how would you invest right now? cd's bonds rental property? - Mothering Forums

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#1 of 6 Old 04-08-2011, 07:04 AM - Thread Starter
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if you had some money to invest, not long term retirement, money you may need access to some of, lets say 400,000 you need access to 200.000 of so you want that fairly secure low risk


i used to know a tiny bit about investing but thigns have changed a lot i think since the crash and now in a recession...


i would lean towards a few rental properties and cd's because i know nothing about stocks, bonds, mutual funds etc and i couldnt bare losing money in it and paying an investor seems really expensive

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#2 of 6 Old 04-08-2011, 07:48 AM
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I would avoid rental properties.  In order to keep your emergency cushion liquid, you'd probably have to take on a mortgage to buy one, and then you'd have to take on the risks of tenants failing to pay on time, or damaging your property and degrading it's value. 


My temptation would be to divide things up.  Keep $200,000 in a money market account, since you may need access to it (and probably would prefer not to pay capital gains tax, possibly short-term cap gains tax, on it when you need it).  Put the remaining $200,000 in an investment account.  The thing to warn you is that there is no way to promise that you won't lose money.  If you put it in investments, the investments could decline.  If you keep it under your mattress, inflation reduces its purchasing power.  There are always risks.


Investment advisers vary in cost.  Many are willing to do consultations and offer one-time advice for pretty low fees.  Check your local association of CFPs.

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#3 of 6 Old 04-09-2011, 09:49 AM
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What a great problem to have! I'm no expert, but I do like to follow the market and invest. Personally, I'd stay away from bonds unless they were gov't issued. I'd def stay away from rental property unless you were super handy and found a fabulous deal, plus had a fabulous renter in mind.


Have you thought about dividend paying stocks? Altria, Phillip Morris, and AT&T are all paying around 6% right now, and IMO those companies aren't going anywhere. The bad news is I'm not the only one thinking this so they're at highs. But stocks like that are nice in that they don't need to be watched and traded. We have our retirement in funds because we have to, but we consistently beat the fund w/ fairly conservative picks and pay less in fees.


You can set up a trading account at Ameritrade or similar and pay only $15 a trade. The dividends get paid into a money market account (which pays .5%). You may also want to consider that interest gets taxed higher than dividends and capital gains (your tax rate vs 15% unless your rate is under 25%). I like having a big cash cushion and would want at least 100K in cash, but DH would probably talk me into 50K.

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#4 of 6 Old 04-09-2011, 08:10 PM
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We've been landlords and my family has been in that business all of my life.  I absolutely know what I'm doing with my money in rental properties vs. understanding how to even QUALIFY someone to handle my money in the securities market... kwim?  I'm not comfortable handing my money over to someone to do with it something I don't even really understand--and therefore can't really understand if what they're doing makes sense. And I think trusting other people to manage money in arenas they know nothing about is exactly how lots of people LOST their money (not just in securities--just in any investing arena they don't fully understand).  No different than handing your tax returns over to an accountant and not being able to review them for accuracy yourself because YOU are accountable for them ultimately.  Mine is easily 15 pages and sucks, but I have gone through and learned and asked a ton of questions so that I understand my return inside and out.  It wouldn't be quite as easy with securities.


But that's me.


And in some parts of the country, you can buy a rental property for less than $75,000 and need less than $20,000 worth of work. So you could buy and renovate two of them for cash, and still retain half of your money in a liquid account plus have the rental income.  And with no mortgage, your outgo is minimal (insurance, taxes and utilities) if you don't have a renter.  The mentality that "tenants ruin your property" is the exception vs. the rule.


I think really it depends on what your overall goal is.  I like the rentals because there's income attached to it and because I know what I'm doing there.  I know how to read the real estate market.  I know how to handle managing the properties.  I know when I've found a good property, etc.  I know all of that way better than I could understand what a CFP (or whomever) is doing with my money.  


And agreed: nice problem to have!  Congrats!

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#5 of 6 Old 04-10-2011, 04:37 AM
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I have wondered this myself.  I will be getting a bit of cash from my divorce and where in the world should I put it??   Part of me wonders if the best place is just to take the whole bit and put it into a small, simple home to be our own residence.  That is one of my financial goals anyway, but should I just throw all of the money at that house or invest some of it.  After studying things like international political economy and other freaky topics, I don't exactly feel assured that there is much chance of growth in long-term prospects.  So I am starting feel that the best thing to do with money is invest it in myself.  Get a home, make it as sustainable as possible.  Keep cash accessible.  Maybe put a little into a workable home business.  But if I had extra, I might choose rental properties in the right market.  Or I might choose individual stocks that my own research has shown will probably show steady growth, avoiding bubbles as much as possible.  But that is what you get for spending too much time studying peak oil, peak uranium, potential for catastrophic climate change and social upheaval and our kind of scary international economy. 

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#6 of 6 Old 04-10-2011, 06:32 AM
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This is from the inheritance you got a year or two ago, right?  It would really depend on what you did with the rest of it, where you have the balance of the money, and what your goals are... short-term, mid-term, and long-term.  Establishing goals is the first step.  I would spend $1000 to consult with a financial planner (one that is not commission-based) to have them give you suggestions.  You would not invest through them, just get them to look over your finances and give you a roadmap that you follow through with.  I manage our portfolio, but we've spent some money to talk to fee-only FAs.  You can do it all yourself, but information is key, so if you know what you're doing, the FA is just going to confirm your thoughts or give you new ideas to explore.  Every family's finances look different so the answer to, "What would I do"... what we actually have done... is going to be vastly different because we don't have the same goals, we're not the same age, we don't have the same kids, have a different income, live elsewhere, etc.  This is too general of a question and you need specific answers for YOUR situation.  Good luck!

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