What to do with $20k…

[barnaby33]

I wish I had $20,000 that I didn’t know what to do with, but I do have $5.36 in change in my car, any advice?

Clean your car, its like mining for gold!

Josh

[HereWeGo]

Sector wise, base materials might be a good bet, given the current world economic growth. There are several funds of that flavor (as well as ETFs,) ranging from conservative to hyper-aggressive.

[HereWeGo]

Sector wise, base materials might be a good bet, given the current world economic growth. There are several funds of that flavor (as well as ETFs,) ranging from conservative to hyper-aggressive.

[masayako]

I will give you some idea:

Buy Vanguard Total Intl Stock Index (VGTSX)

$20k is not a lot of money to pick individual stocks. I personally will put in it international index and avoid any management fee. The transaction fee for index fund is usually lower.

Min Initial Investment: $3,000
Year to date: 7.92% return
Top holdings:
Vanguard European Stock Index 58.17%
Vanguard Pacific Stock Index 26.13%
Vanguard Emerging Mkts Stock Idx 15.66%

Masayako

[masayako]

I will give you some idea:

Buy Vanguard Total Intl Stock Index (VGTSX)

$20k is not a lot of money to pick individual stocks. I personally will put in it international index and avoid any management fee. The transaction fee for index fund is usually lower.

Min Initial Investment: $3,000
Year to date: 7.92% return
Top holdings:
Vanguard European Stock Index 58.17%
Vanguard Pacific Stock Index 26.13%
Vanguard Emerging Mkts Stock Idx 15.66%

Masayako

[Raybyrnes]

I am a pretty big fan of ETF’s. I have held EFA over the last 4 years. If looking to add a little bit of Beta to your portfolio another way to invest in in Depository receipts Ex ADRE. Challenger here is you will ahve to pay commision each time you buy and sell.

Rather than simply focus on the sector or investment type you might also consider strategy. Market seems a little high at the moment so another idea might be to open an account with the minimum and dollar cost average into the fund over the next year or 2. This would help take some of the risk out of timing the market. By this I mean pick a fund and open it up with 5000k and then contribute 1K a month over the next 15 months.

[Raybyrnes]

I am a pretty big fan of ETF’s. I have held EFA over the last 4 years. If looking to add a little bit of Beta to your portfolio another way to invest in in Depository receipts Ex ADRE. Challenger here is you will ahve to pay commision each time you buy and sell.

Rather than simply focus on the sector or investment type you might also consider strategy. Market seems a little high at the moment so another idea might be to open an account with the minimum and dollar cost average into the fund over the next year or 2. This would help take some of the risk out of timing the market. By this I mean pick a fund and open it up with 5000k and then contribute 1K a month over the next 15 months.

[capeman]

With the way the dollar looks to be going in the next couple of years I’d buy gold. If not then probably park it in Euros.

[capeman]

With the way the dollar looks to be going in the next couple of years I’d buy gold. If not then probably park it in Euros.

[Raybyrnes]

Capeman

I can see how gold could be used to diversify and little or no covariance with market remoses some risk but hasn’t gold had a fairly big run up at this point.

[Raybyrnes]

Capeman

I can see how gold could be used to diversify and little or no covariance with market remoses some risk but hasn’t gold had a fairly big run up at this point.

[capeman]

Normally I would agree with that but with the major currencies (Dollar and Yen) at the tipping point of spiraling downward. With that in mind, gold is what people tend to flock to for security during such times.

Here's a good article…

http://www.dailyreckoning.com.au/gold-5/2007/02/09/

Gold really is a hedge against inflation. When commodities become stocks and hedge funds become stocks and stocks become a kind of public currency for wealth building, gold trails them from a distance, sometimes jumping ahead a block or two, but always near by. It watches bemusedly as people measure their new wealth in the latest currency du jour.

Gold, which has always been and will always be money, has seen this show a thousand times before. It knows how it always ends. The assets which have inflated the egos, expectations, and bank accounts of the newly duped eventually collapse in deflationary spiral. The supply of the new currency- whether its dollars or shares-eventually becomes so large and divorced from demand, and real economic value, that it becomes worthless.

And a better one…

http://www.dailyreckoning.com.au/gold-price-9/2007/05/09/#more-902

“Gold never really ‘goes up.’ It simply holds its value while the values of other things are collapsing due to inflation and currency devaluation. Many times, in the 1960s or 1990s for example, it is the most useless of assets, sitting inert and generating no income. In inflationary periods, this inertness of value is gold’s most admirable quality.

 

[capeman]

Normally I would agree with that but with the major currencies (Dollar and Yen) at the tipping point of spiraling downward. With that in mind, gold is what people tend to flock to for security during such times.

