Suppose I save 5K in a year...

Following with interest and that’s basically my situation too.

Give it to your parents' investment advisors and tell them to work their magic on it, the same way they do for your trust fund! Easy as pie!

Trade it for some magic beans.

I guess all the DL investment gurus are enjoying their 1 million nest egg or asleep. Makes since, early to bed, wealthy and wise...

R4 there's a millennial investment site called Wealthfront, maybe look there. Or the Acorns app.

Sense

That was egregious! I must be tired...

Ok, suppose you succeed! You got this...

Put it all on Red. It’ll double.

Or...

You lose it all.

Invest in a diversified mutual fund. It can be like investing in the US economy. Assuming you have faith in it.

OP, I have a few go-to mutual funds:

FOCPX is mostly high tech and is up 500% over 10 years. Be advised, that the last ten years have been unusually boffo.

FBALX is tech tempered with some bonds. I’m not sure how that will work in bad times. During the last crash it was less volatile.

And then a tax free money market account or other money market account.

The situation an be complicated when things take a tumble, so I don’t know what to tell you. In simple terms, there is “risk vs reward”, and people underestimate the risk, I think, since the market hasn’t really gone pear-shaped in a decade or more.

Beware: any fool can point you at an investment that made money in the last decade. One should ask if it made money [italic] for the amount of risk [/italic] it took? Only an expert can answer that, if he actually can. If anyone can.

OP, you should make an effort to learn about investing, or hire someone who will do so for you. It takes a lot of learning.

Assuming you leave your investment untouched, principal plus interest, the chances of your investment growing increase each year you leave it untouched due to compounded interest. $5000 earning 6% annual interest will double in value in 12 years. A total market index mutual fund with low fees, like from Vanguard, held longterm would likely beat any other type of investment - unless you were extremely lucky and invested in the next Apple or Microsoft at the beginning of their run-up.

The last few posts have been very helpful. I’ve just got myself into the position where I can save/invest a few thousand per year. My parents both have about 150,000 each sitting in a checking account. I said this to a date recently who almost choked and told me I must help them out and get them to invest. They don’t get any interest as far as I know and he also said the 6% figure is what they should be getting.

I can give you a few pointers

R13, your parents are losing money since that money isn't keeping up with inflation. Interests rates are low, but money earning zero interest is losing value each year. R12

It’s tricky, OP. In normal times, I would be all-in. But we have a moron as President, and Brexit? I don’t believe Trump could have taken either Bush’s or Obama’s role in the last crash. I think things would have been more severe. So, I have recently moved my money from FOCPX and similar aggression mutual funds, into more conservative investments, including bonds and cash.

I’d recommend your folks diversify - that’s very important. I don’t think they should be taking big risks over age 50. So, well, they really ought to hire an investment advisor.

You can spend your life learning a little at a time, for your whole lifetime. Someday, it can pay as much as your regular job, to understand some basic investing rules.

(My bro in law understands nothing and gambles with his money - and he loses it, because he puts money in very risky things that he knows nothing about. Don’t do that.)

There’s a standard rule-called the rule of 72. Take whatever percentage of interest you’ll be receiving and divide into 72 and that will tell you how long it will take to double your money. Isn’t that amazing that you can use any percentage number and still get a correct answer

Gold is still rising like crazy. It's been an incredibly lucrative investment for decades now.

It's very hard right now to keep putting $ into an investment account with at the shit show that is currently our government, as well as Europe, Middle East and China nonsense. I guess one should try to always think long term and hope for the best

Gold lags behind stocks as shown here.

One has to be careful if your data is from a gold seller, and the dates - gold prices before ~1970 aren’t really relevant today.

R18, please show your data.

However, wartime is good for gold, but this is an exception.

OP, times of crisis are times to lose, or make, great sums of money. Be aware that the pros are way ahead of the plebes.

The best you can realistically expect is an 8% rate of return.

R11 what exactly do you mean by "the amount of risk"?

OP, that’s an average of 8%, over time. (Reference R22).

The good times should yield much better. The bad times will yield much worse. Together, they'll probably be in the 7%-9% range. God willing, you will get in and enjoy the good times, and not get in right before the market drops, because that matters. You should read about “dollar cost averaging”.

