$25,000 to invest what should a noob do?

[vindikation]

I have $45,000 in my checking account and can't afford to buy a home in Los Angeles (where I currently rent). I figured $25,000 was a safe amount to do something with.

What would you do with my $45,000 if you were a complete noob who knew NOTHING about investing (stocks, cd's, mutual funds, money market, savings account)?

THANKS!

Open an account with scottrade.com and deposit the money there. Then buy VTSMX, which is the Vanguard Total Stock Market fund. Basically, it distributes its money equally throughout the stock market, so you don't have to worry about picking stocks. If you're going to retire in the next 30 years, you might also put some money in a bond fund such as VBMFX. A rule of thumb is that the % of your money that should go into bonds should be equal to your age.

You should also start an IRA, which is a special tax-sheltered account where your money can grow without paying taxes on it. The disadvantage is that you can only put in $4000 per year (will be $5000 soon), and that you can't withdraw it until you're 65 without a penalty. Search around for more info.

This all assumes you won't need the money for the next 5 years at least. There are other options if you anticipate needing it for a down payment on a house or your kids' college tuition.

Do you really need to keep the other $20,000 in your checking account? You could probably open a money market account with ING Direct and get 3% interest on $15,000 of that. A money market fund doesn't pay much interest, but you'll never lose money at it, and you can withdraw your money any time. ING makes it really easy to transfer money between your account with them and your checking account.

[ahnuld]

Ill invest it for you for a 1% fee. You keep your money and ill tell you where to put it. Or go to a mutual fund. they charge more than me, like 2-5%, but you`ll feel safer i guess. Whatever you do, dont invest it yourself. Oh, and start subscribing to a good financial newspaper.

Books are solid too if you have the time, my recommendation is making money in stocks by william J. oneill.

[snowbank]

I'd invest a couple hundred bucks in some good books on anything that interests you(real estate, stocks, etc...) Find out how to invest before you invest.

Why jump into the game before you know how to play?

[vindikation]

Thanks for the replies and insight, greatly appreciated.

I'm thinking of maybe putting:

$15,000 in stocks
$15,000 in money market
$10,000 in checking
$5,000 in poker (strictly as an investment experiment)

This is of course after doing research on all of the above. I'm 35 and married (though my wife doesn't save any money) and there's no way I can afford a home here in Los Angeles.

Thoughts?

[snowbank]

"there's no way I can afford a home here in Los Angeles."

what's your income, and what's the value of properties?

[vindikation]

Pre tax $56,000 a year income (my wife doesn't save any money so that's strictly my income).

Average home price in Los Angeles $600,000.

Average income to pay for a $600,000 in Los Angeles is $140,000 a year.

[Sniper]

[ QUOTE ]
What would you do with my $45,000 if you were a complete noob who knew NOTHING about investing (stocks, cd's, mutual funds, money market, savings account)?


[/ QUOTE ]

If I were you, I would start learning about investing. With 45K to invest, you should have that money working for you!

[midas]

I would adjust the following:

10K in stocks - putting 5K in SPY over 12 months and 5K in MDY over 12 mos

25K in Money Market - you can always transfer to checking what you need.

Also, in your career will your income increase over time? If not, move, its tough to live in the big cities making less than 100K.

[vindikation]

I'm an electrical engineer, but I work at a musical instrument company so my wage is lower than the average EE. It's a cool job, but after 5 years the "cool" factor has worn off and the "money" factor is starting to become a bigger deal.

I'm a musician who got a EE so I could one day work on guitar amplifiers, well by age 30 I achieved that dream, and now at 35 I'm starting to look at my life, marriage and future a little differently.

Thanks for the replies, greatly appreciated.

[Sniper]

At 35, his exposure to the stock market should be higher than 10K out of 45K available.

[vindikation]

.

[midas]

I would agree except if his situation changes (moves) he might want to put a down payment on a house and not have the short term loss that the market might deliver.

[chardog]

What company do you work for? I have a Mesa Tremoverb, love it.

