patrick.net

Times are so odd. Will the currency change? Is it good to have money or to have stuff? Stocks are rigged. Good deals on RE some places. Sorry i wonder about this too? You don't want 100,000 to drop dramatically in value. Buying a cheap property and renting would get you out of paper. RE iS a tangible item of value. I question the dollars long term value or even medium term.

Kevin says

Savings accounts (where I have the money parked right now) are obviously a waste. Nobody is offering more than 1% APY.

What do do with the $$$ depends on what you need it for - and how soon you plan on using it. From some of your other posts it sounds that your financial house is mostly in order - so I'm not about to try and give you any advise. But I can relate to the "what do I do with this money?" question. I've concluded that in the lack of any clear alternatives, the safest route is best.

Personally, given the lack of better options (relative to the perceived risk). I'd just keep my cash parked in the savings account. A must admit I get the "just stick it under my mattress" mentality sometimes too.

I wouldn't totally be scared of commodities. The volitility is not dependent on how much you buy. So if you don't want 1oz of gold you can go with half or even a quarter oz.

Everyone seems to be in the same boat for the interest rates on banks.

A recession is all but guaranteed at this point I think. Dollar will gain in purchasing power, medium term (1 year).

If I had 100k, here's what I would do:

1. Invest in personal and family resilience. For starters, see here: http://www.chrismartenson.com/page/what-should-i-do

2. After the resilience part is taken care of, I would invest in real assets - which include physical gold and silver, real estate.

The rationale for investing in physical gold/silver is simple: you are betting on the stupidity of governments. This is a fairly easy and a safe bet.

Real estate is all doom and gloom, which is why I am selectively bullish here. Depending on location, all-cash properties are very attractive.

Dude, count your blessings. All 100,000 of them.

With underemployment at depression levels, good jobs being outsourced to Asia, lotsa homes underwater, many folks without medical insurance, etc., having 100K lying around is never a "problem".

It is an opportunity.

Get a brokerage account with low/no commissions.

Pick the allocation percentage you want for dividend stocks. (Hopefully, you also have at least a small allocation to invest in human capital, which could be charity, or [*]education/tuition, or something like that, but that is for a different thread. {[*] 529 is not an "investment" in tuition}.).

Dollar cost into your positions between now and this time next year, with dividends reinvested.

That is what I did a year ago, but the amount was not 100K.

It is not Cool and Hip, it is not Glamorous, and it is not something that I can Crow about how Smart 'N Savvy I was, but it worked; grinded out a positive cash flow and incremental appreciation (some of the stocks were down, more went up, all were positive cash flow).

There were plenty of good investment options. You are focused on the short term maybe.
Stocks are a good investment now as interest rates are low. Nothing else matters that much.
You could have bought Vanguard High Yield corporate fund and made about 7% interest.
Vanguard Dividend Growth buys large cap stocks that pay dividends. Do see people cancelling their Verizon plans much?
Profits of many companies are rising 5%+, the global gdp is rising 5%+ (even averaging in anemic USA and Europe ex.German speaking countries).
20 milion + people worldwide enter the workforce and start buying stuff, e.g. Apple, which they bought in a huge store, e.g. Walmart.
Even Vanguard High Yield Tax Free paid something, as did Vanguard Total Bond Market Index.
The problem for many people is lack of patience or too much focus on what the accounts do on a yearly or even monthy basis. Many of my friends are like this.
Having lived in a third world country and having been on other assignments to China, Australia, Canada, France, Texas (it's like a whole other country!) etc. I see rampant consumerism and increased in construction (Caterpillar) farming (Deere, Monsanto, Potash), Abercrombie, Apple.
Consumers in "poor" countries have no debt so are actually eager to spend.

how about offload 10k of it to each of your kids. If they ALL double it in 5 years, you ship them the rest of the 100k. They need to work together to make this happen.

Oh yeah, and if they make it happen, there is a final elimination round - WINNER TAKE ALL.

On top of that you can film this as a reality TV idea for YouTube. And sell t-shirts. and bumper stickers and all that.

1% return is less than inflation, so in effect it is a negative interest rate.

If you have a mortgage or other debt, it makes sense to pay off all your debts starting with the highest interest ones (after tax deductions) unless you can get a higher return in an investment. Since that's impossible now, why not just pay off your mortgage ahead of time. That's a guaranteed return.