When the Fed did their Qualitative Easing III, I figured the market would go up. It did. My sister made 53% over 3 years. That’s the good times. One can expect a 20% drop, maybe 30%; maybe more, in the coming years - however, some of us have been expecting that since Turnip was elected, so, we’ll see.

[quote] R23: what exactly do you mean by "the amount of risk"?

That might not have been well-phrased, but I mean that one person might have made 20% on Apple stock over a year. And another might have made 30% at a casino.

Who was smarter?

The guy who invested in the Apple stock was smarter, even though he made less, he was smarter because Apple wasn’t a gamble, it was a thoughtful investment. His “risk” was less, because (let’s assume) he bought a company with solid value. It wasn’t completely chance. Allowing for everything being partially chance, I mean.

Does that answer the question, R23?

If you are looking for brainless double your money every year, it doesn't exist. Day traders, ebayers, flippers yes you can but if you are looking to just plop 5K somewhere and have it double ..sorry unless you sell drugs it won't happen. But...if you can put away 5k year over year in a roth IRA - starting at 5K for 20 years you would have 350K - meaning you put in 100K you got out 350K, so 3.5 return on your investment. The magic of compound interest!

Basic Finance rule that everyone needs to know: In order to increase returns, you must increase risk. However, increasing risk does not necessarily mean increased returns.

In financial terms, risk means uncertainty around an outcome.

There are many types of risk: risk of loss of principal, interest rate risk, opportunity risk (opportunity costs), inflation risk, liquidity risk, market risk, credit risk, currency risk (FX). Most people only consider loss of principal - a flawed strategy.

Finally, numerous studies show that rather than following the old adage, buy low, sell high, humans are actually hardwired to do the exact opposite. Our natural instincts drive us to buy high and sell low. Compounding that phenomenon is that people tend to value potential loss over potential gain - people put more importance on not losing a dollar than earning a dollar. One study looked at children and told them that if they behaved, they would be given a dollar. Other children were told that if they didn't behave, a dollar would be taken away - the children who would lose a dollar on average behaved. As adults, we continue to overweight loss against potential gain.

When the market tanks, that’s when you should buy, buy, buy... because things are cheap.

Most people panic and sell when the market tanks, which is about the dumbest thing you can do. You might as well just throw your money away.

I was let go during the last recession, out of work for 2 years and had to take an entry level position to get back in the workforce so I was not in a position to buy anything and it will always be one of the greatest missed opportunities of my life. Family members who were unaffected by the recession bought up houses that had dropped to $25,000 in my home state. A second cousin bought 6 of those houses with his life savings and sold them all last year at $85,000 each without doing a single thing to them. 😪 My boss at the job I was let go from made millions buying cheap land and turning them into trailer parks for people who lost their homes.

Any “for dummies” type advice would be appreciated. I don’t even know where you go to do this stuff.

How long do you have to wait? (I know, please don’t rip me to shreds)

R30, you could log on to Fidelity.com and open an account. Then, afterward, send money in. Or, you could stop into a branch. Make an appointment and hopefully they can explain it to you in more detail.

I know, it’s really hard to get started. Most people know nothing about any of this. But honestly, learn a little bit at a time, over a lifetime, and it can pay better than your regular job someday.

I got two friends to take the plunge in 2010, so they’ve done well. I hope they don’t get cocky, though, because Bear markets are part of the ride. They haven’t seen one yet, but some day...

It's not actually that hard. Charles Schwab, you can do it all online. You want to open a Roth ira. You can then deposit 5K (which by the way reduces your reported income on your taxed the year you deposit it). Then just pick how you want the money invested. I would suggest a no or low load SnP500 fund. Then just keep depositing 5000 every year, set and forget.

Continuing from R32, a Roth deposit must be earned income, and has a $6000 maximum per year, unless over 50.

Do any middle class non Americans invest? I’m sure they do but I’ve never heard Europeans talk about having X saved for retirement and I can’t find any equivalent of Roth IRA type things in the U.K. I do have US bank accounts so maybe I can do it in dollars.

R34, if you’re OP, please write so, so we know who’s asking.

The people at these firms, Fidelity, Schwartz, Vanguard, etc., are not usually full service investment firms; however, they should help you get started.

