Looking for investment advice

[bbhaag]

So I'm at the point in my life were I'm maxing out my wifes and my traditional IRA's. I also have a SEP-IRA that gets the max contribution from my business. We have some cash in money markets and of course the traditional saving/checking accounts. Our asset to debt ratio is very low.

I need ideas on how to invest our extra income. Our goal is to have around 2million saved by the time we retire(approximately 20-30 years from now). Looking at the typical tax deferred retirement options offered by the government our goal does not seem achievable.
We have around 15k to invest outside of the plans I've already mentioned. What would you guys suggest we invest it in? Do I need to sign up for a Fidelity account and start trading stock or do I pick mutual funds? I'm at a loss here on how to achieve our retirement goal and could really use some advice.

 

[DaveSimmons]

Do not start trading stocks. For 99% of people who try that it's gambling not investing.

The easiest and safest thing to do would be to open a regular brokerage account at vanguard.com and put 100% into their Target <year> fund.

It's a low-expense fund made up of their other low-expense index funds where the amount put into bond funds starts small but grows over time. One fund, fully diversified. Just add more money every year. No thought or effort needed, and you get the safest stock based investment you can make.

If the Target 2045 / 2050 versions have too much in bonds for your taste you can pick a later retirement date like 2055 / 2060 to be more aggressive.

You could do the same thing with a brokerage account at Fidelity or Schwab but then you'll pay a trading fee to buy Vanguard shares.

 

[Excelsior]

Yeah, get an account with Fidelity or Vanguard (or something similar) and pick a low expense index fund. If you want to play around with the stock market, maybe put 80 percent into the index fund and 20 in stocks, but fewer people beat the market than the ones who don't. I wouldn't keep too much of that cash in money markets. Obviously you have your emergency fund and other liquid funds, but being that you have that many years before retirement you don't need to be excessively conservative.

 

[Excelsior]

Do not start trading stocks. For 99% of people who try that it's gambling not investing.

The easiest and safest thing to do would be to open a regular brokerage account at vanguard.com and put 100% into their Target <year> fund.

Yep, I have some of my retirement in a Vanguard Target account. Stupid easy, good enough for most.

 

[RockinZ28]

I've put about $55k diversified among the following in last couple months since I've maxed the Roth IRA and employer has no 401k:

Vanguard S&P 500 index fund ($3k minimum, or 10k for admiral shares)
1 year CD
Robinhood (free stock trading)
Lending Club
Fundrise
Betterment
Cryptocurrencies

I'm open to more ideas as well, still have a lot of money in savings barely making over 1% ( and way less once uncle Sam pillages it come tax time).

 

[TheVrolok]

Do not start trading stocks. For 99% of people who try that it's gambling not investing.

The easiest and safest thing to do would be to open a regular brokerage account at vanguard.com and put 100% into their Target <year> fund.

It's a low-expense fund made up of their other low-expense index funds where the amount put into bond funds starts small but grows over time. One fund, fully diversified. Just add more money every year. No thought or effort needed, and you get the safest stock based investment you can make.

If the Target 2045 / 2050 versions have too much in bonds for your taste you can pick a later retirement date like 2055 / 2060 to be more aggressive.

You could do the same thing with a brokerage account at Fidelity or Schwab but then you'll pay a trading fee to buy Vanguard shares.

Exactly this.

 

[Safeway]

Don't pick Target Retirement. They are underperforming in comparison with your standard fare total stock index fund, and have inflated Expense Ratios.

Buy $15,000 in VTSAX. Set up an account directly through Vanguard.

VTSAX is an Vanguard Admiral fund, which means that it has a $10,000 minimum investment and a much lower expense ratio than the non-Admiral version of the same fund (VTSAX Expense Ratio: 0.04% vs. VTSMX Expense Ratio: 0.15%). Similarly, Vanguard doesn't offer Admiral shares of any Target Retirement fund and, as a result, you'll be paying an Expense Ratio of 0.16%.

 

[Charmonium]

Conventional wisdom is to go with no-load, low-fee, passive funds. Vanguard is probably the best example of that especially their admiral versions. You get wide diversification over an asset class or industry, very little churn, and extremely low fees. That last bit is important. If you're only making 5 or 6% and your fees are 2 or 3%, that doesn't leave you very much, to say nothing of what happens in a down market. Here is an example of some of the fees you can be charged.

However there is something to be said for investing in active funds. Unlike passive funds that tend to buy and hold a specific portfolio of assets, active funds tend to tend to take advantage of market trends. Of course the fees for such funds are higher but in theory they should also produce higher returns. However it's your job as an investor to insure that they do. T. Rowe Price is an example of a group of well regarded active funds.

 

[DaveSimmons]

Don't pick Target Retirement. They are underperforming in comparison with your standard fare total stock index fund, and have inflated Expense Ratios.

Buy $15,000 in VTSAX. Set up an account directly through Vanguard.

VTSAX is an Vanguard Admiral fund, which means that it has a $10,000 minimum investment and a much lower expense ratio than the non-Admiral version of the same fund (VTSAX Expense Ratio: 0.04% vs. VTSMX Expense Ratio: 0.15%). Similarly, Vanguard doesn't offer Admiral shares of any Target Retirement fund and, as a result, you'll be paying an Expense Ratio of 0.16%.

