What should I do with my savings?

[Sinican]

Right now I've got about 18k in savings.

 

What should I do with it?

 

I have no debt or anything, but figured that I could use half or more of my savings and maybe put it in a CD or something... good idea?

 

What are some other options?

[Nummerkins]

Make sure it's in an account yielding 3.5% or more. There's plenty of threads about this exact same topic. Rates will rise soon, so locking into a CD makes no sense. Just keep it simple.

[54regcab]

Stocks are on MAJOR sale right now.

[Sinican]

I know this may be resurecting an old thread, but does anyone else have advice that's in more detail?

 

I'm essentially looking for a low risk way to make my money grow and having a problem finding enough information on enough topics to truly comprehend which option really is the best one.

 

IRA? Roth IRA? Annuity? So many options, so little understanding.

 

Thanks in advance for any help guys.

Edited August 13, 2009 by Sinican

[Kevin20]

I know this may be resurecting an old thread, but does anyone else have advice that's in more detail?

 

I'm essentially looking for a low risk way to make my money grow and having a problem finding enough information on enough topics to truly comprehend which option really is the best one.

 

IRA? Roth IRA? Annuity? So many options, so little understanding.

 

Thanks in advance for any help guys.

 

 

OK, advice is to go to the nearest Barnes and Noble and cozy up to the personal finance shelves and start browsing through some "for Dummies" books. You're expecting a lot from us -- it would take an awful lot of writing to even begin to answer your questions. If you are not willing to do that, then you should find a financial advisor and pay him for advice.

 

Just saying "Hi stranger, you don't know me but what should I do with this pile of cash" is a question that is fraught with complications.

 

If we were sitting down to talk for an hour or two I'd be asking about all this:

 

- If you are as financial unsophisticated as you appear, how do you have $18,000? Where can I get $18,000?

- Do you have a job? Extra income? Are you adding to savings now? Do you have a 401K?

- Do you have a spouse and family? How old are you?

- What are your monthly expenses?

- Do you have any investment goals -- such as are you specifically planning for retirement, or to buy a house, etc?

- Why do you keep taking about risk-free cash investments? Are you afraid of the financial markets or are you just unaware of them? Do you actually have no tolerance for risk? Are you aware that you cannot make money without taking risks?

- IRAs are not investments, they are account types. Do you know that that means? Are you aware of the tax implications of various tax-preferred accounts?

[radi8]

I'm essentially looking for a low risk way to make my money grow

 

Perhaps we can narrow it down some.

 

What is your definition of "low risk"? Never losing a penny, even if you might gain it back at some future point? OK with some ups and downs? Willing to earn less interest in exchange for no ups and downs?

 

What is your projected timetable and use for the money? Retirement? 10 years from now? 25?

Emergency savings?

[nothingtolose]

IRA? Roth IRA? Annuity? So many options, so little understanding.

 

Thanks in advance for any help guys.

 

Put very simply, IRA/Roth IRAs are vehicles to manage current and future tax liability, not a way to generatite a higher return. Depending on your AGI, you may be eligible to deduct the contribution to an IRA up to IRS limits.

A Roth IRA allows you a tax-free withdrawal when you retire without an immediate tax benefit when you contribute. It may be beneficial if you expect to be in a higher tax bracket when you retire.

IRA/Roth IRA money can sit in a CD, money market CD, mutual fund, stocks etc depending on the bank/brokerage where you open those accts.

 

If you already have a liquid emergency fund for 6-18 months to cover your expenses in the event you're laid off etc, you could invest the additional savings.

A short-term CD right now is not going to offer more than 1.5-2.5%. Long-term CDs do not look that attractive given that rates will likely rise over the term of the CD. Munis are also reasonably low-yield and general obligation munis are fairly safe (perhaps excepting CA?) and offer tax exempt interest. Other tax-efficient options such as tax-managed mutual funds are available.

If you are looking for a higher upside and are comfortable with a 30-40% plunge in portfolio value in a worst case scenario, you can grab a no-fee mutual index fund from one of the majors or through your brokerage (fees apply).

Annuities as an alternative to mutual funds/CDs aren't necessarily that attractive but charge hefty fees although YMMV.

[ZeroDebt]

What are some other options?

Dunno...buy a house and rent it out? These days, $18k will get you a decent house in a decent area - rent it out or $400-500 a month.

That's a helluvalot better ROI than some anemic 3 1/2% CD. You don't have to play landlord, nor do you need to live anywhere near the house - that's what property management companies are for. They typically take 10% of the rent, screen and get tenants, and collect the rent for you.

[nothingtolose]

What are some other options?

Dunno...buy a house and rent it out? These days, $18k will get you a decent house in a decent area - rent it out or $400-500 a month.

That's a helluvalot better ROI than some anemic 3 1/2% CD. You don't have to play landlord, nor do you need to live anywhere near the house - that's what property management companies are for. They typically take 10% of the rent, screen and get tenants, and collect the rent for you.