I ran into a co-worker, Betty, years ago at a branch. The staff couldn’t answer her question, but I could. I write for my own satisfaction.

I have my two work 401(k) accounts with Fidelity, R31. I'm so risk-averse (R27 describes me) that when Trump took office, I switched almost all my funds to "safe" things like municipal bonds and index funds (because I was sure the economy was going to tank). I'm not even sure if that's the right terminology. That's how dumb I am with finances. I probably shot myself in the foot, huh? Should I leave it all there?

Open a gay porn studio. You'll make 100X your investment in a single year.

The most sound advice here is the poster who mentioned it will probably take a decade to double.

OP seems the type best served putting all 5K into one of Vanguard’s ETFs (blend of various industries and individual holdings).

Even with the uncertainty of the last few years, most of these funds have yielded 10-15% increases.

OP look this up on the web, plop your 5K in, and then pretend it doesn’t exist to you anymore. Don’t pull it out, don’t get all crazy with trading unless you educate yourself and/or get professional advice. Add even 1K a year if possible. It will double by a decade.

Buy ETFs rather than mutual funds.

They are basically the same thing, except with an ETF (exchange traded fund) you determine at what price you buy and sell. With a mutual fund, the company just gives you the end of day price.

R36, you’re not dumb. Turnip is a complete wildcard. There’s too much unknown for me to tell you what to do, but I believe this and next year will be interesting, with Trump and Brexit. It’s a good time to make, or lose, a lot.

One of my guiding principles is that I expect the pros to be two steps ahead of me, and I try to stay humble, and not start thinking that I can predict the market, ever.

Is there a minimum? Can you just invest 1K?

Thanks, R40. I see one of my accounts earned 13% this year, even with some setbacks, and another one earned just over 4%. At least my balance hasn't gone below what it was at the start of this year. So I guess I'll just keep things as they are for now. Thanks again.

R41, Fidelity accounts usually have a $2500 minimum, except some funds allow less, if you setup a regular investment into it.

Just to be clear, a Fidelity account probably has no minimum. Then you use the money in the account to buy stocks, mutual funds, or whatever.

Put it all in CAN ALL PET.

What EXACTLY would be the absolute best plan for 20 million dollars? Knowledge able guys, can you provide a highly likely scenario on who, how, what, when, why would manage that size of an investment and h o a the returns would generated?

Basically, if you had that type of money to invest then how would you go about it?

[quote] Basically, if you had that type of money to invest then how would you go about it?

Take it to a wealth manager like US Trust. Every bank has a Wealth Management/Private Banking division. They royally kiss your ass when you have lots of money. You don't need ATMs. They just schedule someone to bring you a bundle of cash each week.

Do financial advisors/investment managers work with people making tiny investments. Would they even give the time of day to a blue collar worker wanted to invest 3-5,000 per year? I’d feel self conscious contacting one with that kind of budget. What about banks? Do they offer advice to people to me or are they only concerned with the big accounts?

I lost money on individual stock purchases. Now, I only buy mutual funds or bonds. (No, I'm not rich.)

I would suggest you take advantage of the Roth IRA and consistently do that every year. It sounds like you have youth on your side.

[quote] They just schedule someone to bring you a bundle of cash each week.

Rich people don't bother with cash. It's strictly for the poors.

The problem with things like a Roth IRA is that you can't get the money until you're old. Some day, I may have to buy my way out of the country. A Roth IRA won't be of any use to me.

[quote] Rich people don't bother with cash. It's strictly for the poors.

That's not necessarily true. I used to work for a wealthy man. Each week his banker would bring him cash. He was the cheapest fuck I'd ever met.

No wonder why they’re bad tippers R51! No cash!

Unfortunately most brokers won't talk to you unless you have $100,000 minimum. It may seem elitist, but it actually makes sense. There's no point in both of you wasting each others' time when you are on different trajectories.

Also unfortunately there is no surefire way to go about investing when you are new to it other than to educate yourself on the basics, accept there is going to be some risk, and invest only what you are comfortable losing.

ETFs are the way to go for beginners. Get your feet wet, stick to them for the long run, keep educating yourself, and just go for it. Take a quarter of the time you could be spending looking at porn or bickering on this site daily and do it the old fashioned way - earn it.

They have an ETF for everything. They just announced a Vegan Climate ETF.