BTW, my financial advice.. don't do anything with the money (except for payoff any credit card debt you may have) until you go down the learning curve. Read read read.

good luck!

[vindikation]

I work at Line 6.

I have zero debt so this $45,000 is free to be used in any way. I just purchased "Investing for Dummies" today and have just started reading about all this stuff. I'm not going to jump into anything for probably a month or so, and I'll probably post here before I do it so you gives can hopefully help my noob ass out.

Thanks again for the feedback guys, greatly appreciated.

[kagame]

MRH!!!
RVSN
ILSE
DRC
DNA
RVSN
LGF
YHOO
MTF
SNDA

just some ideas to start you out for your stocks

start at www.motleyfool.com (http://www.motleyfool.com) or maybe www.bobbrinker.com (http://www.bobbrinker.com) to do your research and whatnot

dont turn your trades into investments, theyre trades youre not locked into like a fund and require you do your "homework"

[Degen]

read Rich Dad Poor Dad, and The Intelligent Investor, in that order...life changing books

gl

[vindikation]

I just received "Investing for Dummies" yesterday and started reading it. Again I'm a complete noob with investing, so I think this book will do me some good. After finishing this book I'll be ready for some more advanced recommended reading and will start making some real investments.

I'm giving myself 1 month of research, then I'm going to take $40,000 and divide it up into a myriad of investments (leaving $5000 in checking). It's funny to see the similarities of Poker and Investing, very intersting stuff. Starting to think strategically with my money is a new concept. Up until 5 years ago I had no money saved, so this is all new, scary and exciting territory.

Thanks again for the advice, greatly appreciated.

[Sniper]

Vind,

After you finish reading "Investing for dummies", why don't you post a "here's what I learned" thread. Should prompt some interesting discussion.

[Python49]

Im pretty much in the same boat... i have money id like to invest, but first would like to know whats possible to be made with say... 25,000 like the OP said he has. Examples of the kind of info im looking for is... "well if he invests in XX and XX, he could make X ROI after X time". I just would like a general idea of what's possible. Similar to in poker if someone asked me whats possible id ask them how much money they have and then be able to tell them roughly what they could possibly make depending on numerous factors.

[cdxx]

[ QUOTE ]
Thanks for the replies and insight, greatly appreciated.

I'm thinking of maybe putting:

$15,000 in stocks
$15,000 in money market
$10,000 in checking
$5,000 in poker (strictly as an investment experiment)

This is of course after doing research on all of the above. I'm 35 and married (though my wife doesn't save any money) and there's no way I can afford a home here in Los Angeles.

Thoughts?

[/ QUOTE ]

your split should be different. assuming that $15k is enough to last you 6 months if you lose your job, there's no reason for checking + money market to be more than that.

open an IRA, put $4k there now and $4k after Jan 1st. buy a good diversified growth stock fund. such as small cap growth, or emerging markets growth. buffalo small cap and fidelity low priced stock funds are doing rather well for me. put the rest (~$20k) into a non-retirement mutual fund account but put that into a more balanced fund, such as a blend fund or split it among some large-cap value and growth. if you want strictly stock trading money, put 5-10k into scottrade (and/or poker), and start trading. also do yourself a favor and subscribe to some financial publication, such as thestreet.com or financial times, or WSJ though that one is a bit dense. some stock picking alerts are also not a bad idea (on thestreet.com).

[sprmario]

I think this allocation is horrible... why do you need $10k in your checking account? Why not $2k in checking and the rest in a savings account in ING Direct, Emmigrant Direct or one of the other high yielding savings accounts?

Then why $15k in a money market account? You'd be better off in one of the above savings accounts than in any money market account.

If you want to be conservative, put $10k in an online savings account, $2 or 3k in checkings, $5k in poker and the rest in stocks. Break up the rest and put them in a variety of different mutal funds... a basic index fund, an international fund, an energy fund, a value fund and a bond fund (for example).

Good luck.

[ QUOTE ]
$15,000 in stocks
$15,000 in money market
$10,000 in checking
$5,000 in poker (strictly as an investment experiment)
Thoughts?

[/ QUOTE ]