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need advice from you awesome PatNetters


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2014 Apr 10, 9:15am   23,554 views  51 comments

by AdamCarollaFan   ➕follow (0)   💰tip   ignore  

the details:

30s, single, no kids, happy renter, good job, no debt, roth ira and 401K maxed every year

i have a large chunk of change that i'd like to do something with. it's currently earning 0.75%. i don't plan on using any of the money any time soon. also, i have a low financial risk tolerance.

my question is - what should i do with the money to maximize earnings?

i'm thinking of putting it in a 60-month CD earning 2.25% - good idea?

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1   clambo   2014 Apr 10, 10:28am  

60 months is a long time and that's a lousy return if you don't need the money handy.
The CD is you lending your cash to a bank for it to use, essentially for free, while you are locked in. If this appeals to you, re-read the previous sentence.
The time frame for making a stock investment is generally 5+ years, since stocks can fluctuate down, not just up.

If you are afraid to see the account value fluctuate down, then you can buy a bond fund, or a balanced fund at Vanguard or T.Rowe Price, or similar. I prefer Vanguard because the fees are low and bond funds don't return so much.

If I found a suitcase with money in it, I would buy Vanguard Wellington (balanced), or buy Vanguard Dividend Growth and forget it. There are other choices, a fund like T.Rowe Price Capital Appreciation is also a balanced fund, i.e. has a bond component. Balanced funds have the secondary objective of "capital preservation"=try not to see the value fall dramatically, hence the bonds component.

Wellington is a bit interesting because the stocks in it are only quality companies, and the bonds in it also.

If you are not afraid to see some fluctuation down of the account value which will happen from time to time, you can go more agressive in a stock fund which isn't balanced. There are other stock funds that are cool like Fidelity Contrafund, Vanguard Total Stock Market Index fund.

The more you fear seeing the account fluctuate down, the more you move from the stock investments towards bond investments.

Today since interest rates are so low, I like stock investments. Also, because of your age you can compound a stock mutual fund and have fantastic results over a couple of decades.

If you want to make something but want to worry less, you always have the option of bond funds. You could also make your own "balanced" fund with Dividend Growth Fund, then add a bond fund in the proportion that you like.

Your making money on your investment and having a low financial risk tolerance are conflicting. Stocks can appreciate capital, but if you fear them then stick to blue chip stocks that pay dividends, or buy a balanced fund.

The entire "chunk of change" doesn't need to be invested in stocks or funds, you'll like to keep some in a money market account just to feel safe.

2   AdamCarollaFan   2014 Apr 10, 12:01pm  

you're a good man, clambo. thank you.

i like the idea of a balanced fund, and i'll have to look into it.

my problem all these years is that i'm a lazy bastard, so just putting the dough in a CD and being able to forget about it is a lot easier than taking the time to learn about something else.

3   Reality   2014 Apr 10, 2:01pm  

Whatever you do, do not put the money into stock market now, in the April asset reallocation season after a big out-performance year for stocks last year. A lot of mutual fund owners need to pay taxes, and your new money will pay their taxes if you invest into their funds at current NAV.

Cash, gold and income-producing real estate are all better options for this year.

4   Ceffer   2014 Apr 10, 4:10pm  

What clambo said.

5   AverageBear   2014 Apr 17, 11:53am  

ACF, I'm here to tell you that you want to put your money in 5-10 blue-chip dividend paying stocks. If you want to spend a llittle time doing some research, you will find that dividend growth investing is very rewarding. A 60 month CD earning 2.25% ..... How about putting some of that $$ into Coca Cola (KO). It currently earns 3.2%, and KO increases its dividend payout every February around 10%. They have been doing this for over 30 years. Coke ain't going anywhere... It will take 7 years to double your dividend... 3.2% becomes 6.4% for Yield on Cost ... There's a reason why Warren Buffett holds tons of this stock (around 9% of KO, IIRC). Other bluechips to consider with annual dividend growth between 7-10%... PEP, JNJ, XOM, CVX, PM, MCD.

http://dailydividendalert.com/david-fishs-dividend-champions-contenders-and-challengers/

For more info/inspiration on Dividend Growth Investing, check out the following links... Good Luck!

http://theconservativeincomeinvestor.com/

http://theconservativeincomeinvestor.com/2013/07/11/colgate-palmolive-stock-an-essential-core-holding-in-your-portfolio/

http://www.dividendgrowthinvestor.com/

6   indigenous   2014 Apr 17, 1:29pm  

Bonds make sense. Stock does not, it is overdue for a big correction.