 

In many areas $18k won't even get you a fixer-upper. Mb a mobile home? If the amount is sufficient to cover a fixer-upper, the place would probably need another $20-30k of repairs before it is up to code and can be rented out. Then there's the issue of finding tenants. Fixing any damage tenants will do to it (especially if the house was in a real cheap high-crime area or rented out section 8). Probably years to break even. If I had $18k invested in a rental, I doubt it would be any less risky than putting $18k in a single stock. JMHO...

[gj83]

How much work are you willing to do to earn money? Some of the best APR accounts right now are "rewards" checking accounts. They offer over 4% APR, but require at least 10 debit card transactions a month. That is too much for some people.

 

The highest APR liquid accounts without such restrictions are around 2%. Rates on those accounts are subject to change.

 

CDs do lock in rates, but right now rates for CDs are much lower than the rewards checking accounts and about the same as liquid accounts, but there is no certainty about when the rates will increase so locking into a 2% 60 month CD will be dumb if rates go up to 5% in 2 years.

 

To make the most money will require some work. To just keep it safe will require little work.

 

Of course there is always investing or just going on vacation.

[workerdrone]

If you want a high return and relatively secure investment, you can invest in real estate without purchasing an entire property - rehabbers and real estate investors are often looking for cash partners - you provide some funding and are secured with a lien on the property itself.

 

They're usually looking for $100k + in my area but YMMV.

 

Not as simple as depositing in a bank account but people are getting 10-15% plus other perks doing this all over the country.

 

I have a self directed Roth IRA set up just for this purpose.

[jayrandom]

If you want a high return and relatively secure investment, you can invest in real estate without purchasing an entire property - rehabbers and real estate investors are often looking for cash partners - you provide some funding and are secured with a lien on the property itself.

 

They're usually looking for $100k + in my area but YMMV.

 

Not as simple as depositing in a bank account but people are getting 10-15% plus other perks doing this all over the country.

 

I have a self directed Roth IRA set up just for this purpose.

 

Something about this doesn't quite add up. If the person has sufficient interest in the property to offer a lien, couldn't they get money less expensively than at 10-15% interest? Are they just including you out of the goodness of their heart? I'd question any investment that claimed to be secure but offered considerably higher interest rates than other secure investments. What am I missing?

[Kevin20]

If you want a high return and relatively secure investment, you can invest in real estate without purchasing an entire property - rehabbers and real estate investors are often looking for cash partners - you provide some funding and are secured with a lien on the property itself.

 

They're usually looking for $100k + in my area but YMMV.

 

Not as simple as depositing in a bank account but people are getting 10-15% plus other perks doing this all over the country.

 

I have a self directed Roth IRA set up just for this purpose.

 

Something about this doesn't quite add up. If the person has sufficient interest in the property to offer a lien, couldn't they get money less expensively than at 10-15% interest? Are they just including you out of the goodness of their heart? I'd question any investment that claimed to be secure but offered considerably higher interest rates than other secure investments. What am I missing?

 

Very simple, that investment may often yield 10-15% but it is risky and it is utterly illiquid. Let there be no doubt an investor could lose money on real estate (in case anyone's been living in a cave for the past 5 years). And if you want out you cannot just log on and hit the SELL button -- if you are just an investing partner to someone else who's controlling the deal you probably have no ability to convert your share to cash.

 

In short, this is surely a pretty bad answer to the guy who wants a risk-free or low-risk alternative to bank savings.

[workerdrone]

Low risk? Yes, if the investor has a proven track record - real estate, unlike the stock market, does not go down to zero value. We're in the middle of the biggest real estate 'crash' in recent history, which means it's the best time to buy distressed properties of all types.

 

Illiquid? Yes, compared to savings of course, but you are in the control of the contract - if you want to be out in 6 months, then state so and specify the penalties and make sure the contract is strong in your favor. You've got the cash, you're in control.

 

I just bought a property in a great town, previously valued at $315k, for $117k. I'll put about $20k into it, hold it for a while, and resell whenever I feel like it for a relatively obscene return compared to any CD or savings account. If I want to liquidate quickly, might take a few months - yep, it's real estate. It's expected going in so no surprises there.

 

Could I sell next month cash for $150k? Yep, but that would be stupid :-)

[workerdrone]

Stocks are on MAJOR sale right now.

 

I'm curious and a total CB newb - my EX score is 772, how come I only show "good" compared to your "excellent" 770?

 

BTW I'm sure stocks are on major sale right now, I'm just scared of what companies might do, don't have the time to research, and don't want to pay taxes if I get lucky and make big profits.

Edited August 21, 2009 by workerdrone

[hurricanesfans27]

Stocks are on MAJOR sale right now.

 

 

 

they were in March too when I got in. Ive been raking it in ever since lol.

