Short-term investments

learhawkerbe400

learhawkerbe400

Well-Known Member
Finally making enough money to pay all my bills, max out my 401k and have enough left over that my bank account keeps rising. What should I do with that money so it's working for me, not sitting in my checking account? I pretty much know nothing about investing besides how to put the max in my 401k haha.

Some basic info about my situation. Late 20s, 150k mortgage, 10k car loan, no credit card debt/ school loans. Thanks!
 
What's the APR on the car loan? If you know nothing about investments most short term options would be too risky. I'd just pay off the car if the APR on it is anything above 3%
 
Look into individual stocks, bonds, ETFs, even crowd funding of you want. Start with small amounts of money (think 200-300 bucks at a time), and go from there. You'll learn as you go and your initial mistakes will be much less costly of you start small.

If you want to make more in interest and have money you know you won't need for 6 months to a year? Look at CDs, like a saving account they are guaranteed not to lose money and if you don't withdraw the money after a specified period of time (I've seen anywhere from 3months to 5 years) you pick up a higher interest rate. It's not as good stocks, the interest rate is around .25% to 2.0% APR, but higher than a savings account. Plus, again, there no downside like on a stock.
 
HVYMETALDRVR said:
Look into individual stocks, bonds, ETFs, even crowd funding of you want. Start with small amounts of money (think 200-300 bucks at a time), and go from there. You'll learn as you go and your initial mistakes will be much less costly of you start small.

If you want to make more in interest and have money you know you won't need for 6 months to a year? Look at CDs, like a saving account they are guaranteed not to lose money and if you don't withdraw the money after a specified period of time (I've seen anywhere from 3months to 5 years) you pick up a higher interest rate. It's not as good stocks, the interest rate is around .25% to 2.0% APR, but higher than a savings account. Plus, again, there no downside like on a stock.
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He'd be better off paying the mortgage or the car loan than a CD.
 
hammerhat said:
What's the APR on the car loan? If you know nothing about investments most short term options would be too risky. I'd just pay off the car if the APR on it is anything above 3%
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The car loan is 2.9%. I'm thinking of just paying it off altogether. Definitely want to refi my house. My interest rate is 5.25%. Problem is I owe about 10-15 grand over what it appraises for and I don't want to put that much down.
 
learhawkerbe400 said:
Finally making enough money to pay all my bills, max out my 401k and have enough left over that my bank account keeps rising. What should I do with that money so it's working for me, not sitting in my checking account? I pretty much know nothing about investing besides how to put the max in my 401k haha.

Some basic info about my situation. Late 20s, 150k mortgage, 10k car loan, no credit card debt/ school loans. Thanks!
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If you don't know what to do with the money (as in investing in a brokerage account) then go with the safest option and pay off the car loan, then get your mortgage back down to a value less than it appraises for so you can refi to something better than 5.25% and see if your budget will allow for a 15 year . The financial security with that method outweighs the risk of investing. After that is done start piling up some money and break into investing slowly.
 
@learhawkerbe400 What length of time do you mean by short term investing? What do you want this money to do eventually?

Also, what do you mean by maxing out your 401(k)? Do you mean you put in the $17,500 contribution limit for 2014 or do you mean you fully maximized your company match?
 
learhawkerbe400 said:
The car loan is 2.9%. I'm thinking of just paying it off altogether. Definitely want to refi my house. My interest rate is 5.25%. Problem is I owe about 10-15 grand over what it appraises for and I don't want to put that much down.
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Don't ever pay off a loan that is only charging 2.9% interest. That's basically free money. Even a retarded chimp can get a better return than that on his investments.

You should refi the house, though. You may qualify for a streamline refinance, in which case no appraisal is necessary. Give Quicken Loans a call.

Keep about a month's pay in your checking account. Put everything else in long-term investments. Setup a brokerage account with Schwab, TD Ameritrade, or Scottrade. Put all of your extra cash there and put it all into an ETF (exchange traded fund) that tracks the S&P 500 or the broad market. I recommend Schwab. That's where all my money is, and they have a bunch of no-commission ETFs with dirt cheap expense ratios.

Standard Disclaimer: I am not a financial adviser and nothing in this post or any other post should be construed as financial advice.
 
adk said:
@learhawkerbe400 What length of time do you mean by short term investing? What do you want this money to do eventually?

Also, what do you mean by maxing out your 401(k)? Do you mean you put in the $17,500 contribution limit for 2014 or do you mean you fully maximized your company match?
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By short-term I mean somewhere I can park my money and be able to pull it out whenever I may need it.

I contribute close to the 17.5k limit annually. My company doesn't match, they just put 16% of my salary into a retirement savings plan. So between the two I'm putting away about 3k/month.
 
ATN_Pilot said:
loan that is only charging 2.9% interest. That's basically free money.
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This is a dangerous advice. It's not a binary choice between 2.9% loan and 30-ish% fund. Index funds can go down too. They can be a great long term strategy but horrible short term choice. For example rate hikes (which are almost certainly happening this year by the way) can easily send S&P in red for months or even years. Not understanding the risk and volatility is probably what caused greatest financial disasters including crisis of 2008.
 
learhawkerbe400 said:
By short-term I mean somewhere I can park my money and be able to pull it out whenever I may need it.

I contribute close to the 17.5k limit annually. My company doesn't match, they just put 16% of my salary into a retirement savings plan. So between the two I'm putting away about 3k/month.
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If it's money that you need to keep liquid (i.e., pull it out whenever you need it), a savings account or money market account are going to be pretty much the only options and you're not going to get more than about 1%. Despite that, it's probably a good idea to have 6 months of expenses in a savings account.

If your 401(k) is maxed out and you're looking to add more retirement savings, you can also contribute $5,500 annually to an IRA. If you're single with high income, you might want a traditional IRA instead of a Roth (you can't contribute to a Roth if you make much more than $110k anyways). I use Vanguard for my IRA and I've been very happy with them.

If it's money that you just want to grow, @ATN_Pilot already gave you some good advice. Depending on your risk tolerance, you may want to put a portion of your investments into bond funds. Just remember that if you do invest into stocks you may not be able to pull your money out if you need it suddenly without realizing losses.
 
adk said:
If your 401(k) is maxed out and you're looking to add more retirement savings, you can also contribute $5,500 annually to an IRA.
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If you do this just remember that your IRA contribution may not be tax deductible if you are already covered at work and have certain income level.
 
hammerhat said:
This is a dangerous advice. It's not a binary choice between 2.9% loan and 30-ish% fund. Index funds can go down too. They can be a great long term strategy but horrible short term choice. For example rate hikes (which are almost certainly happening this year by the way) can easily send S&P in red for months or even years. Not understanding the risk and volatility is probably what caused greatest financial disasters including crisis of 2008.
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No one should be keeping more than one or two months of income in short-term investments. Your level of conservatism is why most Americans have no savings and won't be able to retire.
 
mikecweb said:
It's as good of a time as any. If you aren't trading then you shouldn't try to time the market.
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This. I don't consider myself exceptionally skilled, so most of my saving money that's slated for stocks gets put in an index fund, the same amount twice a month. It has had positive results. If fact, my advice is DON'T dump it all into an index fund at once, even if you can.

Whatever small portion that is left over is "expeditionary" where I research and try dumb stuff like timing and looking for stuff that has fallen on hard times … when I think to do it.
 
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