Just make sure you have a good 6 months of living expenses in case something dramatic happens. Then concentrate on being debt free.

If you do pay off all your debts, and have an emergency fund, and have fully contributed to all available retirement plans (401K/IRA), then it makes sense to buy durable goods now because they are relatively cheap given depressed demand.

Give ten percent of it to a charity.

hmisc_login says

how about offload 10k of it to each of your kids. If they ALL double it in 5 years, you ship them the rest of the 100k. They need to work together to make this happen.

Oh yeah, and if they make it happen, there is a final elimination round - WINNER TAKE ALL.

On top of that you can film this as a reality TV idea for YouTube. And sell t-shirts. and bumper stickers and all that.

My oldest child is eight.

My mortgage is at 4 percent. I owe about $410k and the appraisal i got in september put the value at $540k. Paying it down more is my default option if i cant find anything better.

401k is already maxed. Id never pass on a 50 perent match.

The only other debt i have are two zero interest car loans. Paying those down would be a waste.

My retirement (401k) is already tied up in vanguard mutual funds, so putting more money in there seems like a poor diversification.

Im thinking about buying rental property, but im not sure i want the stress of managing tenants.

First of all, don't get your advice from a forum full of strangers. Secondly, find yourself a financial adviser. As a disclaimer The rest of what I have to say is merely opinion and not to be taken as "financial advice".

The key is diversity. You can have more than just a 401k. I have a 401k too but I also have 3-4 mutual funds, a Roth IRA, a couple of CDs, cash, and a life insurance plan. As far as buying rental properties, well that presents a different level of risk and responsibility. You'll have what amounts to a financial liability because whether you rent it or not the bill for their purchase and upkeep will be relentlessly due every single month. Therein lies their risk. Historically real estate has not performed as well as the overall stock market as a whole. Stocks for the last 100+ years have had an average return of 7-8% conservatively speaking. That doesn't sound like much but in 30-40 years that compounded interest really adds up.

The end goal is how much money you'll have. The saying these days is that in order to have enough money to live from 60-100, which isn't out of the question, you'll need to have saved 1 million dollars for yourself. That will give you an income of roughly 40k per year. If you live in an expensive metro like SF and plan to stay... double it. Also- the typical retirement home costs around $70,000 per year. Most of us will wind up in a place like that so this is worth putting into heavy consideration.

* Not financial advice.

edvard2 says

find yourself a financial adviser

If you go this route, please make sure they are a CFP/CFA/CPA and that they have a fee only pay structure. Otherwise their incentives will not be aligned with yours.

Well, you still work for someone else, paid a salary. Why not invest into your own venture on a side, isn't that the real American dream? Find a couple of good reliable friends who would go into it with you and see if you can make it. No day job is going to last forever.

Time is the most precious commodity, once it's gone it's really gone. And biggest regrets in life is not trying something. I see it as it's better to try and even fail than not try at all.

Have you gone solar yet? At the very least, buy a large enough solar electric system to take care of the higher marginal electric rates (above baseline usage). You seem like the type that may be running a server farm in his basement.
BTW, who is your insurer that jacked up the rates 40% (or was this due to other externalities?)

Kevin says

My oldest child is eight.

Why won't you invest in your children?

There are lots of things 8yo can do.
Get private music lessons.
Teach him foreign languages.
Do serious sport(s).
All of these are better than saving/investments.
You may think about arts lessons, math tutors, I mean real math, not puny school BS (yes 8yo can do this).
Same with your younger child(ren).
That’s something you may easily burn $50-80K/year on two kids.

Im thinking about buying rental property, but im not sure i want the stress of managing tenants.

Looks like you make good money, why would you burn your time on managing rentals?
You may also enjoy yourself: take vacations, travel, etc.
You may look for a charity you like what it does. There is nothing wrong in giving to such. You may also have friends/relatives in need (what about giving to patrick.net?).
The bottom line, be the master of your money, rather than its servant, make it do something you would like.

edvard, I have plenty in mutual funds, I'm not looking to put more in. Based on what I have there alone I'll be able to comfortably retire and leave a small fortune to my children.

FortWayne says

Well, you still work for someone else, paid a salary. Why not invest into your own venture on a side, isn't that the real American dream? Find a couple of good reliable friends who would go into it with you and see if you can make it. No day job is going to last forever.

