Investment ideas / strategies - Advice?

[82-T/A]

Hey guys... I just purchased a new home last month, and am in the process of selling my current home. I did really well on the sale of my home and will be coming into a sum of money and looking for some opinions.


Conventional wisdom would have me immediately roll that money into the new home I already purchased last month. This is usually recommended because the assumption is that eventually you roll enough equity from one home to the next that your home is paid off.


But the interest rate on my new home is 3.125%... and I can't see spending a large amount of money to pay off a ridiculously low interest rate.


I already sold off all my stocks to pay for the down-payment in the new house, so I want to replenish that, and I do also want to put some of it into my daughter's 529. But what are some other avenues for saving / investing?


I am planning on putting some of it in the stock market, which I usually do really well (no need to go into too many specifics, but just know for the sake of this argument I'm not going to do something stupid and dump it all into Atari or Commodore stock, hahah). Are there are things like high-yield CDs, or any other investment mechanisms besides just the stock market that would keep the money relatively liquid?




I'm just thinking... with potential greater-than-normal inflation coming, and potentially a housing bubble (just saying...), I'd rather have that money not directly tied to real estate. My new home will appreciate regardless... and my debt will depreciate regardless.




Thanks!!!

 

[Sunset]

....
I already sold off all my stocks to pay for the down-payment in the new house, so I want to replenish that, and I do also want to put some of it into my daughter's 529. But what are some other avenues for saving / investing?


I am planning on putting some of it in the stock market, which I usually do really well (no need to go into too many specifics, but just know for the sake of this argument I'm not going to do something stupid and dump it all into Atari or Commodore stock, hahah). Are there are things like high-yield CDs, or any other investment mechanisms besides just the stock market that would keep the money relatively liquid?
...!!!

You might have a big tax bill from your sale of stock, so figure that out and pay the taxman now or get a penalty next year.

I agree buying some stock for over the next 25 yr period will probably earn more than the mortgage (after tax) interest cost.
Remember the mortgage will only be worth deducting for most folks in the first 10->15 yrs, and after that the standard deduction makes the deductibility worthless.

 

[OldShooter]

... But what are some other avenues for saving / investing? ... Are there are things like high-yield CDs, or any other investment mechanisms besides just the stock market that would keep the money relatively liquid? ...

Sorry, there is no magic and there are no magicians. I suggest two books:

"The Coffee House Investor" by Bill Schultheis https://www.coffeehouseinvestor.com/

"The Bogleheads Guide to Investing" by Taylor Larimore et al https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore/dp/0470067365

I also suggest that you heed Warren Buffett's advice: "Much success can be attributed to inactivity. Most investors cannot resist the temptation to constantly buy and sell. ... Lethargy bordering on sloth should remain the cornerstone of an investment style."

 

[38Chevy454]

Take your house sale proceeds and first set aside any for taxes. Then I would replenish your stocks. Third put what you are comfortable with into the 529 for your daughter. Any leftover I would put into stock market. I don't see any real reason to stick into fixed income at this time with the poor returns and pending inflationary pressure. Maybe in time the rates will improve, but what do you do with the money until that time?

You mention liquidity, what about the stock market gives you concern? I can sell stock funds and have money in my hands within 2-3 days.

If you are comfortable with the mortgage, that's fine. I do agree that you should be able to get higher returns than the cost of mortgage. A lot of us prefer the paid off home because it just feels nice to have lower monthly budget in total. But it is really an emotional choice over financial choice.

 

[82-T/A]

You might have a big tax bill from your sale of stock, so figure that out and pay the taxman now or get a penalty next year.

Hi, thanks. What do you mean by pay the taxman now? Do you mean save some of the money with the intent to pay it in my taxes when I file in January? Or is there some other means by which I pay my taxes early?


I sold off about $60k in stocks, and another $25k was just savings ... but they weren't all straight gains... I'd say maybe $15-20k of that was actual gains, the rest was just savings over the past couple of years. So I assume I will have a decent tax bill on that, but nothing I couldn't just handle at tax time.

I agree buying some stock for over the next 25 yr period will probably earn more than the mortgage (after tax) interest cost. Remember the mortgage will only be worth deducting for most folks in the first 10->15 yrs, and after that the standard deduction makes the deductibility worthless.

Yeah, I guess my thought was... if I decided at some point I wanted to go and pay off the mortgage, I could then do so with the money I'm investing in. In the mean time, I'd already be paying principle anyway (through my monthly mortgage payments) and the stock market would likely have some inflationary protection, plus better gains.



That's true... I hadn't considered that, when I file my taxes, it's the interest I'm getting the break on! Thanks for the idea bounce!

Sorry, there is no magic and there are no magicians. I suggest two books:

"The Coffee House Investor" by Bill Schultheis https://www.coffeehouseinvestor.com/

"The Bogleheads Guide to Investing" by Taylor Larimore et al https://www.amazon.com/Bogleheads-Guide-Investing-Taylor-Larimore/dp/0470067365

I also suggest that you heed Warren Buffett's advice: "Much success can be attributed to inactivity. Most investors cannot resist the temptation to constantly buy and sell. ... Lethargy bordering on sloth should remain the cornerstone of an investment style."

To be clear, I sold all that stock so that I could pay for a down-payment on the house I bought last month. So it wasn't for timing the market. The current house I'm in, I'm on contract to sell and will be getting a large payment from it... sorry if I wasn't clear.

Take your house sale proceeds and first set aside any for taxes. Then I would replenish your stocks. Third put what you are comfortable with into the 529 for your daughter. Any leftover I would put into stock market. I don't see any real reason to stick into fixed income at this time with the poor returns and pending inflationary pressure.

Thank you, I appreciate this... this was kind of what I was thinking, but wanted to bounce this idea to see if others concurred or if I was being overzealous. Everyone is telling me to dump it right back into the house I just bought... and I'm not sure that makes financial sense.

Maybe in time the rates will improve, but what do you do with the money until that time?

You mention liquidity, what about the stock market gives you concern? I can sell stock funds and have money in my hands within 2-3 days.

If you are comfortable with the mortgage, that's fine. I do agree that you should be able to get higher returns than the cost of mortgage. A lot of us prefer the paid off home because it just feels nice to have lower monthly budget in total. But it is really an emotional choice over financial choice.

To be honest, I didn't even look to see what the rates were for CDs... but I guess that makes sense that they'd be low to if general interest rates are low. You are right in that I should be able to just sell stocks if I need to... I just wonder how much (really) I should have in just straight savings.



Years ago in South Florida, I remember in 2007 when the housing crash hit. I had friends who had bought at highs... and I'll never forget my one friend who bought a new construction town house for $400k. Six months later the last two town houses that were completed (but lacked some things like bathroom vanity and carpet, etc...) sold at auction for $23k and $98k. Homes that now (again) cost about $500k... and I told myself that the next time this happened, or something like this happened, I wanted to be ready and have money to be able to afford in a down market. So that's the only thing I'm thinking about... generally if there's a down market in anything, the stock market will generally also go down to some extent.

 

[RetireeRobert]

If you are working be sure to max out Roth IRA accounts, or any 457/403b plans etc. which may be available to you.

Besides stocks, another "calmer" investment vehicle you might look into to garner perhaps a better return than sitting in cash is a GNMA fund. Perhaps Vanguard's VFIIX. Might get you 3% annually when held for some number of years.