Playing w/100 G

[TexasJ]

I have 100 grand sitting in a money market. I am about to turn 50 and I want this money to start making money on its own. I want this moeny to be sent to work to make money for the family if you know what I mean. My wife doesnt want anything to do with stocks due to the instability. Does anyone have any ideas what to do with it? WHat mutual funds are out there that are good and any reasons or anything please help. I want to retire rich. Thank you all in advance
J

[midas]

A few questions:

1. Will your wife let you invest in equity (stock) mutual funds?

2. When do you plan on retiring and what are your other sources of retirement income? (This is to gauge your risk tolerance)

[playerfl]

you are a stock broker's dream. you need to be afraid....very afraid.

you picked a very risky time to suddenly have $100k burning a hole in your bank account.

1. the stock market in the u.s. is a crap shoot at best right now. forget the media, the media work for the big corps that want their stock to go up forever. When was the last time you watched CNBC and they told you stocks were a bad investment ? You are 50 so you remember the 70's. This time period has similarites to the 70's.

2. you can't buy u.s. bonds because interest rates have bottomed and once they start rising nothing will stop it until its done, and nobody knows when that is.

3. you can't just dump it in real estate because much real estate in the u.s. is artificially pumped up by low interest rates and low mortgage requirements.

4. the dollar itself has been dropping tremendously over the past year, and nobody knows when it will hit bottom.

so, what looks good ? commodities and companies that produce commodities. Commodity futures are more risky than playing poker IMHO. Many of the commodity producers have ugly looking charts right now, so there is no rush to buy them either.

So........CD's ain't so bad. Be more worried about just not losing for the rest of the year.

[TexasJ]

I have other monies for retirement, but I still want this to be a low level risk investment. Anything low level. I will probabley be retiring at 62.

[Ray Zee]

you wont retire rich with low risk at your age. but maybe paying off any interest things you have. like credit cards, mortgages, car loans, etc. no better investment than retiring things you pay interst on unless you have something you know will pay more and thats unlikely in this environment.

[GeorgeF]

There is no reason to invest in stocks. As to bonds you should diversify.

You could go with www.PIMCO.com the biggest bond familly. They actively manage their funds and charge a bit extra. Talk to a rep but I think you should chose their total return funds.

www.Vanguard.com is also good as they have low expense index funds and the company is owned by it's customers. Talk to a sales rep but I would chose both treasuries, GNMAs and inflation protected protected.

It might be worth talking to reps from both companies and putting 50k in each.

I myself own closed end funds like GIM FAX FCO to diversify away from the US$.

[Mano]

You could consider buying a rental property.

[gvibes]

Although you are awfully close to retirement (on an investment horizon view), I think you should at least have some equities in your portfolio (don't mean to step on your toes, GeorgeF) unless you have an unnaturally low tolerance for risk. Your risk tolerance seems low, so 30-40% equities would seem like a good number. Normally, I would say 50 would be good number.

Set up an asset allocation, and stick to it.

The rest of GeorgeF's discussion is good - you should always have a wide variety of securities, to reduce variance. If you have money in a 401(k) or IRA (i.e. tax-free), then I would suggest holding your bonds in those funds - you are generally better off holding taxable bonds in tax-protected accounts than stock.

Stock - Vanguard is sweet. Vanguard total stock market is good place to start (VTSMX). If you believe that the value and small-cap premiums are real (I buy the research), you could do something like a four way split in equities (large(S&P 500)/large value(VIVAX)/small(NAESX)/small value(VISVX)). You may want to add the REIT index to further reduce variance (VGSIX). I think the REIT index may expose you to a decent amount of tax liability. Maybe add the emerging markets index as well. Keep in mind, that the more different funds you use, the more your tax exposure, as you rebalance your asset allocation.


Do the following things:
1. Read Burton Malkiel's "A Random Walk Down Wall Street."
2. Start visiting diehards.org. Learn.
3. Don't listen to playerfl.
Follow the above, and you should safely expect cumulative returns of (my guess) about 6% over the next 15 years.

EDIT: I think Ray Zee may have overstated the issue a little bit. Yes, pay off your 12.9% (or 17.9%) credit cards. But don't pay off your 1.9% car loan. Don't pay off your 5.7% mortgage (yes ER will likely be right around 6%, but you get the favorable tax treatment).

EDIT #2: I would be very leary of stock brokers in general. There are some good ones, but mostly are a bunch of crooks (churn&burn).

[Ray Zee]

whats wrong with paying off or down a 6% mortagae if you dont have a current investment that is sure to make more than that. also the favorable tax is only good if you dont have that amount of money earning something similar some place else. than it is a wash.

[gvibes]

But say you are in a 30% federal income tax bracket, and a 3% state bracket. Your effective interest rate on the mortgage would only be 4%. Any diversifed equity/debt portfolio will return substantially more than that (i.e. there is is a disgustingly high chance that, after 10 years, the cumulative return of the equity/debt portfolio would exceed four percent - and it would need to exceed 4.8 %, to offset capital gains taxes.). Actually, I think you could find a debt-only, tax-exempt bond-only portfolio that would return over 4 percent. Check out the Vanguard tax-exempt bond funds - other than the short term funds, the returns seem to range from 5-6% (conservatively).