Time is the most precious commodity, once it's gone it's really gone. And biggest regrets in life is not trying something. I see it as it's better to try and even fail than not try at all.

Quality Auto Repair Since 1979

I've started businesses before, and I don't have the taste for them. There are really only two ways to go about it:

1. You work hard at something boring

2. You have a brilliant idea

I'm not interested in working hard at something boring, nor do I have any brilliant ideas at the moment.

$100k isn't nearly enough for me to continue my current standard of living for more than a year or two. That would be less than a third of my current income.

EBGuy says

Have you gone solar yet? At the very least, buy a large enough solar electric system to take care of the higher marginal electric rates (above baseline usage). You seem like the type that may be running a server farm in his basement.

The math doesn't work here as an investment. It's something I might do for environmental reasons, but with the cost of power in my area I have a hard time seeing how this would be a financial investment.

BTW, who is your insurer that jacked up the rates 40% (or was this due to other externalities?)

Blue Shield of CA. Apparently it was actually more like 75%, but my employer bumped up their portion of the contribution to dampen it. Granted, a 40% increase for me means $80 a month instead of $60...but still.

michaelsch says

Get private music lessons.
Teach him foreign languages.
Do serious sport(s).

Er, my children aren't an investment plan, they're my children. I'm not going to dump money into things they don't want to do in the hope that they become successful in that career. They play sports and take music lessons -- for fun. The kind of programs that cost $50k a year are the ones designed to sucker in well off immigrant parents who think that it's the only way their kids will go to a good university.

michaelsch says

Looks like you make good money, why would you burn your time on managing rentals?
You may also enjoy yourself: take vacations, travel, etc.
You may look for a charity you like what it does. There is nothing wrong in giving to such. You may also have friends/relatives in need (what about giving to patrick.net?).
The bottom line, be the master of your money, rather than its servant, make it do something you would like.

I make -plenty- of money. I'm just looking for where to invest the $100k in cash that I have sitting in a savings account. This is by no means all of my assets, and my income this year will easily replenish whatever I do with it since my household expenses are pretty modest.

Kevin says

I make -plenty- of money. I'm just looking for where to invest the $100k in cash that I have sitting in a savings account. This is by no means all of my assets, and my income this year will easily replenish whatever I do with it since my household expenses are pretty modest.

Back East I know a lot of people that buy land and grow hardwood trees that they eventually plan on selling/harvesting. I don't know what the initial investment is on something like this but it always looks like a good idea 30 years after the fact when grandpa dies and the kids sell the wood for a cool million.

You ain't no kind of man if you ain't got land - Delmar O'Donnell

There really don't seem to be many good investments now, I agree.

Stocks: overvalued on a long-term, cyclically-adjusted basis see www.multpl.com. If interest rates rise, money will flow out of stocks and into more conservative investments

Bonds: everyone's in bonds, bond yields at historic lows

Cash: governments around the world are printing money.

Gold/Silver: all the inflation paranoia is already "priced-in". Gold and silver are starting to look like bubbles.

Other commodities (oil, agriculture, industrial metals): wild price swings. China RE construction bubble is collapsing.

I suppose cash is the worst asset class right now, except for all the others. Cash gives you the ability to be opportunistic, and losing 2-3% annually from inflation isn't as bad as losing much more in riskier investments. Wait for a panic in some asset class, and then buy when there's "blood in the streets."

That's my plan anyway.

Kevin says

edvard, I have plenty in mutual funds, I'm not looking to put more in. Based on what I have there alone I'll be able to comfortably retire and leave a small fortune to my children.

But that doesn't mean the same general investment options suddenly don't exist. I'd say the exact same thing if someone had $100 or even $10. Your post was basically asking what would be some ideas of what to do with 100k. Regardless of your financial situation, 100k is still a sizable amount of money. Sure- you could blow it all on a new Bimmer, tons of crap for the house, or some other consumer goods. Or if you just stuck it into plain ole' fashioned, well-diversified stock market investments and let it do its thing for 30 years or so. If the market performs at its historical levels you could be looking at an extra cool million+ bucks in the end. I certainly wouldn't scoff at that unless you're as seemingly well-off as you are alluding to at which case sure- go out and buy a Bimmer and a coupla' 60" flat screens for all we care. If that be the case why are you asking strangers on the internet what you should do with your money?

Either way, its your money. Do what you want with it.

* Not financial advice.