If Elizabeth Warren or Bernie Sanders gets elected, move everything you have out of stocks and into bonds. Those people hate corporate America and will fuck up your financial portfolio.

R55. Wrong.

That kind of reactionary thinking hinders people's investment confident. Stocks existed before both of them (well maybe Warren...) and they'll exist after them.

Balance out your portfolio. Build in some risk, rely on a moderate foundation, and for heavens sake don't put it all in bonds unless you are 55+.

The best investors realize the best time to invest was yesterday. The second best time, today. Don't wait. Time stops for no one.

Liz, r56, don't you have a campaign strategy to plan?

I want something where you can take the money out/back at any time. Does such a thing exist?

And if you invest in stock, is it hard to resell? Who’s responsibility is that? The stockbroker/day trader? You pay them for services?

If the percent interest you're earning is less than inflation, then you're obviously losing money. For a portfolio to have a 2-3% return is just inflationary prices.

We are in a low inflationary period not seen in this long of a period since early 60's. To expect a 6% return is wishful thinking - it's really a 2-3% return due to inflation. Second, any person who says they will guarantee 6% increase every year is a liar. EVERYONE would invest in that.

Reality is that, with some exceptions, investing is risky as fuck. But there's really no other way to grow your money.

R58 Yes, that's possible. For the most part. You can literally buy a stock one day and take it all out the next.

There are various reasons why you wouldn't want to do this, but it is absolutely possible.

I think you should educate yourself on the web first before investing, however.

Look into TD Ameritrade, Fidelity, eTrade. Not sure about minimum investments, but they should be pretty easy to meet for smaller amounts. Customer service reps are generally helpful, even for complete newbies. Still, educate yourself first.

Honestly don't rely on the tips here. Leans risk averse. Investing is about accepting risk.

[quote]What EXACTLY would be the absolute best plan for 20 million dollars?

With that much money, the best investment would be real estate... which is pretty much guaranteed to appreciate in value. Or you can rent it and generate predictable revenue every month.

[quote]You can literally buy a stock one day and take it all out the next.

Don’t forget you’ll have to pay capital gains taxes on your profits every time you sell like this.

I have a traditional IRA. Do I need to roll it over into a roth IRA?

Yes, dear R63. YOU MUST.

Once you get to 20 million, you still have to ask yourself the same questions.

(And you hire a wealth manager you trust to help you answer these questions.)

1. How risk averse are you?

2. How active do you want to be in your investments?

3. What is your goal?

4. What kinds of investments interest you?

There are a zillion ways to invest money.

[quote] R59: ... Second, any person who says they will guarantee 6% increase every year is a liar.

I think it’s illegal for a professional to promise any return. It’s certainly stupid.

I advised my family, and my bro in law kept wanting me to “promise” a good return to beat his bank return, 2%. I kept telling him I would not promise anything. l think he was used to dealing with scammers. He got 53% over 3 years.

Send it to me OP. I promise to double your money in 90 days!

at 20 mil I would just invest in an annuity and take the return for my annual income. This is how they pay out those big lotto sums. The cash value is usually half and they pay out over 20-30 years. At a modest 5% you would be taking 1 million a year pre tax and never touching your principle.

[quote]And if you invest in stock, is it hard to resell? Who’s responsibility is that? The stockbroker/day trader? You pay them for services?

It depends.

American stock for a majority of companies is sold either on the New York Stock Exchange (NYSE) or Nasdaq. You can hire someone to make the transactions for you or do it yourself through one of the online brokers like ETrade, Fidelity, etc. Usually the stocks on these exchanges are easy to buy and sell. They go through a rigorous screening and have to meet certain criteria to be listed.

Smaller companies trade OTC (Over the counter). You can also access these stocks through someone you hire or the online brokers, but they are not as easy to buy and sell. They aren't traded in the same volume as other stocks and you sometimes have to wait for someone to accept your "bid".

I would suggest anyone that is thinking about buying stock to begin looking at stock prices. Look at the products you use and what other people use. Look for these companies stock prices online. They change throughout the day according to trading volume. Buy what you know and like.

