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What percentage of your available money would you invest and how?


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2013 Jan 17, 2:48am   3,682 views  17 comments

by lserranov   ➕follow (0)   💰tip   ignore  

I, as many other people here, have decided to rent and save vs. Buy a house and owe.

I would like to hear from others, some advises on what percentage of money to leave in bank, and how much to invest and where.

Thanks in advance
Luis

#investing

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1   dublin hillz   2013 Jan 17, 3:16am  

If you are gonna be a lifelong renter and are not in a rent control city, your biggest threat is rent inflation which very likely may exceed the overall inflation. Thus your biggest need is to invest to beat inflation so that you can cover the rent in retirement. You should consider maxing out your 401K and Roth IRA and overweigh high yield bonds and stocks until you are 60. At that point, scale back on stocks to about 45% total. When you are ready to retire, have at least 2 years of expenses in checking/savings. While you are working, it is always a good idea to have 6 months of expenses in savings regardless of other issues.

2   epitaph   2013 Jan 17, 3:51am  

Keep your emergency fund in a savings account, your monthly budget in your checking, and the rest in markets. Balance your bank accounts once a month and your portfolio once a year.

Don't worry about percentages of money in accounts, worry about covering your expenses then the rest goes into the markets where percentages play a bigger role. I wouldn't hold cash as a hedge, but that's just me.

3   epitaph   2013 Jan 17, 4:50am  

I use savings accounts because it is much more protected to theft than checking. Other than that, not much else advantage besides the interest rates at certain banks.

4   edvard2   2013 Jan 17, 5:42am  

This is what I do so don't view this as advice.
My goal was to save a lot of cash for a house while renting, then also save for retirement. I've put 10-15% of my income into various mutual funds, bonds, CD's, and a 401k. These are spread all over the place: big cap, small cap, foreign, domestic, commodities, government bonds, and so on.

I bought a house last year after 12 years of saving and renting. But I also kept a large chunk of cash on hand in case for some horrible reason I lost my job. As of now I could pay for the mortgage with no job for 4 years or more.

5   nope   2013 Jan 17, 4:00pm  

Max out your 401k / IRA and then spend whatever you want on whatever you want.

If you're making a "never buy a house" decision, you will *never* have enough money to be "rich", so "investment" is largely irrelevant. You need to insure that you have enough to retire comfortably and that's about it.

Enjoy life. You can't take it with you, and it's more fun to spend money when you are healthy enough to enjoy it.

6   Patrick   2013 Jan 17, 4:21pm  

You'll get rich much faster by being in the stock market than from any other legal investing avenue. In theory you should always be 100% in the stock market, but obviously thereis danger there too. You can reduce that danger with index funds like Vanguard's, or by spreading you investment across many solid big cap stocks.

7   Peter P   2013 Jan 17, 4:29pm  

I am skeptical of diversification.

8   Peter P   2013 Jan 17, 4:33pm  

Kevin says

You need to insure that you have enough to retire comfortably and that's about it.

That is almost never possible, unless you have a low bar for comfort. Besides, you will have to make assumptions that will likely be proven wrong in the future.

Kevin says

Enjoy life. You can't take it with you, and it's more fun to spend money when you are healthy enough to enjoy it.

This is very true though.

9   nope   2013 Jan 17, 5:38pm  


You'll get rich much faster by being in the stock market than from any other legal investing avenue. In theory you should always be 100% in the stock market, but obviously thereis danger there too. You can reduce that danger with index funds like Vanguard's, or by spreading you investment across many solid big cap stocks.

You'll get rich by running a business that earns profits, inheriting it, or winning the lottery. Basically nobody gets rich by stock or other straight forward investing. It's better than a savings account, but that's not saying much.

You can also get rich if you're so good at whatever you do that you land a high level executive position and get paid millions per year. That's basically the same as the "running a business" part though.

Peter P says

That is almost never possible, unless you have a low bar for comfort. Besides, you will have to make assumptions that will likely be proven wrong in the future.

maxing out a 401k over a 30-40 year working career will be more than adequate, especially if you get a matching contribution.

10   carrieon   2013 Jan 17, 7:37pm  

Renting and investing in the stock market today is more popular than ever, given the state of the housing market.
However, once you decided to rent, don't forget the other side of the equation for making money, which is keeping your costs to a minimum.
That being said, seek out a rental unit that's close to your work and lifestyle for the least amount of money possible.
This will also reduce the outrageous cost of driving a car today.
Between this and all the good investment advise listed above, you'll also have extra free time for recreation.
Good luck and enjoy.

11   Patrick   2013 Jan 19, 1:59am  

I have a feeling that the stock market is going to rise in the next couple of years due to inflation and a reduction in the unemployment rate. I can't prove it, but I'm going to bet at least some of my savings on it.

Also, now that I have a real job again, I can afford to take a little more risk.

