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| frac0019 |
 Posted: Thu Dec 21, 2006 7:03 am Post subject: What to do with $10,000? |
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Investing Sr. Associate
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Hello, I need some opinons and suggestions. In Janurary my friend will be receiving $10,000 from a life insurance policy and he wants to invest $5000 of it. He wanted to put it in some mutual funds or any kind of investment for long term. I suggested to him that he could put $3,000 into an index fund since the costs are lower and the returns are higher with a good expense ratio. I told him to put it in the Vangaurd Mid Cap Index Fund which generates a return of 16.8% in 3 years with an expese ratio of 0.2%, the minium amount to be invested is $3,000. I also told him to put maybe a $1,000 into 6 month or year Cd with a good rate and maybe the rest in a Roth IRA. He just started a new job and I told him that he open an IRA account and try to contribute to the max and if the company he works is offering a 401k that he should enroll in that as well. He is only 23 years of age. Does anyone have any suggestions? Thank you. |
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| Im Not Warren Buffett |
| Posted: Fri Dec 22, 2006 10:27 am Post subject: |
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CFO
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I try not to jump to conclusions without knowing things like risk tolerance or what his goal for his new portfolio is, but...
At 23 your friend can afford to take some risks with his money - so a midcap ETF would probably be a solid starting point. I would look for a place that had a lower initial investment requirement so he could build three decent positions in different areas, and keeping $500-1000 in cash at the bank would provide a nice cushion if he won't give into temptation to spend it on something unnecessary. 
Maybe you should point him here so you can see if he has any skills at picking his own stocks. 
If you want to go with ETFs, a sample portfolio could look something like this:
20-30% Midcap Value (IJJ or IWS), Growth (IJK or IWP), or Blend (IJH or IWR)
20-30% Foreign Exposure: Emerging Markets (VWO or EEM), Large European (IEV), or Large International Value (EFV)
20-30% Smallcap Value (IJS or IWN), Growth (IJT or IWO), or Blend (IJR or IWM)
Remainder in cash and equivalents, or a sector ETF or stock of his choosing |
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| frac0019 |
| Posted: Sat Dec 23, 2006 5:33 pm Post subject: |
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Investing Sr. Associate
Joined: 25 Aug 2006
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28615.32 e$
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| Im Not Warren Buffett wrote: | I try not to jump to conclusions without knowing things like risk tolerance or what his goal for his new portfolio is, but...
At 23 your friend can afford to take some risks with his money - so a midcap ETF would probably be a solid starting point. I would look for a place that had a lower initial investment requirement so he could build three decent positions in different areas, and keeping $500-1000 in cash at the bank would provide a nice cushion if he won't give into temptation to spend it on something unnecessary.
Maybe you should point him here so you can see if he has any skills at picking his own stocks.
If you want to go with ETFs, a sample portfolio could look something like this:
20-30% Midcap Value (IJJ or IWS), Growth (IJK or IWP), or Blend (IJH or IWR)
20-30% Foreign Exposure: Emerging Markets (VWO or EEM), Large European (IEV), or Large International Value (EFV)
20-30% Smallcap Value (IJS or IWN), Growth (IJT or IWO), or Blend (IJR or IWM)
Remainder in cash and equivalents, or a sector ETF or stock of his choosing | Are ETFs better than index funds? |
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| esquire415 |
| Posted: Sat Dec 23, 2006 9:09 pm Post subject: |
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Investing Manager
Joined: 02 Jun 2006
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| Im Not Warren Buffett |
| Posted: Sat Dec 23, 2006 9:16 pm Post subject: |
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CFO
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| frac0019 wrote: | | Are ETFs better than index funds? |
ETFs (Exchange Traded Funds) act like stocks in that they are constantly traded, but they are diversified into many companies like a mutual fund. They often have much lower fees than an actively managed mutual fund, and if your friend doesn't know much about stock picking, a diversified ETF plan could be a great starting point.
Again, any kind of info about risk tolerance and portfolio goals could help in setting up a sample.. the one I gave was just a potential set for your general young guy willing to take on some extra risk in the market for greater reward. |
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| frac0019 |
| Posted: Sun Dec 24, 2006 11:04 am Post subject: |
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Investing Sr. Associate
Joined: 25 Aug 2006
Posts: 125
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Location: Jacksonville, FL
28615.32 e$
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| Im Not Warren Buffett wrote: | | frac0019 wrote: | | Are ETFs better than index funds? |
ETFs (Exchange Traded Funds) act like stocks in that they are constantly traded, but they are diversified into many companies like a mutual fund. They often have much lower fees than an actively managed mutual fund, and if your friend doesn't know much about stock picking, a diversified ETF plan could be a great starting point.
Again, any kind of info about risk tolerance and portfolio goals could help in setting up a sample.. the one I gave was just a potential set for your general young guy willing to take on some extra risk in the market for greater reward. | My friend doesn't know much about stocks at all..i think i will tell him to put it into ETFs..the only reason i went with index funds was because i thought the fees were low as well...but i figured since he is young he should invest at least 70% into stocks.. |
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| rick103054 |
| Posted: Mon Jun 04, 2007 2:11 am Post subject: |
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Investing Sr. Associate
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| wish i could help but as for me i have to keep taking hardship withgrawals out of my 401k to pay medial bills |
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| Grimreaper |
| Posted: Mon Jun 04, 2007 2:38 am Post subject: |
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CFO
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Of course the scenario for what to do wit 10K is constantly changing...but under the current conditions I would allocate it like this:
1. $2000 averaged into MZZ at 48.75....buy 100sh here...add 50 shares each week till the $2K is gone....start selling out abov $69
2. $2000 averaged into an ETF or fund that mirrors the 10 yr treasuries when they hit 5%.....mortgage rate on 30 yr fixed going to 4% in 2 to 3 years....mtg rates based on the 10 yr treasuries...as rates fall....yer principal rises. I'm not an exspurt on treasuries so I can't advise what to buy....but I am confidunt the scenario I just laid out will materialize.
3. $2500 towards speculative stocks trading at or below March 2003 levels. Those will be your ONLY chance for stocks you can buy and hold for even a 12 month period.
4. $3500 in cash and waiting for a long term opp in gold stocks. The next wave down will be a "death run" and summa these plays will become the next great macro 10 year buy n hold plays....gonna take at least that long to unwind this mess in China and eventually I baleave we will be on the gold standard. |
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| eamoses |
| Posted: Wed Jun 20, 2007 2:02 pm Post subject: |
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Investing Manager
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| rick103054 wrote: | | wish i could help but as for me i have to keep taking hardship withgrawals out of my 401k to pay medial bills |
wow, that is really a bad deal |
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