How to invest?

[Anonymous]

My husband and I have about $600K to invest. We currently have it in saving accounts earning less than 1%. We've kept it liquid because we were planning on buying a house but infertility has put that on the back burner - no need for a bigger house if we can't have kids. We own the condo we live in so there is no mortgage to pay off. We are great at saving money and living frugely but are truly clueless about investing our money. We want someone reliable to invest and manage our money for us but someone who doesn't cost a lot. We are fairly risk averse. Can you please recommend how we go about investing our money? Any advice is greatly appreciated!

[Anonymous]

I use Alexander Randolph in VA. We've been happy with the firm. Many will tell you just buy index funds, and I'd generally agree, but they've been useful in many ways - 401k advice, structuring cash, etc.

[Anonymous]

I would talk to Vanguard. For that amount of money you can get a consultation with a certified financial planner, although you can also get almost the same advice on the web using their portfolio tool.

[Anonymous]

p.s. Vanguard is low cost index funds, so to be honest they are a great company but handholding isn't really their specialty (although they are one of the few places that will give you the chance to talk to a full CFP, rather than someone who completed an online course in investment advising). T Rowe and Schwab also offer consultations for that kind of investment. T Rowe is a good co. but Schwab has access to lots of different investments.

[Anonymous]

Vanguard, absolutely. At that level, you get free advice from a Certified Financial Planner (private consult and complete portfolio recommendations - they will even do the trades for you).

Call today.

Signed - vanguard investor with $1m in assets

[Anonymous]

Ditto Vanguard. There's no reason to look any further.

[Anonymous]

Do it yourself!!!! No cares about your money more than you.

Average market returns with winning v. losing stocks and bull v. bear markets will only be about 5% annual gains.

Financial planners will charge you 1% per annum whether you make money or not. On $600k that's $6k or $500 per month to watch your money stagnate.

Mutual Funds charge 2% annually for management fees. So now you've paid out 3% annually out of the approximately 5% you will earn annually. Ten years will have passed and your principal will have hardly improved whatsoever.

If you want growth, but with little risk buy a basket of diversified dividend yielding stocks which have a long history of paying and increasing their dividend yields. These corporations will pay their dividends quarterly. Google "Dividend Achievers" and "Dividend Champions" for specific corporations to buy. Once you've divided your $600k between about 30 different corporations set your brokerage account to automatically reinvest your dividends back into the same corporations when they come in quarterly. The nice thing about DRIPs (dividend reinvestment programs) is there is not a brokerage fee to purchase additional shares in the same companies. This way you have a compounding quality to your investments.

If you earn 3% to 5% in dividends and 5% in stock price appreciation you should be able to double your money every eight years with little risk. Clearly there are going to be bear markets from time-to-time, but if you hold shares in quality companies those bear markets will provide opportunities to purchase more shares of stocks at lower prices with the dividends you will continue to receive. Invest in quality corporations for the long term. Markets go up and down. Do not panic and sell your stocks because the market declines. Do that and you'll go broke for sure. Most companies that crashed in 2008 have recovered nicely now and most investors are significantly more wealthy today than they were before the crash occurred.

Diversify into a basket of 30 high yielding dividend paying stocks and reinvest your dividends. You'll double your money every eight years.

[Anonymous]

One more thing is that others on this thread have been truthful. If you were going to buy mutual funds the ones sold and managed by Vanguard have the lowest management fees in the industry.

[Anonymous]

Anonymous wrote:Do it yourself!!!! No cares about your money more than you.

Average market returns with winning v. losing stocks and bull v. bear markets will only be about 5% annual gains.

Financial planners will charge you 1% per annum whether you make money or not. On $600k that's $6k or $500 per month to watch your money stagnate.

Mutual Funds charge 2% annually for management fees. So now you've paid out 3% annually out of the approximately 5% you will earn annually. Ten years will have passed and your principal will have hardly improved whatsoever.

If you want growth, but with little risk buy a basket of diversified dividend yielding stocks which have a long history of paying and increasing their dividend yields. These corporations will pay their dividends quarterly. Google "Dividend Achievers" and "Dividend Champions" for specific corporations to buy. Once you've divided your $600k between about 30 different corporations set your brokerage account to automatically reinvest your dividends back into the same corporations when they come in quarterly. The nice thing about DRIPs (dividend reinvestment programs) is there is not a brokerage fee to purchase additional shares in the same companies. This way you have a compounding quality to your investments.