7   RentingForHalfTheCost   2014 Apr 17, 2:28pm  

Convert it over to Swiss Franc's immediately. About the only way it will still have value in 10-15 years.

8   Heraclitusstudent   2014 Apr 17, 3:01pm  

RentingForHalfTheCost says

Convert it over to Swiss Franc's immediately. About the only way it will still have value in 10-15 years.

The Swiss devalue their currency to cap it against the euro, and pay super low interests.

And the ECB is likely to start printing soon, devaluing the euro.

9   indigenous   2014 Apr 17, 3:15pm  

RentingForHalfTheCost says

Convert it over to Swiss Franc's immediately. About the only way it will still have value in 10-15 years.

Why?

10   Y   2014 Apr 17, 3:22pm  

Car washes. Invest in publically owned carwashes.
The middle class is extinct.
Only the richens and guttersnipes remain.
Latter washes formers luxery sedans.
All the time. Every day.

11   lahossain   2014 Apr 17, 3:23pm  

Whatever you do, i just wanna say I love your username. Oh, the good ol years of Loveline!

12   Heraclitusstudent   2014 Apr 17, 3:23pm  

sbh says

instead I council you to stay single, don't father any kids, continue to rent, work hard, don't borrow money, and for sure, max the fuck out of Roth and 401K.

Be sure to die early too, so you can maximize your lifestyle.

13   clambo   2014 Apr 17, 3:46pm  

If you do not care that the "chunk" of money grows at all, this is OK.

If you want to make your life simple, Dodge&Cox have just 5 funds. None will damage you financially, all are good funds. You could just get Dodge&Cox balanced and forget it.

T.Rowe Price Capital Appreciation is a good balanced fund, as is Vanguard Wellington.

Yacktman fund is a fund that exclusively buys the bluest of Blue Chip companies. Similar is Vanguard Dividend Growth.

There is going to be a Fidelity office in your area or nearby probably. You could go in there and buy a balanced fund, or a bond fund plus fidelity Contrafund, Fidelity Blue chip growth, Fidelity Equity income (means dividend paying stocks=huge successful companies, Exxon, Chevron, ATT, etc.)

Many years ago my mother had an IRA, I drove her to a Fidelity office and got her Contrafund and Blue Chip Growth. She made a lotta dough over the years from it.

It's possible you feel more comfortable seeing a person rather than doing the transaction online, so Fidelity is good for walking in.

For fun, take a few Gs and buy Blackrock's Swiss ETF, (Symbol=EWL), great companies, Nestle, Roche, Novartis, Transocean, etc. Oh man Switzerland rocks.

14   clambo   2014 Apr 17, 3:57pm  

A little off the subject, don't be afraid of stocks. Even in bad times people consume.
The other day I was gassing up and seeing the endless stream of cars thought to myself "there go the people paying the Exxon dividends." Of course, so was I. People are not going to stop driving and using energy.
In McDonalds for my "senior coffee" I saw lots of people latched onto their iPhones. Apple and AT&T are going to be making money for a long time.
I stopped at my friend's house to see what he was up to, and he was watching TV (Comcast) while his girlfriend was playing with her iPad mini using the internet (Comcast). He and millions of people are not going to cancel Comcast. He asked me to go help him buy something at Costco, which I dislike but I went. The parking lot was like a demolition derby, people were in a huge hurry to go spend money on stuff! The inside of Costco was almost chaos with people swooping up the samples like seagulls. It was scary.
But, those people are normal worldwide. Worldwide people consume and this is growing. Successful businesses get a piece of the action and make profits. These profits can be yours too if you buy stocks that pay dividends.

15   indigenous   2014 Apr 17, 4:07pm  

clambo says

don't be afraid of stocks.

Be afraid be very afraid

16   JH   2014 Apr 17, 4:44pm  

clambo says

A little off the subject, don't be afraid of stocks. Even in bad times people consume.

clambo says

I stopped at my friend's house to see what he was up to, and he was watching TV (Comcast)

clambo says

These profits can be yours too if you buy stocks that pay dividends.

Bullshit. Cashed in 100 shares of Verizon in 2001 at $50 a share. Guess what VZ closed at today? $47.60

All those dividends I missed? $2400

Inflation since 2001? $1600

I could've beat inflation by $800, or 1.2%.

Before the current bubble, VZ hovered at $30 for several years. Expect that again...in which case VZ would've been a loss for me. This is "America's best network" with millions of subscribers/consumers.

