You are the only one who knows your risk tolerance and the long-termness of your investment. If you have mid-range risk tolerance and/or a long time before you'd be hitting this money, you obviously want mutual funds. If you have no risk tolerance or this is a short term investment, go for the guarenteed yeild.
Generally investments are divided into three main catagories.
Stocks: High risk, high average historical gain.
Bonds: Moderate to lot risk, moderate to low gains. Good to buy in mutual funds for the higher risk end(non-federal government)
Cash and cash equivelents: Very low risk, very low gains. Cash in a mattress, in a Bank, in a CD and in a Money Market account fall here.
Generally, mutual funds can have just about any combination of the above three catagories of holdings, so your risk level can vary widely.
How much risk can you afford in your investments? How tight is the ten year window(this would lower the risk you want to take)? How much are you willing to keep an eye on your investments(this would raise it slightly). You are likely to want some mix of stocks funds and bond funds.
Given what I know about your level of finance knowledge, I would recomenend for stocks that you look into index funds and other vehicles. (the Vanguard s&p 500 undex fund is popular and well regarded. S&P 500 is the 500 largest public americal companies. if you want to look around more, there is something equivelent that is not a stock or a fund, but is similar called SPDR).
Many activly managed mutual funds do no better or worse, and have much larger fees, and I can't give advice on finding one that will definatly be better, and individual stocks are much more stressful to deal with.
On the other hand, you might be able to find a single fund that contains a mix of stocks, bonds and cash equivelents you like, in which case it may be simpler to deal with one large investment.
Lordy honey, you clearly don't have enough Jewish freinds. If you would like I know a nice Jewish stock broker who works in the financial district and is considered to be very good at what he does. Maybe you should just open an account with him.
At 50k, you may want to look into your own stock portfolio... 20 stocks at ~$25 each, or better yet fewer with the remainder in some mutual funds. I'd aim for some big, well-established things with a few spicy ones thrown in.
Stay away from CDs right now - interest rates are too low and will be going up a fair amount in the next couple of years. If you really do want them, go for <=1yr ones so you can roll them over to something better later. Same for bonds.
Given your age and the amount of time that these will be sitting around, you might as well go medium to high risk. Diversified, of course... high risk in half a dozen unrelated industries means that some should do well, and some will suck big rocks, averaging out to something OK. Mutual funds are good for diversity, since they already have a market basket of stuff. Mutual funds would require a bit more sleuthing so you can make sure that, say, every one of them is not half invested in RJ Reynolds. Many funds invest in the same things.
And, I'd agree with the "pay off all loans first if possible" thing. Loan rate of 5% vs. a CD return of 3% is a loss to keep the loan going. And don't even get me started about credit cards.
Last option, although not for the Bay Area: real estate. It's a good downpayment for many parts of the country.
I'll second the "pay off loans" thing. Interest on debt is almost invariably higher than the returns you can earn on an investment. (Otherwise, your lenders would just invest. *g*)
I'm not so sure about real estate, though -- while I don't think our land is going to get cheaper, I suspect that it is going to have to lag the market in the rest of the country at some point, to correct the dot-com boom's distortion of prices. Rents have come down, and real estate has stalled a bit, but the low mortgage rates have prevented prices from seriously sinking (because the same price seems cheaper to buyers, currently). The fed just started raising rates -- I'd be willing to wager that if the economy does well, Bay Area real estate is going to yield very little for the next two years, in investment terms.
I would highly recommend discussing this issue with either a professional, or, if you want to save on the advice, with DEC, who might as well be a pro, since his primary income is from his investments. (He also does have a broker and an accountant, but he's sharp.)
My immediate instinct is: If you want the money to be semi-liquid, but mostly for investment purposes, split it two or three ways between a general mutual fund -- I would suggest starting with the Domini Social Index Fund (DSEFX), as it has outperformed all the major indices over the last decade or so, and has socially-conscious screening (your money won't go to tobacco companies, gun companies, etc) -- and then maybe some bonds and CDs. Exactly how much to put into each of those I am not qualified to determine; partly depends on purpose, risk-tolerance, and desired liquidity.