[nothingtolose]

If you want a high return and relatively secure investment, you can invest in real estate without purchasing an entire property - rehabbers and real estate investors are often looking for cash partners - you provide some funding and are secured with a lien on the property itself.

 

They're usually looking for $100k + in my area but YMMV.

 

Not as simple as depositing in a bank account but people are getting 10-15% plus other perks doing this all over the country.

 

I have a self directed Roth IRA set up just for this purpose.

 

Buyer beware.

This type of 'business opportunity' is fruitful territory for real estate scammers.

Hint 1: If it sounds too good to be true, it probably is. 10-15% on a relatively secure investment. Hmmm.

Hint 2: Search for 'cash partner' on craigslist and see how many hits come up.

[nothingtolose]

Low risk? Yes, if the investor has a proven track record - real estate, unlike the stock market, does not go down to zero value. We're in the middle of the biggest real estate 'crash' in recent history, which means it's the best time to buy distressed properties of all types.

 

Illiquid? Yes, compared to savings of course, but you are in the control of the contract - if you want to be out in 6 months, then state so and specify the penalties and make sure the contract is strong in your favor. You've got the cash, you're in control.

 

I just bought a property in a great town, previously valued at $315k, for $117k. I'll put about $20k into it, hold it for a while, and resell whenever I feel like it for a relatively obscene return compared to any CD or savings account. If I want to liquidate quickly, might take a few months - yep, it's real estate. It's expected going in so no surprises there.

 

Could I sell next month cash for $150k? Yep, but that would be stupid :-)

 

Real estate is an undiversified investment. It's more adequately compared to buying a single stock than to buying the market.

 

With few exceptions, real estate investments are significantly less liquid than investments in American stocks. Statements that a property can be resold "whenever [the investor] feels like for a relatively obscene return" show excessive confidence in the R/E market or

possibly a financial motive to promote the business, which leads me to ask if there is going to be a CB thread with rehab/cash partner requests.

[workerdrone]

if you're not educated in real estate, then you're asking to be scammed if you don't review potential deals with a trusted attorney.

 

if you have enough $ to invest in R.E. and you don't have a trusted attorney, beware.

 

I'm not selling anything here, nor will I be.

 

When did I suggest you go to random Craig's list with your cash haha before you do that PM me :-)

 

just honestly trying to give another (highly preferable IMO) option here, I know I'm a CB newb but R.E. investing done right with a little education is far better odds than Vegas I.E. the stock market plus the tax benefits of R.E. investing are just insane.

[Kevin20]

if you're not educated in real estate, then you're asking to be scammed if you don't review potential deals with a trusted attorney.

 

if you have enough $ to invest in R.E. and you don't have a trusted attorney, beware.

 

I'm not selling anything here, nor will I be.

 

When did I suggest you go to random Craig's list with your cash haha before you do that PM me :-)

 

just honestly trying to give another (highly preferable IMO) option here, I know I'm a CB newb but R.E. investing done right with a little education is far better odds than Vegas I.E. the stock market plus the tax benefits of R.E. investing are just insane.

 

 

This is kind of comical. The OP is an evidently unsophisticated saver looking for cash savings that get a better return than bank savings account. And you parachute in suggesting he make risky real estate investments (leveraged? you are not clear about that but it sounds like it) that you admit demand both special experience and a lawyer to review contracts.

 

I realize you can make money in real estate. The richest people I personally know are a commercial real estate family. I'm just pointing out that your advice does not belong in this particular thread. Perhaps you should start a separate thread and we can have a fruitful conversation about real estate investing. It actually would be educational because we never talk much about that here.

[workerdrone]

What are some other options?

 

I provided another possible option...sorry....I'll go back to lurking for now......

[breeze]

info and forums on RE investing http://reiclub.com/

 

http://www.real-estate-online.com/

[refi4]

Real estate is a great field. I would suggest you start buying books on real estate investing and read and read and read some more. After you submerge yourself in it, understanding will start to come. Go join your loal real estate group and listen. Go to the different real estate websites (thecreativeinvestor.com, creonline.com, fatwallet.com are a few)and soak even more knowledge and know-how. Don't let anyone rush you, nor do you rush yourself. You can make money when the market is going up and when it is going down. Timing is crucial when you are investing. So take your time and learn and win.

Edited November 4, 2009 by refi4

[AnonymouslyIndebted]

If you don't have business start making one. And if you have start another one.

[AnonymouslyIndebted]

Right now I've got about 18k in savings.

 

What should I do with it?

 

I have no debt or anything, but figured that I could use half or more of my savings and maybe put it in a CD or something... good idea?

 

What are some other options?

If you're looking for a guaranteed return with low risk option, you can go with CD or US savings bonds.

 

Stocks are risky, if you're up to it, it could generate you a higher return. But you have to prepare yourself for the worse just in case. If the economy goes down, there's a possibility that you will lose the money you invested in stocks.