How would you invest...

[DesertDevil]

I have $60,000 I need to invest. This is a large sum of money for me as I am a teacher.

With the state of today's economy, how would you invest this money? I am obviously looking to diversify, but what are things I should definitely stay away from? What are safe bets? What about 10 percent towards something with a little more risk reward?

Serious responses only please. Im not going to put it all down on the Pats tonight...

Thanks.

 

[Hitman26]

What is your time frame and risk tolerance?


No risk tolerance and short time frames = gov't backed bonds, cd's from banks (4%)

Slight risk tolerance and short time frames = gov't backed bonds or cd's from banks (4-5%)

Slight risk tolerance and long time frames = Bond mutual funds (5-6%)

Med risk and long time frames (5 years or more) = Blue chip good dividend paying stock based mutual funds (8-9%)

Larger risk and long time frames (5 years and longer) = Good growth stock based mutual funds (10-12%)



Super high risk = picking individual stocks unless you are going to spread the money equally over 20 stocks or more. I don't recommed this unless you have a iron gut when it comes to money and losing 50% or more doesn't really bother you. But this can make you the richest if you are a great stock picker.



If you don't need to touch this money for 10 years or more I would go with at least 70-80% stock based mutual funds and maybe the rest in bond funds. All of my percentages are based on past results and maybe a lot worse in years to come.




Had you stuck all of your money into the stock market (general stock based mutual funds) at the high in October you would be down 10% right now and there is a great possiblity that you would lose another 10% this year. So how much would it bother you that your 60k could be worth 50k by December? Would you lose sleep or panic sell? Would you at least give it 4 more years to see what happens and realizing it could drop another 30 percent or more?



It would help if you told me how old you are and you goals for this money.



My advice to you is to get out there and read as much as you can about investing for the short, med, and long term and form your own opinions. Listen to everyone and don't do anything just becasue one person tells you what to do and makes it sound so great.




I will be happy to answer any other questions you might have.

 

[DesertDevil]

Thanks

Thanks for the help.

To answer some of your questions, I am 32 years old and am EXTREMELY nervous about the the US economy. I obviously want to make my money work for me, but I am also very leery.

This money basically came in as "unexpected income". My wife and I are teachers. We make just enought to put away 200 bucks a month if we are lucky.

I would really like to spread this money around. I would like to really diversify this. I think I would like to play it safe at this point with 75% of this money, while taking some moderate/high risk with the rest.

Do you know anything about investing in foreign economies? Should I invest any of this in "real" gold?

Thanks again.

 

[Hitman26]

I know nothing about foriegn companies and very little about gold. I'm pretty much a US stock man. I do understand your reluctance to invest in the USA. Hit that google and read as much as you can. I wish I knew where to point you but I don't.



Obviously if I had that kind of windfall, I would pay off any outstanding debt first because that is a guaranteed return on your money of not having to pay interest. I'm talking about credit cards, car loans, student loans, and lastly house payments. Plus it allows you to save more down the line while keeping your monthly expenses to very small unless you are living beyond your means.



Later

 

[DesertDevil]

Re

You bring up some more good questions.

We have 2 cars. We own one, and owe about 20k on the other at 6 percent interest over 60 months. Our only other debt is our house. We have 2 mortgages. Our first is at 5.5 fixed which we wont touch. The other is a home equity line of credit at prime. With the housing crash, we are now upside down as far as that goes.

Would you or anyone else suggest paying off the vehicle loan or paying down some of the home equity line of credit which is an interst only loan?

I appreciate the fact that you are not trying to give me advice on things you have little knowlege of.

I have been doing my research as you have advised. Just trying to gather as much advice as possible before jumping in...

 

[Hitman26]

First I would pay off the car because it's a depreciating asset. Secondly I would pay as much towards the HELOC as I could. I'm not sure if your HELOC is deductible but it may be (ask your tax man). Also consider setting up a 3-6 month emergency cash fund by putting it in a money market or interest bearing checking account.



Dave Ramsey has a book called the Total Money Makeover which you might find useful. Also there is a book called "The millionaire next door" by Thomas Stanley which is a great read and will really give you some ideas and strategies you can implement that will get you well on your way to becoming very wealthy by the time you are in your 50s and 60s.



Later

 

[Hitman26]

Check out those 2 books on Amazon and read some of the customer reviews.

 

[UoweDucks]

How much is the line of credit? Pay it off if possible then take the amount that you paid monthly on it and invest it. Hitmans suggestions are solid.
Good Luck

 

[DesertDevil]

Loc

I owe somewhere between 60-70K on the interest only home equity line of credit. My monthly payment has been fluctuating between $450 to $500 a month.

Im going to go buy those books. Thanks for the advice.