[quote] R47: Do financial advisors/investment managers work with people making tiny investments

I believe so. Call Fidelity. They know most people start small, as I did. Call them, and ask to make an appointment with an advisor. He should give you 5 minutes, if not an hour. I’ve called and stopped by, many times.

OP, the hard part is getting started. It sounds like you want something simple to manage. If you want a "set it and forget it" investment, look for a low fee index mutual fund. There are fixed stock/bond ratio funds (example: 60% stock and 40% bonds), or "target date" funds, tied to the year you expect to retire, where the ratio between stocks and bonds changes the closer you get to retirement. While I own various mutual funds and ETF's, I really like the simplicity of Vanguard's Balanced Index (linked below.) It requires a $3000 initial investment and you can contribute any amount thereafter. It's a relatively low risk investment for longterm investors. Vanguard has the lowest fees in the industry. You can link your account to your checking account and transfer money easily every month, as example. While I like ETF's, they require a bit more hands-on expertise than mutual funds.

There is no "best" plan for $20mm.

Best is a relative term that depends wholly on the individual's circumstances and his financial (and life) goals. ALL investment has risk of one sort or another, some types of risk are simply more palatable to some people while other risks are not. Some types of risk are more obvious to the casual observer, but even a government bond that whose coupon rate is considered the "risk free" rate is not risk free. It is merely free of certain market and credit risks for which there are no risk premiums embedded in the coupon rate.

Except for this advice - NEVER accept investment advice that does not consider your total current financial situation (including your job and job security), your financial goals, and your risk tolerance.

The single best piece of financial advice I've ever gotten was that however you invest, you have to be able to sleep at night. Individual personal risk tolerance for various types of risk will determine how well you sleep at night when the markets are roiling.

It's critical to understand and assess what type of risk you're accepting, especially when the returns seem outsized relative to other investment opportunities.

Anybody with $20 millions should be getting professional advice and not be playing on here.

Thank you, R27 aka R72.

I could buy a LOT of Volvo wagons with 20 million!

FAs at banks don’t won’t to be bothered with anything under $50,000.00.

It’s not worth their time.

Just like loan officers won’t bother with a loan $5000.00 or under, they’ll tell you to apply for a credit card.

R76, try Fidelity. I’ve had good luck with them. Their customer service is pretty good.

Pork bellies.

Invest all your money in just one company like Enron.

[quote]Pork bellies.

For Pete's sake, r78.

There is also the "invest and forget it" type of investing.

For example, Vanguard has the fully diversified portfolio called the 4 Total Market ETF. One total bond fund, one total stock fund, one total international bond fund and one total international stock fund.

This balances out your investment and covers all bases.

[quote]This balances out your investment and covers all bases.

No, it doesn't it covers some bases at the expense of others.

The price for that level of diversification of some market risks and lowered risks in some categories is lower returns. Depending on the investment time horizon and age of the investor, this may be effective at preserving capital at the expense of achieving returns. If the investor is younger with a longer investment window, he would have plenty time to make up for any short-term volatility. However, the compounding nature of investments makes taking some risks earlier worthwhile.

He would be trading one set of risks and exposures for another.

Not to mention that you may still have your investments highly concentrated in those funds. For example, both stock funds may be heavily invested in high tech companies. If your international fund were invested in say, Foxconn and your stock fund were invested in Apple, both investments are exposed to Apple's earnings and sales. Similarly, an international bond fund and total bond fund are both making bets on the shape of the yield curve. More important than geographic diversification is time (short- vs. long-term).

And of course, his job might also have some exposure in the case of a recession, so his investments should weigh that accordingly - would you really want to be invested in stocks of high tech companies and work for a high tech company with a downturn in that sector causing financial armageddon if he's laid off and all his stocks tumble?

We're not talking about a lot of money, so it doesn't have to be that complicated. Contrary to everything I've said, I'd argue that a simple index fund should be near the top of the list of investments that should be investigated by most people, long before people start trying to get fancy and complicated.

Do those with say $75 million get special interest rates? How would one go about generating a great interest income with that figure?

[quote]How would one go about generating a great interest income with that figure?

Depends on how you define "a great interest income." However, one common strategy is to create a maturity ladder if you're purely interested in generating interest income.

