So, I have 20 k to invest. I don't need this money for 1-2 years. I am virtually debt free. Save about 65 k a year. Any suggestion? Any financial book you recommend?
Investment: where to invest my 20 k?
- Thread starter Jenny2009
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This link (http://www.getrichslowly.org/blog/2011/11/28/the-best-books-about-money/) offers a list of books. May be too many for your current needs but will certainly help in the long run. Don't make mistake I made. I never cared about investing and just left money rotting in the bank account. I was scared about investments and my fundamentals of investments were zero. So learn now and it will help you in the long run. My feeling is, it is the best time to invest in the stocks. Market is very volatile and almost everyone is scared to death because they have invested at high rates, You can buy stocks for really cheap. If I were you, I will save 10K and gamble 10K. Gamble less and less after 40.
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Hit the casinos and play poker. Be patient, win a couple of rounds with "all-in" wagers, and run away.
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Put it all in Apple. It's going to jump above 400 per share again soon.
She should've done that on Friday.
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Depends on how risky you want to be and what your motive for investing is. If you're just looking to earn some higher rate of interest rather than leaving it in the bank, I would take a look at AT&T. It's beat down at the moment trading at a 52 week low and pays a 6.3% dividend. Invest 20K and you'll get about $300 every 3 months or $1200 per year just in free money regardless of if the stock goes up or down.
I would consult a financial adviser at your bank if you are an inexperienced investor.
I would consult a financial adviser at your bank if you are an inexperienced investor.
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The stock market now is more unpredictable than ever. Hedge fund managers and robo trading have turned it into a video game. Save more and buy some income property. You can build equity and have a tax write off. Renting is popular now that ownership is no longer as attractive as it once was.
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Also, she does not need this for 1-2 years implying she might need it in 1-2 years. Stocks are generally a bad investment tool as you have to be in the market for a few years. Otherwise, it is "gambling".
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It's only gambling if you don't do your research. I personally do tons of research before I ever purchase a stock and generally only invest in things I have knowledge about. I also place an automatic stop loss at 6% to minimize my risk. If I buy and the stock drops in value by 6% then I believe that my initial research was incorrect and get out the stock. The key is finding the right entry point. I never hold onto a stock and "hope" it goes back up. This strategy also takes the emotion out of selling stocks.
Another way I try to minimize risk is to buy the same stock at 2 different points in time. Buy shares today and wait to see what happens. If stock goes up, great, I made money. If stock goes down, I can buy at another entry point that was cheaper than my original (assuming the stock is still attractive) and have a cheaper price per share than what I originally purchased the stock at. For example, I buy 500 shares of AT&T at $28. 1 month later it drops to $27, but only because the market as a whole is shaky and nothing to do with the individual stock as I still believe it is a solid investment. I buy another 500 shares at $27 making my new purchase price per share $27.50. If I had bought all 1000 shares I was looking to purchase at $28 I would have lost $1000 at that point in time.
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Another way to minimize your risk is to invest in stocks that pay dividends. Using AT&T as an example:
Pays 0.43 cents per share every quarter. That means the stock can go down 0.43 in a quarter and you still break even, or $1.72 per year and still break even. This minimizes risk.
Pays 0.43 cents per share every quarter. That means the stock can go down 0.43 in a quarter and you still break even, or $1.72 per year and still break even. This minimizes risk.
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How long have you been investing in the stock markets? Dividends are not guaranteed. Also research is hard to come by. Sure most stock trading sites have online research but as of lately, markets follow emotions. She also does not have the experience to utilize the research.
Stocks are risky and that is why as you get older, you should allocate most of your money in mutual funds and bonds. Young people should invest in stocks but that is assuming 1. they are in it for the long run (at least 5-10 years), and 2. they are diversified. I dont feel like OP can meet both critieras.
For example, you can trade stocks but general rule is that you should at least hold stocks for a year for tax benefits. If she had invest in stocks the last year, she would have been burned pretty hard assuming she needed the money in 1-2 years. On the other hand, if she had sold before a year, she would have been taxed pretty hard (40 percent) on gains.
Good investment for op? I guess only op can decide.
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Since the op is only sure that the money wont be needed for just 1-2 years, putting it all in stocks is extremely risky with such a short investment horizon. Bonds ( or even laddered CDs) are probably better in this case, at least until op becomes more certain of the time frame.
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Most people don't have the time or knowledge to follow stocks as closely as you do Pharm D. It is unrealistic for most. If the OP needs the money in 1 to 2 yrs bonds would probably be the best investment. I've lost faith in stocks after witnessing and being subject to multiple corrections over the last 12 yrs. I feel the best investment at this time is real estate. Particularly if you have a large cash reserve and don't require liquidity.
