the library today and try to find "Investing for Dummies", "Mutual Funds for Dummies" and "Your Winning Retirement Plan." I don't mind letting the money sit where it is for now.

My husband is pretty good with technology stocks (he works in high tech). In fact, we made a killing on one stock (in the boom) that enabled us to invest in real estate to begin with. But he has very little time to invest because his job demands so much of him. He still enjoys working and thinks he'd like to retire in about 5 - 6 years. But then he wants to teach at a university. He doesn't seem to have much desire to "really retire", but that could change. He's 49.

I'm 51 and I guess I must already be retired. I've just realized that recently. I took some time off of work a few years ago -with the intention of eventually going back - but I never did... I've found that I can make a lot more money focusing on real estate and now maybe if I learn about investing, I can make some money this way too. I just never envisioned myself as an "investor". I'm more the "artist" type.

You people are great - I appreciate your time, knowledge and support.
 
madrone said:
My question is, where do I start? When I read through your posts, I have no idea what you are all talking about. I'm also VERY right brain and to be honest, have avoided the investing world. But I think it's time to figure this all out. Any suggestions on a first step?

I think CNN and Money Magazine have put together a great tutorial to get started. money.cnn.com/pf/101/

Also, since you've admitted to not being the "investing type" that really gets turned on by this sort of stuff, consider hiring a financial planner. Now, that's easier said than done. You will find lots of folks who have hung out a shingle and call themselves financial planners. They have gotten a bad reputation for being little more than used car salesmen looking to make fat commissions.

Check out napfa.org (national association personal financial advisors) and interview some fee-only planners (meaning you pay them like a lawyer, not on commissions) to find one who you feel comfortable with.

When you are dealing with that much cash, allocation becomes really important. Meaning you need to have your finger in several different pots. So when international stocks go up and domestics go down, you have done ok. When bonds go up, and stocks go bust, you have done ok.

Believe me, the whole game is one of risk management. The question is, based on your goals, age, and other sources of income, how much risk is right for you?
 
dandan14 said:
fee-only planners (meaning you pay them like a lawyer, not on commissions)

bad example. last lawyer I talked to wanted 33% of whatever settlement he got. If it didn't go to court. 50% if it did.

I vote for what the others said. Do your own research. Read books. Figure out your comfort zone. Then decide if you need to get a financial planner. It's not that big of a deal to control your own investments. The most significant hurdles are psychological. Come up with a plan, implement it, and stick with it. Try to keep your emotions out of it. Know your timeline, and allocate your funds accordingly. Then, don't micro-manage.

Frankly, if I'd followed this advice, I'd be far ahead of where I am today.
 
I very highly recommend this book: http://www.efficientfrontier.com/t4poi/t4poi.htm

Hard to get through for a beginner, perhaps especially the "artist type," but somehow I suspect you're more than smart enough to understand it all. You can always ask questions here, to help with tough parts.

Gives a good background including a historical perspective, and in my opinion, great advice.
The first chapter is online in the link above, though I instead got the book from the library.

You can probably find other posts on it by searching the forum for "four pillars" or "4 pillars"
 
Thanks for all the suggestions.

dandan14 - I checked out the CNN and Money Magazine tutorial - it's great - I'm working on it...

Nords - The library just called to tell me that  the Investing For Dummies book is in...

- and - lazyday,   I just ordered The Four Pillars of Investing

So you folks have put me on the track.  Thanks.  Meanwhile, we think we're going to put the 570K in a 3 month CD (with Schwab) to let it earn some interest while we figure out the next steps...

I'll keep you posted - I'm so glad I discovered this site.   
 
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