Here's a good article…

http://www.dailyreckoning.com.au/gold-5/2007/02/09/

Gold really is a hedge against inflation. When commodities become stocks and hedge funds become stocks and stocks become a kind of public currency for wealth building, gold trails them from a distance, sometimes jumping ahead a block or two, but always near by. It watches bemusedly as people measure their new wealth in the latest currency du jour.

Gold, which has always been and will always be money, has seen this show a thousand times before. It knows how it always ends. The assets which have inflated the egos, expectations, and bank accounts of the newly duped eventually collapse in deflationary spiral. The supply of the new currency- whether its dollars or shares-eventually becomes so large and divorced from demand, and real economic value, that it becomes worthless.

And a better one…

http://www.dailyreckoning.com.au/gold-price-9/2007/05/09/#more-902

“Gold never really ‘goes up.’ It simply holds its value while the values of other things are collapsing due to inflation and currency devaluation. Many times, in the 1960s or 1990s for example, it is the most useless of assets, sitting inert and generating no income. In inflationary periods, this inertness of value is gold’s most admirable quality.

 

[Coronita]

I will give you some idea:

Buy Vanguard Total Intl Stock Index (VGTSX)

$20k is not a lot of money to pick individual stocks. I personally will put in it international index and avoid any management fee. The transaction fee for index fund is usually lower.

Min Initial Investment: $3,000
Year to date: 7.92% return
Top holdings:
Vanguard European Stock Index 58.17%
Vanguard Pacific Stock Index 26.13%
Vanguard Emerging Mkts Stock Idx 15.66%

Masayako

 

You know I have had a significant stake in this fund for the past 3 years. And it's been a great three years. But I've actually stopped contributing to international (I haven't pulled out, just stopped adding to my position in this fund). Where I've been putting heavily into is big large cap domestic index funds. I know a lot of folks will probably think this is stupid. U.S. is headed for a decline, companies are going to suck on guidance here, housing collapse etc,etc,etc,etc….

I am considering where the media/general attention is telling you to put money now, and do completely the opposite. The issue that I have with the international indexes is that while their returns have been great over the years (namely due to the dollar decline, not real performance), this can't keep going on forever. The problem that I see now it seems everyone is all over "international investments". Every media is telling you to invest in overseas markets. My rule is that by the time the media is reporting what you should be doing, it's already too late to actually do it. I think the international markets have had their run, and pretty much it's over when Average Joe at the office's water cooler starts to talk about how he's putting money into a International Index Fund because he read about it being "smart" to do from BusinessWeek.

Where I have been building up a position over the last 2 years and will continue to do this this year is in big cap domestic indexes here. It's been pathetic for the past couples years. Don't think these can return that low for that long. Some folks argue that well U.S. business is shrinking. Yes, I would agree. But I've noticed part of the frenzy these days have also been through a lot of M&A activities that's proping these markets (as opposed to IPOs). Big CO's are swallowing smaller CO's (in the process laying off a bunch of people to cut expenses and redundancy)…I think what we are seeing now is just the tip of M&A activities. Also, several of these big companies have been massively buying back their own stock. So while I think there's some merit to the doom and gloom for the real estate companies, I don't see a complete meltdown in the U.S. financial markets: namely because the big I-banks make money in more than 1 way…. The current trend is via M&A deals (and I have several friends are/were M&A Investment Bankers that are having a field day now…Because during the 90's it was mostly about IPOs and not M&A)

So it were me, I'd take the entire $20k and do Vanguard Growth Index Fund Investor Shares. Or, more diversify, I'd do $10k in the Vanguard Total Stock Market Index and another$10k in the Vanguard Total International Stock Market Index if I were to be afraid of missing any further rise in the international markets.

I would also recommend spending $20 and buy the book The 4 Pillars of Investing by William J. Bernstein…Or for the mathematically inclined, his previous book Intelligent Asset Allocator.

You can take a look at the performance of the Vanguard Funds over the past couple of years and see for yourself..if both the stellar international performance and the cruddy domestic large cap performance are really sustainable at their respective levels.

Total Int’l Stock Index Returns
1yr, 3yr, 5yr, 10yr, Since Inception(04/29/1996)
9.62% 18.78% 17.36% 8.66% 7.85%

Growth Index Fund (Large Cap Growth) Returns
1yr, 3yr, 5yr, 10yr, Since Indeception(11/02/1992)
7.40% 11.46% 6.25% 6.53% 9.81%

One additional caveat. If you are SURE you are going to need to use this money in 2-3 years…You really shouldn’t put all of it into the market at all imho. It should be liquid earning the highest possible return in an almost guarentee-like fashion. First, there is the possibility that all of us at piggington are wrong, and both the international markets/domestic market/precious metal market all have a bad rap over the next 2-3years. Second, you could have bad luck and pick the wrong indexes. Third, you definitely shouldn’t pick individual stocks unless you are prepared that you have a chance of losing this amount. In all my major purchases, I alwyas plan 1-2 years ahead. The funds I need for those major purchases are ALWAYS held liquidable in an insured short term cd/interest account, even though it may be declining due to inflation.