17   Rew   2014 Apr 17, 5:06pm  

JH, I think the operative word here was "if you buy stocks" ... as in plural. That is to say, not all dividend giving stocks are equal, and it depends on how big a position you can take, in how much those stocks pay back in their dividends.

18   TheOriginalSBH   2014 Apr 17, 11:20pm  

JCP..100% IN
u can't lose....

19   RentingForHalfTheCost   2014 Apr 18, 1:12am  

indigenous says

RentingForHalfTheCost says

Convert it over to Swiss Franc's immediately. About the only way it will still have value in 10-15 years.

Why?

Massive US debt for one. Add in increasing liabilities in Health Care and Social Security, and you have a perfect storm for currency devaluation. Each US dollar I make quickly gets converted to something else. Gold, other currencies, foreign stocks, etc. This place is living on hope and hope only.

20   JH   2014 Apr 18, 1:45am  

Rew says

JH, I think the operative word here was "if you buy stocks" ... as in plural.

It was, but then he blathered on about specific stocks, so I thought I would discuss a specific example of stock from a company that it seems every other person has some consumption of. Demand for Verizon is very high, and 2 year contracts are the norm, so many people are stuck with Verizon. Yet, over 13 years, their stock dividends have barely covered inflation, even in an inflated stock market.

But sure, buy 1,000,000,000 VZ, and you'll get nice dividends. Until the market corrects or crashes, and then I hope the dividends cover your losses.

21   indigenous   2014 Apr 18, 2:01am  

RentingForHalfTheCost says

Massive US debt for one. Add in increasing liabilities in Health Care and Social Security, and you have a perfect storm for currency devaluation. Each US dollar I make quickly gets converted to something else. Gold, other currencies, foreign stocks, etc. This place is living on hope and hope only.

But all the countries are in a currency war.

From what I read the unfunded liabilities are going to come to a head in 2030.

We are in a deflation period because the banks are not lending, technology has made almost everything cheaper, the demographics in the US are shrinking.

Gold is a hedge against inflation not deflation.

22   zzyzzx   2014 Apr 18, 3:09am  

AdamCarollaFan says

what should i do with the money to maximize earnings?

Buy low. Sell high. Works every time!!!

23   indigenous   2014 Apr 18, 3:14am  

zzyzzx says

Buy low. Sell high. Works every time!!!

Cept when you are shorting (8^(l)

24   clambo   2014 Apr 18, 4:56am  

Re: Rentingforhalfthe cost, he has a point, a reason to own Swiss Francs would be to preserve capital buying power v. US dollar. I consider having swiss francs like owning gold, but much more convenient and liquid, no tax on selling it, etc.

When I visited Switzerland in 1974 1 Swiss Franc cost me 33 cents. Today, 1 Swiss Franc costs $1.13
Switzerland is awesome by the way.

Oh, a little off the subject, the Swiss stock market index is up 8.8% since Jan 1 (EWL)

re: stocks being dangerous for the next "crash", well the way to avoid losing money in such events is obvious; have sufficient cash reserves from your *dividends* to pay your bills and do not sell stocks when the market dips down unless you must.

There is always the risk of losing capital with stocks, but some stocks are much safer than others.

My complaint is becoming a shareholder in Solyndra when no one asked me if I wanted to own it. GM and Chrysler too, Citi too, AIG too, Bank of America too, GE too, etc.

25   clambo   2014 Apr 18, 4:58am  

You don't need to go overseas to open a bank account in Swiss Francs if you desire to.

26   Waitingtobuy   2014 Apr 18, 7:17am  

I invest some money in Everbank foreign currency CDs. The maturity is short (3 months) and they are FDIC insured. They have individual currencies or baskets, some of which have interest rates (the value of the currency can fluctuate)
https://www.everbank.com/currencies/rates

27   FortWayne   2014 Apr 18, 7:23am  

It's a simple game of risk vs reward. How much risk can you stomach?

28   epitaph   2014 Apr 18, 7:48am  

Vanguard sounds like what you want. Congrats on being in good financial shape.

29   rufita11   2014 Apr 18, 7:53am  

SoftShell says

Car washes. Invest in publically owned carwashes.

The middle class is extinct.

Only the richens and guttersnipes remain.

Latter washes formers luxery sedans.

All the time. Every day.

I know someone who fantasizes about owning a car wash in retirement ;p Apparently, he just loves spending time at them.

