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

vindikation · #1 09-09-2005, 11:16 AM

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!

#2 09-09-2005, 11:27 AM

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 · #3 09-09-2005, 12:41 PM

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 · #4 09-09-2005, 01:18 PM

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 · #5 09-09-2005, 01:54 PM

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 · #6 09-09-2005, 01:57 PM

"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 · #7 09-09-2005, 02:03 PM

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 · #8 09-09-2005, 02:50 PM

[ 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 · #9 09-09-2005, 03:51 PM

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 · #10 09-09-2005, 04:10 PM

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.