A simplistic example would be that you divide the money into 5 x $15 mm. Then, you invest the money in government bonds (or other interest bearing vehicle) with varying maturities of 1 to 5 years. Each year, 1 x $15 mm matures, you take the interest, then reinvest the principal in another bond with a new 5-year maturity. Depending on your view of inflation, you might decide to reinvest a portion of the earned interest in addition to the principal. You could do the same thing with CDs.

As with all things, the downside of this strategy is that it take 5 years to really get going. Using very simple math. Let's say the rate you're earning on each $15mm is 2.75%. You earn $412,500 after the first year. The second year, the $15mm has had two years to earn interest, so you get $825,000. After the fifth year, you get $2,062,500 (again, very simplified math for illustrative purposes only without taking into account compounding or variation in rates from different maturities). From the fifth year onwards, you get 5-years of interest on $15mm (whatever the going rate was at the time you reinvested in the next run of the ladder).

Whenever you have a large lump sum that you intend to put into a "savings" account with a time commitment, like a CD, it might be worth considering diving the money into a couple different maturities, depending on the rate differentials. You never know when you might need the money.

Thanks, R84

r83 - preferred customers - they will usually have a wealth management banker assigned. But short answer is yes they get better interest rates.

I’m not sure the questions about $20 or $75 million are serious, but that’s a whole different league. I do like R84’s answer.

At that huge amount of assets, it always depends on your goals. You should definitely have an advisor, even a team of advisors, investing your money. They should know you intimately. Your age, dependents, goals, temperament, etc. Do you want to invest and so forth, or hunker down?

I, personally, would spread the money all over to diversify. This is where a pro could help. Because, after stocks and bonds, I’d want gold, real estate, and euros. I’d need instruction as to how to diversify. Maybe Yen? Bitcoin? I don’t know. Something that would survive most any debacle. This is just for some of this money.

Then I’d spend some of the rest. Houses in various places, maybe. I’d want to plot out how to spend it over the remaining course of my life. Taxes, earnings, life expectancy, all that.

Certainly at $75 mil, you could spend $1 mil a year on a team of advisors. I’m guessing you could hire, maybe, 5 full time advisors at $200,000 each. That’s an over estimation, I think. But I have no personal experience with this.

I did work for a financial company, though.

A few additional points.

The more complexity you introduce, the more risk you introduce. Diversification MAY (not guaranteed) reduce some risks associated with concentrating your investments (all you eggs in one basket), but the price you pay is lower returns.

If it costs money to develop an "investment strategy," you have to ask yourself whether the additional complexity is worth it - are your returns sufficiently high both to pay for that investment advice AND the incremental risks you incur from more complicated investments. The odds are against you - research suggests that index mutual funds on average perform better than managed funds. You'd have to find excellent money managers to outperform who, in turn, will cost more, placing a higher minimum on your after fees returns to make the additional risks and complexity worthwhile.

And once again, remember that higher returns REQUIRE that you accept higher risk - whether you recognize that risk or not.

To summarize:

- All investments have risk, even government bonds have inflation risk and liquidity risk.

- Do no accept specific advice unless it take into consideration your entire financial picture, goals and risk tolerance, including your job.

- You cannot increase your returns without increasing risk. The reverse is not true - higher risk does not necessarily translate into higher returns.

- Diversification reduces some risks. Just be aware of what exposure that diversification creates and recognize that the cost for diversification (and lower risk) is lower returns.

- Complexity adds risk. The more complicated your holdings, the more risk you've accepted. Be sure you are being compensated adequately for the higher risk.

- You have to be able to sleep at night. Going through contortions just for a little extra return may not be worth the peace of mind.

The "market" is not a level playing field in the sense that you are competing against people whose entire job is to invest money. They have education and practical experience that few people can match. They also have hoards of underlings, equally well-educated, whose job it is to support investment decisions. They spend their entire workday doing research and analysis to provide support to people making investment decisions. Even some "professionals" are at a disadvantage since they are competing against other professionals who may have more resources at their disposal.

R88, please post your experience. I think you’ve posted occasionally before and I’ve enjoyed your posts. I am interested in your education and experience. I’m an amateur but have done well over about 35 years.

Thanks guys for your answers to my $20 and $75 million scenario questions. I guess that from what your responses indicate, one must assume that no matter how much money you may have to call your own, it all really belongs to the ECONOMY! Thanks again.