Living Frugally In 2009
 |
| No items matching your keywords were found. |
In 2011, how should I invest $150,000 - $200,000?
Assets: I have $190,000 in cash, only earning 1.1% in an online money market acct. I have $27,000 in an old 401K and newer Roth IRA (contributed $5K for current and past year). I have a Master's Degree and have worked as a consultant earning gross $76,000 in 2009, $158,000 in 2008, $123,000 in 2007, and $115,000 in 2006, and $55,000 in 2005. I own 2 cars outright. I have a 2-bedroom condo.
Debts:
I split a total mortgage balance of $160,000. We overpay the monthly payment of $650 + $250 HOA. We pay $1400. My half is $700. Since I work from home, I tax deduct a portion of the payments. I have used an accountant every year for past 5 years and itemize everything for maximum deductions. I have no credit card debt. I paid off my $50,000 student loan within 1 year of graduation. I have lived frugally for the past 3 years.
Standard investment advice is that you should invest in a diversified mix of stocks, bonds, and money market funds. If you are like most people you will invest part of your money aggressively in stocks, and part conservatively in money market funds and bond funds. However, some young people will go all stocks, and some very conservative people will go all money markets. The links below have on-line questionnaires which will give you an idea of how to do "Asset Allocation," determining how much to put in each type of investment.
You want to buy a diversified portfolio of stocks as individual stocks are too risky. Highly knowledgeable people can buy a properly balanced portfolio, but most folks have a difficult time balancing things on their own. They will misbalance their portfolio by buying all small stocks or all growth stocks, or some other misbalanced assortment of stocks. Back in 2000, Some people bought all Internet stocks; they got burnt when they all crashed together. You have to diversify across industries. Unless you know what you are doing, it is best to buy mutual funds that will diversify for you. Buy no-load, low cost funds. Mutual funds should have expense ratios of less than 0.5%.
I like index funds. Because of their broad diversification, you are less likely to have a dramatic drop in value. They also have the lowest management fees. For stock funds, I like putting ~70% of one's money in the Vanguard Total Stock Market Index Fund. and ~30% in a foreign stock index fund. The Vanguard Total Bond Market Index Fund is good for a bond fund. The Vanguard Target Retirement funds can be good all-in-one stock and bond funds for an IRA. (If you have less than 3,000 dollars, you can't invest in most Vanguard funds. For such people I would suggest Schwab funds.) There are many different opinions out there on what the best mutual funds are. Read the links below and form your own opinion.
I will warn you that there is a tremendous amount of stock investing books and websites that teach stock investing strategies that don't work. Particularly bad are people that teach "technical analysis" systems that sound impressive, but don't work.
I don't know what the interest rate is on your mortgage, but paying off more of your mortgage can be another option.
Believing advice you get on Yahoo answers can be risky, so read these websites for further information. If you find it too confusing, contact a professional financial advisor. They will charge you significant commissions, however.