30   Shaman   2014 Apr 18, 10:05am  

I've said it before, but check out Visa stock, 50% up year over year over year. And the Asian countries are going in for cards now big time. Huge expansion!
You can make a bundle on single stocks if you choose wisely. Or you can lose your ass. I've done both. But I've mostly won. A lot. My strategy: choose stocks in companies that are rising stars, upcoming technologies or trending uses. Above all, pick companies that are ethically serving the populace with good product/service. Pick companies that have stuff you buy and are happy with.

31   clambo   2014 Apr 21, 5:21am  

More grist for the mill, re: mutual funds.

If you admire Warren Buffet's success with investing, you can have some of it by owning Fidelity Contrafund.

The #2 stock owned by Contrafund is Berkshire Hathaway. Of course Contrafund also has hundreds of other stocks in the portfolio, but Berkshire is #2 in terms of dollar amount. #1 is Google.

Funds are better than stocks unless you enjoy the activity, and for reasonable risk control you need 20 or 30, of course, picking the dividend paying blue chip stocks is OK.

T.Rowe Price Capital Appreciation, Dodge&Cox Stock, Dodge&Cox balanced, Vanguard Wellington, Vanguard Dividend Growth, Fidelity Contrafund are good, as are others. A fun website is Maxfunds.com to research funds if you are interested.
I forgot to mention, T.Rowe Price and Vanguard offer very low cost financial planning, I think it's $500.
If you have a large enough balance at Vanguard, there is ZERO fee for a financial plan to assist you. Theoretically you could "park" your chunk of dough in a Vanguard money market and then qualify for the free financial plan.
Either way the guys there are very good to talk to, the problem is you are on the phone, Vanguard doesn't have offices all over like Fidelity does.

32   corntrollio   2014 Apr 21, 6:58am  

Go over to Bogleheads and have them set you up on Vanguard with a 3-fund portfolio or whatever. You'll get nice market returns and pay almost no fees and be ahead of almost everyone speculating.

33   zzyzzx   2014 Apr 21, 10:00am  

Get a vasectomy. It's way cheaper than having any kids.

34   justme   2014 Apr 21, 4:29pm  

I am entering from stage left, and the below is specifically not written in response to any other posting in particular:

The single most important question you can ask anyone about their stock tip or other investment idea is WHO they got the idea from, or HOW they got it.

Was it from watching CNBC on TV or some other crappy source that is dominated by the sell-side of Wall St? Did you read it on some financial rag, web or otherwise? Did you base it on some original observation or analysis that you made?

My thesis would be that most investment ideas are subtly planted into people's heads, and they have no idea where it came from, and/or they may not recall the correct answer to that question if queried. A lot of times they are just parroting something they saw on TV or "read somewhere".

That does not mean that the advice is bad or good. Sometime one can even identify a good momentum play from what is richocheting around the echo chambers of the web. But most of the times it means that the train has already left the station.

The point is, investment ideas are rarely original, often bad ideas, and rarely timely.

35   Vicente   2014 Apr 21, 5:25pm  

"Municipal bonds, Ted. Triple-A rating, best investment in the book!"

36   AdamCarollaFan   2017 Jan 13, 2:18pm  

epitaph says

Vanguard sounds like what you want.

thanks to all of you for your informative (and comedic) answers.

i ended up putting the majority of it in a vanguard index funds.

and, yes, i did put some of it in a 5-year CD @ 2.2%. egg on my face for that one

37   _   2017 Jan 13, 4:21pm  

AdamCarollaFan says

i'm thinking of putting it in a 60-month CD earning 2.25% - good idea?

Buy a rental property in the new buildings being built from Austin to San Antonio in good school districts and rent it out

38   HEY YOU   2017 Jan 13, 4:40pm  

Who are these AWESOMES you speak of?
This is patnet. You must have us retardos confused with another site.

39   Strategist   2017 Jan 13, 5:33pm  

RentingForHalfTheCost says

Yes, holding about 20% in Swiss Franc, another 10% share in Canadian and another 10% in Reals (Brazil). The Brazil angle is also a double play, because it might be where I buy land and retire. Both Canadian and Brazil are also plays on precious metals making a comeback, which would strengthen the currencies as well as the countries finances. The other 60% is in a mix of metals, quality stocks (high dividends) and cash.

Renting must be broke by now.
And i'm sure he's paying twice the rent.

40   Strategist   2017 Jan 13, 5:44pm  

AdamCarollaFan says

thanks to all of you for your informative (and comedic) answers.

i ended up putting the majority of it in a vanguard index funds.

and, yes, i did put some of it in a 5-year CD @ 2.2%. egg on my face for that one

Here's the best advise you will receive:
Buy that fucking home. It's going up in value.

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