VTSAX - https://personal.vanguard.com/us/funds/snapshot?FundId=0585&FundIntExt=INT

Target - https://investor.vanguard.com/mutual-funds/target-retirement/#/mini/overview/0699

Neither one is a bad choice, but with VTSAX you're trading (currently) higher returns for less diversification, since VTSAX is US-only and 100% stocks, while Target includes bonds and foreign stocks. For something to hold for 20+ years I still prefer Target for someone's first and possibly only non-retirement investment.

 

[MrDudeMan]

VTSAX - https://personal.vanguard.com/us/funds/snapshot?FundId=0585&FundIntExt=INT

Target - https://investor.vanguard.com/mutual-funds/target-retirement/#/mini/overview/0699

Neither one is a bad choice, but with VTSAX you're trading (currently) higher returns for less diversification, since VTSAX is US-only and 100% stocks, while Target includes bonds and foreign stocks. For something to hold for 20+ years I still prefer Target for someone's first and possibly only non-retirement investment.

That's my opinion as well. It is less risky imo.

 

[Safeway]

VTSAX - https://personal.vanguard.com/us/funds/snapshot?FundId=0585&FundIntExt=INT

Target - https://investor.vanguard.com/mutual-funds/target-retirement/#/mini/overview/0699

Neither one is a bad choice, but with VTSAX you're trading (currently) higher returns for less diversification, since VTSAX is US-only and 100% stocks, while Target includes bonds and foreign stocks. For something to hold for 20+ years I still prefer Target for someone's first and possibly only non-retirement investment.

That's my opinion as well. It is less risky imo.

I suppose that both are valid options, but I would still go for VTSAX for now. Perhaps transition into something a bit more diversified in the future. I have a substantial amount of money invested with Vanguard in VTSAX, and it's treated me very well. If you look at the 5yr charts, you're missing out on 20%+ growth by going with a Target, plus the 4x ER. I diversify through other means -- real estate, patents, etc.

 

[Mai72]

I don't know why nobody on this forum ever mentions real estate as an option for investing. Especially multi-family apartments.

Check out Grant Cardone. $500m real estate portfolio. As he says you have renters who are basically paying down your mortgage. Grant also claims that he get 12% ROI his first year and it steadily goes up every year.

-Real estate is tangible.
-People are always going to need a place to live.
-The value of your property goes up year after year.
-The millions of baby boomers are downsizing and will be living in apartments.
-True passive income

You should check out Bigger Pockets. The guy who does the podcast was able to retire in his 30s because the multi-family apartments he has pays for his lifestyle.

 

[Safeway]

I don't know why nobody on this forum ever mentions real estate as an option for investing.

You were 4 minutes too late. Real estate is amazing.

 

[DaveSimmons]

I don't know why nobody on this forum ever mentions real estate as an option for investing. Especially multi-family apartments.

Check out Grant Cardone. $500m real estate portfolio. As he says you have renters who are basically paying down your mortgage. Grant also claims that he get 12% ROI his first year and it steadily goes up every year.

-Real estate is tangible.
-People are always going to need a place to live.
-The value of your property goes up year after year.
-The millions of baby boomers are downsizing and will be living in apartments.
-True passive income

You should check out Bigger Pockets. The guy who does the podcast was able to retire in his 30s because the multi-family apartments he has pays for his lifestyle.

I don't for two reasons:
- It's a lot more work than just sending a check or bank transfer to Vanguard.
- It's much higher risk when you only have 1 or 2 properties. Risk does go down when you have $500 million worth so a few meth labs, hoarders and deadbeat squatters fighting eviction don't hurt you much.

I'd rather spend my free time reading a book, watching a movie, playing a game, etc. than dealing with property.

 

[MrDudeMan]

You were 4 minutes too late. Real estate is amazing.

Indeed. I've made way more money through real estate than anything else. Over the last five years:

Purchased for 137 - sold for 160 after 36 months (+23k)
Purchased for 289 - sold for 310 after 22 months (+21k)
Purchased for 485 - sold for 575 after 18 months (+90k)
Purchased for 187 - sold for 235 after 4 months (+48k)
Purchased for 235 - sold for 285 after 26 months (+50k)

My current rentals are cash flow positive to the tune of 12k/mo. I started very small and gradually worked up to bigger, more expensive properties that attract better tenants. The stock market is probably 10% of my total investment portfolio because I view it is too much risk because how much (little) effort I'm willing to expend learning about it.

 

[MrDudeMan]

I suppose that both are valid options, but I would still go for VTSAX for now. Perhaps transition into something a bit more diversified in the future. I have a substantial amount of money invested with Vanguard in VTSAX, and it's treated me very well. If you look at the 5yr charts, you're missing out on 20%+ growth by going with a Target, plus the 4x ER. I diversify through other means -- real estate, patents, etc.

Unfortunately, looking at the max timeline of VTSAX makes it less attractive to me. Personally, it seems too risky given that it's the highest it has ever been and I have my doubts about the state of the economy over the next two years.

