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Totally clueless with investing, $100k sitting in the bank earning 0.05%. How do I get started? Please advise. (self.personalfinance)

submitted 3 months ago by nieceandtows to c/[email protected]

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I have been putting part of my paycheck into a high yield savings account, but haven't bothered with investing it in a responsible manner partially due a fear of losing the money due to bad investments. I'm finally realizing how much potential money I've lost by letting my money stagnate. Please advise me on how to responsibly invest my money, thanks!

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[–] [email protected] 11 points 3 months ago* (last edited 3 months ago) (3 children)

Any good financial advisor would tell you, "it depends." The variables essentially are:

do you have any debt? If so, you should probably put it toward anything with a high interest rate (e.g. >6%)
when do you need the money? If <5 years, put it in something safe, like treasure bills, CDs, or a HYSA (should be able to earn ~5%)
if you don't need the money for at least 10 years, invest it for retirement - broad index funds (or target date index funds) are a good bet

If I assume you don't have any high interest debt or any short-term (<5 years) expected expenses, I personally would:

reserve 3-6 months expenses in an emergency fund; get a HYSA earning >4% interest
invest the remainder into an index fund (VOO or VTIAX for Vanguard funds)

You didn't specify which country you're in, but if you're in the US, take advantage of tax-advantaged accounts, like a Roth IRA, up to the limit and invest the rest into a regular brokerage account.

If you're not comfortable with this, find a fee-only fiduciary (look for those specific terms), which should cost something like $100/hr. If you're not paying for the advice, they're most likely going to nudge you into a high-fee fund that's good for them, but not for you. If they pitch whole life insurance or annuities (indexed annuities, or anything that limits downside), run and find a better advisor. A good advisor won't pitch any products, they'll explain your options and suggest something, and they should be able to explain their reasoning for making that decision. In most cases, it'll probably be a few index funds (e.g. S&P 500, international index fund, and bonds) or a target date retirement fund, but the specifics really depend on your situation. Your overall fees for the funds should be well below 0.50%, probably more like 0.10-0.20%, and the funds will likely come from Fidelity, Schwab, Vanguard, iShares, or Blackrock (maybe a couple others I'm missing). If it's something else, feel free to name-drop one of those I mentioned and see how they react (every financial advisor would know those companies).

[–] nieceandtows 2 points 3 months ago (1 children)

Is there a national level recommended fee only fiduciary, or is it better to seek out a local company?

[–] [email protected] 3 points 3 months ago* (last edited 3 months ago)

I'd go local. But if you want something online, I generally trust The Money Guy show on YouTube, and they operate a fee-only advisory called Abound Wealth, so you could check them out if you're interested. Check out some of their videos and see if you like what they say, I imagine their advisory services would be similar, just more focused on your specific situation (in particular, check out the Financial Order of Operations).

I like their advice way better than Dave Ramsey (Ramsey is way too anti-debt, and way too aggressive on retirement asset drawdown), and their content is really accessible while not being too dumbed down.

[–] nieceandtows 2 points 3 months ago (1 children)

I'm in the US, but on a work visa. I have a 2.875% mortgage, and a 2% car loan that ends soon (but planning to get a second car). We would mostly need the money in the next 5 years, so I'll start with the hysa and go from there. By the way, is it prudent to take a small portion of it and invest it in more daring ventures like stocks?

[–] [email protected] 4 points 3 months ago

I wouldn't invest anything you need in the next 5 years. I'd stick it in a HYSA or Treasure Bills (if you're in a state with high income tax) or something instead.

[–] nieceandtows 1 points 3 months ago

That's excellently detailed advice, thank you very much!