12   Waitingtobuy   2013 Jan 19, 2:17am  

I have about 22% of my assets invested in my home. Have 2 years of cash in the bank and invested in foreign currency CDs which have done quite well. The rest of my money is invested in mutual fund retirement accounts and 529s for my two kids.

I've rented, owned, rented again, and now own. It's cheaper for me to own in my area (South Bay LA) than it is to rent a comparable place, even with property taxes, etc.

The answer to your question is personal. Do you have kids or not? Does your spouse/significant other work or not? Are you single?

13   Patrick   2013 Jan 19, 2:31am  

bullioncollector says

If you have a lot of money, go for buying land - yes, own land! Don't rent - it's a waste and it will not be yours. All that money is thrown out.

You sound like a realtor, because you failed to ask the most important question about buying land: What is the price?

You can overpay for anything. Do not overpay for land.

If you overpay, you are throwing out your money. Potentially far more money than you can ever recover.

14   lserranov   2013 Jan 19, 2:34am  

I'm single, no kids. In the early 40's.

What I have noticed is that having the money in a bank doesn't help much as interest rates are so low. Is quite different to put the money in a high yield account or mutual funds. Example, assume you have 100K:

-If you leave that money under the mattress, you get 0 dollars a year

-If you put the money in regular savings with 0.1% interest you get 100 dlls a year

-If you put the money in a high yielding account with 1.0% interest you get 1,000 dlls a year

-If you put the money in mutual funds and assume an average of 7% return then you get 7,000 dolls a year

Do you see my point on how different is life just by taking small actions? My intention with this thread was to understand how much of their money people put in investments and of what type.

I'm afraid of having more than half of what I have in mutual funds due to the risk. But in the other hand having money park on the bank doesn't help much. That is why I was asking what is people's comfort level.

Thanks to all for your comments.
Luis

15   Waitingtobuy   2013 Jan 19, 3:35am  

I put some money here:
https://www.firstcloverleafbank.com/personal-checking.asp

2.85% interest on a checking account (up to $15K)

If you are concerned about equity mutual funds, then put some in short term bond funds, foreign currency ETFs or CDs (that pay up to 3.5% like here: https://www.everbank.com/personal/foreign-currencies.aspx )

What about municipal bonds for a well-run city or school district?

Maybe you buy a rental property too.

Diversify, diversify, disversify.

16   AverageBear   2013 Jan 20, 1:29am  

Max out your 401K, and (Roth) IRAs first... If you are fortunate enough to work for a company that matches contributions, great. Does their 401K offer a 'self-directed' option to buy individual stocks? Even better. If not, find a fund w/ blue-chip divdend companies. Think David Fish's Dividend growth Champions, Contenders, Challengers (google it).... Either within your 401k (if possible), and your IRAs, I would take over half and put it in dividend growth blue chip companies. (think MCD, WAG, KO, AFL, PM, CVX, JNJ, REITs: ROIC, O). These companies increase dividends way faster than inflation. Use DRIP to reinvest dividends back into these companies. The compounding in tax free accounts will amaze you over time. I would take 10-15% and put it in a high-growth investment vehicle (ETF or mutual fund?), or if you are a little daring, put it into 1-3 micro or small-cap companies. Then take the rest (10-20%), and put it in silver and gold (NOT the 'paper' GLD or SLV), but Sprott, or gold/silver streaming companies (SLW, SAND, etc). or the top largest gold mining companies? ....

If/When the high growth part explodes, take some or all proceeds and pile it into the high growth dividend stocks.....If/when gold or silver goes parabolic or jumps, sell in steps, and pile that into dividend growth stocks (maybe they will tank when gold/sliver explodes,giving you great entry points?)....

If there's anything left over after you've maxxed out 401K/IRAs, then build out your 6 month expense 'safety net' (if you haven't done so already), in a checking acct. Whatever's left over, go and buy a classic muscle car :) ...

Anyway, as a dividend growth investor, that's my plan (car joke aside). I'm 42, but as I get into my 50s and 60s, I'll probably scale into bonds, but for now, it's all stocks/gold/silver. Good Luck...

17   AverageBear   2013 Jan 20, 1:39am  

...just some more thoughts.....

I hope this plan creates my 'money tree', where I can live off of the dividend income stream, and not need to sell off the principle when in retirement.... My plan is not sexy and actually quite boring. However, to keep me amused, I calculate the growing dividends at the end of each year, and compare it to my current expenses. In 2009, I got around $600 in divdends (or $50 a month). In 2010, I got around $1200 a year in divvies. In 2011, I got around $2000 for the year (put more into non-dividend stocks, which lowered dividend stream growth). But you get the idea. Financial independence happens when your annual dividend stream is larger than your annual expenses. I sure as shit pray that this happens before I retire :)

I think all govt's and central banks will be, or are in a 'race to debase' their currencies, and I think gold/silver is an additional hedge against my dollars which are slowly losing value to inflation/dilution.

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