If you want complete liquidity, rolling short-term CDs or bonds (i.e. get one-year CDs in such a way that one cashes out every few months, then collect the interest from that, and buy another one with the principal) are probably a good way to go. Or even just a money market account. *shrug*
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timeasmymeasure
no subject
Date: 2004-06-29 01:27 am (UTC)no subject
Date: 2004-06-29 01:24 am (UTC)investment
Date: 2004-06-29 07:06 am (UTC)Generally investments are divided into three main catagories.
Stocks: High risk, high average historical gain.
Bonds: Moderate to lot risk, moderate to low gains. Good to buy in mutual funds for the higher risk end(non-federal government)
Cash and cash equivelents: Very low risk, very low gains. Cash in a mattress, in a Bank, in a CD and in a Money Market account fall here.
Generally, mutual funds can have just about any combination of the above three catagories of holdings, so your risk level can vary widely.
How much risk can you afford in your investments? How tight is the ten year window(this would lower the risk you want to take)? How much are you willing to keep an eye on your investments(this would raise it slightly). You are likely to want some mix of stocks funds and bond funds.
Given what I know about your level of finance knowledge, I would recomenend for stocks that you look into index funds and other vehicles. (the Vanguard s&p 500 undex fund is popular and well regarded. S&P 500 is the 500 largest public americal companies. if you want to look around more, there is something equivelent that is not a stock or a fund, but is similar called SPDR).
Many activly managed mutual funds do no better or worse, and have much larger fees, and I can't give advice on finding one that will definatly be better, and individual stocks are much more stressful to deal with.
On the other hand, you might be able to find a single fund that contains a mix of stocks, bonds and cash equivelents you like, in which case it may be simpler to deal with one large investment.
no subject
Date: 2004-06-29 08:08 am (UTC)no subject
Date: 2004-06-29 10:35 am (UTC)no subject
Date: 2004-06-29 01:03 pm (UTC)Stay away from CDs right now - interest rates are too low and will be going up a fair amount in the next couple of years. If you really do want them, go for <=1yr ones so you can roll them over to something better later. Same for bonds.
Given your age and the amount of time that these will be sitting around, you might as well go medium to high risk. Diversified, of course... high risk in half a dozen unrelated industries means that some should do well, and some will suck big rocks, averaging out to something OK. Mutual funds are good for diversity, since they already have a market basket of stuff. Mutual funds would require a bit more sleuthing so you can make sure that, say, every one of them is not half invested in RJ Reynolds. Many funds invest in the same things.
And, I'd agree with the "pay off all loans first if possible" thing. Loan rate of 5% vs. a CD return of 3% is a loss to keep the loan going. And don't even get me started about credit cards.
Last option, although not for the Bay Area: real estate. It's a good downpayment for many parts of the country.
Bullet point: a wide diversity of med-high risk.
no subject
Date: 2004-07-01 01:39 am (UTC)I'm not so sure about real estate, though -- while I don't think our land is going to get cheaper, I suspect that it is going to have to lag the market in the rest of the country at some point, to correct the dot-com boom's distortion of prices. Rents have come down, and real estate has stalled a bit, but the low mortgage rates have prevented prices from seriously sinking (because the same price seems cheaper to buyers, currently). The fed just started raising rates -- I'd be willing to wager that if the economy does well, Bay Area real estate is going to yield very little for the next two years, in investment terms.
no subject
Date: 2004-07-01 01:35 am (UTC)My immediate instinct is: If you want the money to be semi-liquid, but mostly for investment purposes, split it two or three ways between a general mutual fund -- I would suggest starting with the Domini Social Index Fund (DSEFX), as it has outperformed all the major indices over the last decade or so, and has socially-conscious screening (your money won't go to tobacco companies, gun companies, etc) -- and then maybe some bonds and CDs. Exactly how much to put into each of those I am not qualified to determine; partly depends on purpose, risk-tolerance, and desired liquidity.
If you want complete liquidity, rolling short-term CDs or bonds (i.e. get one-year CDs in such a way that one cashes out every few months, then collect the interest from that, and buy another one with the principal) are probably a good way to go. Or even just a money market account. *shrug*