The math doesn't work here as an investment. It's something I might do for environmental reasons, but with the cost of power in my area I have a hard time seeing how this would be a financial investment.
I save around $300 per year (smaller utility bill, mostly baseline usage) on a $10k 'investment' (cost of solar electric install after rebates). That's a three percent return (better than a saving account). You can then say (with a bit of handwaving) that the increase is electric rates offsets equipment depreciation. YMMV.

Kevin says

I'm not interested in working hard at something boring, nor do I have any brilliant ideas at the moment.

Have you thought about being a VC than? I've heard some folks do that when they make more money than they know what to do with.

FortWayne says

Have you thought about being a VC than? I've heard some folks do that when they make more money than they know what to do with.

To play this game, the general partner takes 0 risk of loss but 30% of the gains right off the top. 0 Capital contribution but eligible for a gain like they are a 30% partner.

FortWayne:

I'm not interested in a career change, just a good place to invest $100k. That's not nearly enough to be a VC, but it might be enough to do small scale investing in a local startup. There are hardly any at that stage of funding in the puget sound area though, and I'm definitely not going back to silly con valley.

You could give it to me, if you are really at that much of a loss of what to do with your money. :)

Kevin,

I'm not sure why you feel that it's important to hold investment activity hostage to diversification concerns. That makes a lot of sense if there's a risk of needing the money relatively soon, but that doesn't seem to be the case for you. Leaving the money idle might be a worse sin than settling for less diversification than you'd ordinarily like.

My not-investment-advice would be to hold enough in liquid 1% accounts to protect your investments from unexpected life events, and then look for the best investment values with the best diversification that you can reasonably find. If that leaves all your investments diversified within the equity asset-class, so be it. Sharing your assessment of the various asset classes out there, and seeing a comparatively attractive multiple on the market, I tend to get most of my diversification from index equity funds. I get some protection from volatility by dollar cost averaging.

Don't do that if you can't ride out volatility. The difference between selling and continuing to buy throughout a crash like 2009's is the difference between getting killed and making a reasonable profit.

A good rule of thumb for a life-event war-chest is 6 months of living expenses. You're probably already doing that, but I mention it anyway.

Buy Gold, physical gold.......

Invest. In pennies...
http://abcnews.go.com/Business/laws-change-penny-hoarders-cash-thousands-dollars/story?id=15076522

The following is from Ann Barnhardt Interview posted at: http://www.financialsense.com/contributors/2011/12/02/ann-barnhardt/interview-transcript

Most of our wealth in this society exists as zeroes and ones on a computer server. It takes no effort whatsoever to steal zeros and ones on a computer server.
So what I have been telling people is you need to get into physical commodities. And the rule of thumb is if you can stand in front of it with an assault rifle and physically protect it, then it's real—it's a real commodity.
That includes food, that includes water, that includes long guns and ammunition. That includes fuel. That includes precious metals—gold and silver coinage. Most especially silver coinage because silver is the metal of barter and transaction and currency. Gold is the storage metal because it's so valuable per ounce.

Texas Mom says

It takes no effort whatsoever to steal zeros and ones on a computer server.

This is the biggest load of horseshit I've seen today. It's VERY hard to steal money from a bank electronically. This is why most people who steal money digitally go for credit card fraud and the like.

If we get to the point where I need guns to protect my assets, the world is fucked and I couldn't care less what makes a good investment. At that point it's every man for himself and I'll be killing and eating my neighbors to protect my family.

Kevin says

This is the biggest load of horseshit I've seen today.

LOL. Do you even read news?

Do you know that segregated customer account funds of $1.2 billion is missing from the MF Global fiasco?

There's no explanation as to where the money is and the customers are left in the dark.

http://jessescrossroadscafe.blogspot.com/2011/12/mf-global-issue-is-fraud-and-attempt-to.html

Your 100k is minuscule when compared to $1200 million gone missing.

Are funds at US financial firms safe? The answer to this question is not a resounding yes, but a doubtful maybe.

So no, what TexasMom said is not horseshit, it is reality. Question is whether enough people have woken up to this.

it's too bad discover bank stopped out of their 3.0% CD the other month, but i'm sure you can find a bank that will offer 2.25% or two-and-a-half percent.

it's not much, but it beats a 1% savings account.

ing direct recently dropped their yield on their orange savings account to ~.85 percent.

dayum, gina!