Help an investing noob invest 50k

[Peter666]

Buy as many Berkshire Hathaway B stocks as you can and rest peacefully.

[imported_bingobazza]

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Buy as many Berkshire Hathaway B stocks as you can and rest peacefully.

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Hahaha...I take it thats a dig at me Peter? Well, I asked the question here as to what the point of investing was when Buffett would do it for you? I still believe that this is a good strategy for those that know no better, as the risks are small compared to many similar yeilding investments. Despite no concrete arguements against this strategy from this forum, I decided against it, for me personally, as Buffet cant invest all his cash, and it just keeps on growing. I dont want to buy cash with cash, and think I can get better returns elsewhere in emerging property markets and commodities, which definitely arent for everyone.

Bingo

You have a few reasonably safe, non-time intensive options..

1) If you don't have a house, and you want a house, this is a good chance to get one.

2) Stick the remaining cash in a reputable discount broker with good online service. Think Fidelity, Schwab, Ameritrade, or Scottrade as examples; research may help you find one more suited to your tastes.

3) If you want to do NO due diligence, buy index funds from Vanguard. If you're pessimistic about the US market in short and medium term, diversify with foreign index or foreign bond funds. Again, Vanguard and Fidelity sell these; Yahoo Finance has a fund screener to help you find one with low expenses (under 1% a year) and no load.

4) If your brokerage allows, automatically reinvest your dividends. (Scottrade doesn't seem to allow this; I know that Fidelity does.) IIRC, this has significant tax benefits (since you don't receive the cash) and harnesses the power of compounded earnings while letting you avoid paying commissions.

5) Keep paying yourself! You can set most brokerages to automatically forward a set amount from your bank account to a brokerage automatically. You can sometimes do this directly from large cap companies and large funds also. This way you continue to build your nest egg and treat it like any other bill.

Good luck!

[Sniper]

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4) If your brokerage allows, automatically reinvest your dividends.... this has significant tax benefits (since you don't receive the cash)...

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This is wrong, you will have to pay taxes on your dividends whether you reinvest them or not.

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This is wrong, you will have to pay taxes on your dividends whether you reinvest them or not.

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You're right, and obviously I'm scatter-brained today. Blah.

OTOH, I still think DRIP-ing is a good thing -- it lets you avoid commissions and keeps your cash in equities that you value (otherwise, it'd be stupid to own them, much less DRIP them).

[Peter666]

If anybody can make more than the 20% average that Buffet makes, then more power to them. But I bet many people cannot, and there is no reason those people should try when somebody else does it for them better. So you are right, the Buffet strategy cannot be beat for an unknowledgeable investor.

Open an online brokerage acct and buy closed end funds invested in treasuries, foreign bonds, and gold. Most of these closed end funds pay a fat dividend e.g. >6%.

Since you are young, it's up to you how risky you want to be. My sister is about your same age, came upon 48K due to medical settlement and I invested the following fairly conservative way:

1/3 into a high yielding divy play that I have (Novastar Financial)
1/3 into Vanguard GNMA fund (VFIIX) invests in AAA rated Gov't debt. Pays around 4.5%. Pays monthly
1/6 into Price Water House Cooper growth fund (PRWCX)
1/6 into a growth funds with fewer restrictions (NTHEX)

In your case I would do this:

Option 1.

Get a house. It might be tough to get a prime mortgage rate, but I still think its by far the best investment.

Option 2 (Risky)
Spread your money throughout equity funds focused on high return/growth including high yeild bond funds, tech/growth funds and emerging market funds

Option 3 (safe)
Spread your money in funds mixed evenly between bond funds, i bond funds, total market funds, perhaps a REIT or a REIT fund, and whatever else you want.

Just my 2cents.

Claude

[Gramps]

Whatever you end up investing in, make sure you file as a professional and set up an SEP IRA (all the online brokerages offer them) - it'll allow you to put up to 25% of your annual poker earnings pre-tax into a retirement account (maxing out at a $42,000 contribution for the 2005 tax year). It's a huge tax benefit of being self-employed, and if you get a good chunk of $$ saved early for retirement, that's signficant amounts of $$ that doesn't have to come out of your paycheck/earnings when your're in your 30s, 40s or 50s (and have lagged on retirement savings). There aren't many people walking around, regretting all the "oversaving" they did for retirement...

[imported_bingobazza]

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There aren't many people walking around, regretting all the "oversaving" they did for retirement...

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erm...I would add a caveat to that statement...I can think of several reasons that people regretted it...they died before enjoying the money, (20%), they die shortly after getting the money and the annuity provider keeps any remainder (50% of the survivors) they got divorced and their onshore pension investments were split with their wives, (30%), they hit retirement age after 2002 when the stock market plummetted, they got 60% lower annuity income than their buddies 10 years older than them due to falling interest rates, they (or their pension funds) invested in Enron/Worldcom/Equitable Life and got royaly screwed by corruption. Pensions are a minefield in the UK, do not think that they are str8 forward in any country, cos they are the biggest challenge facing most developed countries, and they fail regurlarly for many different reasons. I hold an advanced professional paper in the UK for pensions law, and have decided not to invest in them. The rules are too strict, and arent in my favour, yet the UK, per capita, has more pension savings than all of Europe combined....go figure. Theres nothing that will piss you off more than saving for your whole life, and getting little in return...that is a pension. It isnt a private stock or property portfolio, and Im favouring the latter at the moment. All that being said, you are prefectly correct...if you can bang substantial amounts away in your 20s, your life is soooooo easy for ever after in this regard, and I urge all younger players to do as much of this type of long term saving as they possibly can, cos you wont regret it.

Bingo.