If you earn 3% to 5% in dividends and 5% in stock price appreciation you should be able to double your money every eight years with little risk. Clearly there are going to be bear markets from time-to-time, but if you hold shares in quality companies those bear markets will provide opportunities to purchase more shares of stocks at lower prices with the dividends you will continue to receive. Invest in quality corporations for the long term. Markets go up and down. Do not panic and sell your stocks because the market declines. Do that and you'll go broke for sure. Most companies that crashed in 2008 have recovered nicely now and most investors are significantly more wealthy today than they were before the crash occurred.

Diversify into a basket of 30 high yielding dividend paying stocks and reinvest your dividends. You'll double your money every eight years.

First of all, expensive mutual funds generally charge 1-1.5%, cheap mutual funds charge 0.2-0.5%

Second of all, it's not accurate or helpful to suggest that people can expect to earn 9% annual return in the stock market with little risk.

[Anonymous]

I don't agree 3-5% in dividends and 5% stock appreciation over the long term is within reason. Madoff promised 12% which was too good to be true, but 8-9% combining dividends+plus share appreciation+compounding share quantity through DRIPS is very much within reason.

Take out management fees and 8-9% growth is well within reason. Using a financial planner and yielding even 5% consistently is very difficult.

[Anonymous]

I was like you OP (although w/ only $100k in savings account doing nothing), and know little about investments. I talked to my bank (USAA) and they offered a managed portfolio account charging 1%. I initially put in $25k and over the past year it's gone up $2-2.5k so I recently put more in.
so it might be worth investing a portion first until you feel comfortable with it.

[Anonymous]

Perhaps the most simple and practical option would be to use your $600k to purchase 4 shares of Berkshire-Hathaway, which sell for about $155k per share.

You'd have the greatest investment manager of all time, Warren Buffett managing your money free of charge. His approach is very similar to mine, but it was me who followed his lead of course.

Like me, Buffett loves dividends which allow you to purchase more shares of stocks which over time leads to compounded wealth. Using this methodology Berkshire collects $1 billion per month in dividends in which they then use to buy more shares or often times entire companies. A few years ago they bought the Burlington-Northern Railroad and earlier this year they bought Heinz.

Ironically, Berkshire which loves collecting dividends from their holdings pays no dividends to their own shareholders. There is a methodology to this approach also. When we as individuals collect dividends, even if we reinvest them we are required to pay about 15% income tax of those proceeds. When Berkshire reinvests their billions of dollars in cash into additional holdings the overall value of the corporation increases, which translates into higher share prices increasing the wealth of their shareholders. However, their shareholders are not paying income taxes on their newly acquired wealth because it has not been distributed to them in the form of dividends.

I like dividends, but I like Warren Buffett too.

[Anonymous]

Anonymous wrote:I was like you OP (although w/ only $100k in savings account doing nothing), and know little about investments. I talked to my bank (USAA) and they offered a managed portfolio account charging 1%. I initially put in $25k and over the past year it's gone up $2-2.5k so I recently put more in.
so it might be worth investing a portion first until you feel comfortable with it.

People like you are why those who work in finance are so rich.

[Anonymous]

Make an account at Bogleheads.org, then follow the directions here:

http://www.bogleheads.org/forum/viewtopic.php?f=1&t=6212

The first three responses will likely tell you that you haven't provided enough information (they really want to see all current investments, yearly fees, etc) After that you will receive quite useful, free advice that, while not garnering you a thirty percent return your first year, will certainly not lose you money over the long haul.

Personally, if I had 600 grand that wasn't particularly earmarked for long or short term use and I didn't want to have to manage it, I'd shove it all in VTMFX and forget about it. It should still do a good job outpacing inflation if you end up letting it ride til retirement, but on the other hand not lose too much if five years from now you need to liquidate and the market is tanking. It's tax managed so shouldn't cause you any headaches on your 1040, either.

[Anonymous]

I agree that managing it on your own is best. Vanguard funds are a great choice and the Bogleheads forum is full of financially savvy people who love to give advice to new investors. Start a topic there instead, you will get a lot of very specific suggestions on how to manage your money.

http://www.bogleheads.org/forum/viewforum.php?f=1

On the other hand, if you know that you are an emotional investor, i.e., the kind of person who panics and pulls your money out at a drop in the market, then it could be worth hiring a professional.

Lastly - sorry to hear of your fertility problems OP. Been there, it's hard.