 

[Svnla]

Go slow and steady as this old guy was saying - https://www.fool.com/investing/2017/06/25/warren-buffett-on-index-funds.aspx

Oh, his name is strange, Warran Buffett is his name. He even did a small wager of $500K of his own money against any of Wall Street stock picker. So far, he is winning.

I put about 90% of investment money on index fund, then 10% on bond. So far, so good, steady as she goes.

 

[Safeway]

Indeed. I've made way more money through real estate than anything else. Over the last five years:

Purchased for 137 - sold for 160 after 36 months (+23k)
Purchased for 289 - sold for 310 after 22 months (+21k)
Purchased for 485 - sold for 575 after 18 months (+90k)
Purchased for 187 - sold for 235 after 4 months (+48k)
Purchased for 235 - sold for 285 after 26 months (+50k)

My current rentals are cash flow positive to the tune of 12k/mo. I started very small and gradually worked up to bigger, more expensive properties that attract better tenants. The stock market is probably 10% of my total investment portfolio because I view it is too much risk because how much (little) effort I'm willing to expend learning about it.

I have almost 20 SFHs now, and growing the portfolio constantly. I let my brother-in-law manage the properties, so it's very hands off from my perspective. We have an excellent relationship with the lender and a skilled laborer to rehab the properties. Rent covers the management fee, mortgage, tax, and insurance, with a surplus that feeds into a business account. The surplus covers vacancies, repairs, and additional mortgage payments. When we've accrued enough in the account, we use a portion of the balance as a downpayment on the next property. We don't need the cash, so it's become a self-aggrandizing real estate acquisition machine.

Unfortunately, looking at the max timeline of VTSAX makes it less attractive to me. Personally, it seems too risky given that it's the highest it has ever been and I have my doubts about the state of the economy over the next two years.

It works for it's intended purpose, which is earn something on held liquid capital.

 

[Mai72]

Go slow and steady as this old guy was saying - https://www.fool.com/investing/2017/06/25/warren-buffett-on-index-funds.aspx

Oh, his name is strange, Warran Buffett is his name. He even did a small wager of $500K of his own money against any of Wall Street stock picker. So far, he is winning.

I put about 90% of investment money on index fund, then 10% on bond. So far, so good, steady as she goes.

I love Warren Buffets advice. It's hard to argue with a man who has been winning most of his life.

 

[Svnla]

My game plan is this: set up a tax-deferred retirement account through a discount broker, use it to buy shares of an index fund or index-tracking ETF and hold those shares until I retire.

 

[dullard]

I don't know why nobody on this forum ever mentions real estate as an option for investing. Especially multi-family apartments.

Real estate is great, but it should only be a portion of your portfolio. Good advice is maybe 10% of your portfolio for the best long-term returns with the least risk. Most people at the stage that they are asking for investment advice are way, way over 10% invested in real estate if they own their own apartment or home (many times real estate it is close to 80%+ of their entire net worth). Thus, real estate at the beginning is usually the exact opposite of what they should be doing for diversification.

Get into real estate investing when you can own at least 4 units. Owning a multi-family apartment outright is a great first entry into real estate. But those may be $300k to $1M, maybe more depending on location. Very hard to do when you are first investing and have say an extra $15k. That is why we don't recommend it.

 

[jpiniero]

Just from my own experience, real estate can be volatile... especially anything that's not a SFH. Can be tough to unload if the area becomes less popular.

 

[Safeway]

Get into real estate investing when you can own at least 4 units. Owning a multi-family apartment outright is a great first entry into real estate. But those may be $300k to $1M, maybe more depending on location. Very hard to do when you are first investing and have say an extra $15k. That is why we don't recommend it.

Just from my own experience, real estate can be volatile... especially anything that's not a SFH. Can be tough to unload if the area becomes less popular.

That's why I only have SFHs right now, but I am looking at a few commercial options. SFH rent well, even in the $2000-4500/month range. I have one duplex, and looking for more. I initially thought about buying an existing 8-plex but, after a bit of research, I found that the buildings were extremely dated, the type of tenants that rent these units, and the areas that these units are often found in ... weren't desirable. I've also picked up a few empty lots in transitional areas for extremely cheap in tax and foreclosure auctions. In 5-10 years or so, it'll be prime time for some three-story, garage-bottom town homes/condominiums. One plot has street access on three sides and can nicely fit 24 units, which should cost around $100k per to construct and sell for $350k+ per.

 

[bbhaag]

I took your guys's advice an opened a Vanguard account. I looked through the indexing funds but haven't decided decided on one yet. I have a few days until my savings account is tied to my Vanguard account. At that point I will probably choose one of the target date funds.

 

[Safeway]

I took your guys's advice an opened a Vanguard account. I looked through the indexing funds but haven't decided decided on one yet. I have a few days until my savings account is tied to my Vanguard account. At that point I will probably choose one of the target date funds.

VTSAX has a 0.04% ER, and the Target funds have a 0.16% ER. On top of that, VTSAX straight outperforms the Target funds. So with a Target fund, you'll realize a lower percentage of likely lower gains. With VTSAX, you'll realize a higher percentage of likely higher gains.