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The stock market is a joke in this day and age. There are other ways to invest money.
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d
I've been investing for about 10 years, and yes I understand there is a difference in knowledge and amount of time which is why I recommended the OP to seek professional help if she doesn't have time or knowledge. Staying with the example of AT&T (T), you can see they have been paying dividends for as long as I can tell and increasing their dividend every year. When I mention dividend paying stocks, that is the type of investment I'm personally looking for.
My stomach can't handle the volatility of this market, so I look at a stocks beta. For research, I'm currently using Fidelity and am happy with their charts, analyst research and technical analysis. I agree that as you get older, you need to move your money to other stable forms of investment and people that were looking to retire in 2008-2009 can tell you that.
I disagree that you have to be in stocks for the long run as I've made tons of cash for short-term gain. I'm also not just going to hold onto shares of a stock for greater than a year due to increased tax rates for short-term capital gains. If I've made money and I like the trading price today for a sell, then I'm selling regardless of how long I've held the stock. Also, short-term capital gains tax is nowhere near 40%. It depends on your tax bracket, but for a pharmacist, I'd estimate it around 30%, but again depends on your personal situation... married vs. single vs. itemized deductions etc.
You can get burned on any stock, but there are ways to minimize risk. Again, I think AT&T is a solid 1-2 year investment given their dividend history and historical price chart.
I've been investing for about 10 years, and yes I understand there is a difference in knowledge and amount of time which is why I recommended the OP to seek professional help if she doesn't have time or knowledge. Staying with the example of AT&T (T), you can see they have been paying dividends for as long as I can tell and increasing their dividend every year. When I mention dividend paying stocks, that is the type of investment I'm personally looking for.
My stomach can't handle the volatility of this market, so I look at a stocks beta. For research, I'm currently using Fidelity and am happy with their charts, analyst research and technical analysis. I agree that as you get older, you need to move your money to other stable forms of investment and people that were looking to retire in 2008-2009 can tell you that.
I disagree that you have to be in stocks for the long run as I've made tons of cash for short-term gain. I'm also not just going to hold onto shares of a stock for greater than a year due to increased tax rates for short-term capital gains. If I've made money and I like the trading price today for a sell, then I'm selling regardless of how long I've held the stock. Also, short-term capital gains tax is nowhere near 40%. It depends on your tax bracket, but for a pharmacist, I'd estimate it around 30%, but again depends on your personal situation... married vs. single vs. itemized deductions etc.
You can get burned on any stock, but there are ways to minimize risk. Again, I think AT&T is a solid 1-2 year investment given their dividend history and historical price chart.
What's the return on investment for these? I had bonds while saving for college, but they took 10+ years to mature. I imagine a 2 year bond would be pretty crappy.
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Probably even less. The marginal tax rate (considering the gains on top of your salary) will be 28% or 25%. The overall tax rate (averaging out the gains with the rest of your salary) will be around 19%. I'm not considering state income tax. Also, you do not pay Social Security (4.2%) or Medicare (1.45%) on capital gains or dividends, unlike your salary. Long-term capital gains tax and qualified dividends can reduce your taxes even lower to 15% (marginal rate).
I agree with you to not worry about taxes when investing. As you can see above, the taxes on investments are much lower than when we are slogging away at our day jobs
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First, I would recommend that you see a financial advisor.
But if you still want free unqualified advice on the internets, I would say put the 20k and the rest of the 65k you're saving each year in a low cost bond index fund like the Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX). The fees are low (0.11%). The capital is fairly stable with the share price fluctuating between $9.50 and $11 over the past 10 years. You can sell it at any time and they will direct deposit the money into your bank account in 2 days. (They will however block you from rebuying that fund for 60 days after a sale.) The dividend is about 3% but with the current market conditions, there have been some capital gains increasing the total return to 5%.
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Single pharmacists are on the borderline for contributing to a Roth ($107,000), but you can still make an undeducted contribution to a traditional IRA and then immediately convert it to a Roth IRA for the same result.
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Do NOT put your money into stocks if you have 1-2 years to invest. Just take the safe route and don't worry about the rest. Put it in a CD or Bonds (not junk bonds). It seems from your post that you don't have enough experience with stocks, so don't waste your time doing the research.
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Do you have 1099 income? If so, consider a solo 401k for excellent tax benefits. You could put all 20K into it if you have 20K in 1099 income. If you don't already have 1099 income, consider finding a way to get some.
This link below explains the solo 401k:
http://richaschocolate.com/2011/06/01/when-a-regular-ira-isnt-enough---solo-401k-plan.aspx
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