Numerous times, I’ve made the following mistake and personally witnessed others that did the same thing. I looked at a CD/savings account and said, “wow 5% sucks..If I left the money in the stock market up until the point that i really need it, I could be earning like 10-15%…” Well, my dumb luck was that that every time i did this, when I needed the funds, it was always during when the market was “correcting” for some random short term news. So it was actually worse for me to leave in the market, than had I just taken the 5% cd….If you are sure you are going to buy a house in 2 years, I wouldn’t even keep all the “other” 80k in the stock market.

[Coronita]

I will give you some idea:

Buy Vanguard Total Intl Stock Index (VGTSX)

$20k is not a lot of money to pick individual stocks. I personally will put in it international index and avoid any management fee. The transaction fee for index fund is usually lower.

Min Initial Investment: $3,000
Year to date: 7.92% return
Top holdings:
Vanguard European Stock Index 58.17%
Vanguard Pacific Stock Index 26.13%
Vanguard Emerging Mkts Stock Idx 15.66%

Masayako

 

You know I have had a significant stake in this fund for the past 3 years. And it's been a great three years. But I've actually stopped contributing to international (I haven't pulled out, just stopped adding to my position in this fund). Where I've been putting heavily into is big large cap domestic index funds. I know a lot of folks will probably think this is stupid. U.S. is headed for a decline, companies are going to suck on guidance here, housing collapse etc,etc,etc,etc….

I am considering where the media/general attention is telling you to put money now, and do completely the opposite. The issue that I have with the international indexes is that while their returns have been great over the years (namely due to the dollar decline, not real performance), this can't keep going on forever. The problem that I see now it seems everyone is all over "international investments". Every media is telling you to invest in overseas markets. My rule is that by the time the media is reporting what you should be doing, it's already too late to actually do it. I think the international markets have had their run, and pretty much it's over when Average Joe at the office's water cooler starts to talk about how he's putting money into a International Index Fund because he read about it being "smart" to do from BusinessWeek.

Where I have been building up a position over the last 2 years and will continue to do this this year is in big cap domestic indexes here. It's been pathetic for the past couples years. Don't think these can return that low for that long. Some folks argue that well U.S. business is shrinking. Yes, I would agree. But I've noticed part of the frenzy these days have also been through a lot of M&A activities that's proping these markets (as opposed to IPOs). Big CO's are swallowing smaller CO's (in the process laying off a bunch of people to cut expenses and redundancy)…I think what we are seeing now is just the tip of M&A activities. Also, several of these big companies have been massively buying back their own stock. So while I think there's some merit to the doom and gloom for the real estate companies, I don't see a complete meltdown in the U.S. financial markets: namely because the big I-banks make money in more than 1 way…. The current trend is via M&A deals (and I have several friends are/were M&A Investment Bankers that are having a field day now…Because during the 90's it was mostly about IPOs and not M&A)

So it were me, I'd take the entire $20k and do Vanguard Growth Index Fund Investor Shares. Or, more diversify, I'd do $10k in the Vanguard Total Stock Market Index and another$10k in the Vanguard Total International Stock Market Index if I were to be afraid of missing any further rise in the international markets.

I would also recommend spending $20 and buy the book The 4 Pillars of Investing by William J. Bernstein…Or for the mathematically inclined, his previous book Intelligent Asset Allocator.

You can take a look at the performance of the Vanguard Funds over the past couple of years and see for yourself..if both the stellar international performance and the cruddy domestic large cap performance are really sustainable at their respective levels.

Total Int’l Stock Index Returns
1yr, 3yr, 5yr, 10yr, Since Inception(04/29/1996)
9.62% 18.78% 17.36% 8.66% 7.85%

Growth Index Fund (Large Cap Growth) Returns
1yr, 3yr, 5yr, 10yr, Since Indeception(11/02/1992)
7.40% 11.46% 6.25% 6.53% 9.81%

One additional caveat. If you are SURE you are going to need to use this money in 2-3 years…You really shouldn’t put all of it into the market at all imho. It should be liquid earning the highest possible return in an almost guarentee-like fashion. First, there is the possibility that all of us at piggington are wrong, and both the international markets/domestic market/precious metal market all have a bad rap over the next 2-3years. Second, you could have bad luck and pick the wrong indexes. Third, you definitely shouldn’t pick individual stocks unless you are prepared that you have a chance of losing this amount. In all my major purchases, I alwyas plan 1-2 years ahead. The funds I need for those major purchases are ALWAYS held liquidable in an insured short term cd/interest account, even though it may be declining due to inflation.

Numerous times, I’ve made the following mistake and personally witnessed others that did the same thing. I looked at a CD/savings account and said, “wow 5% sucks..If I left the money in the stock market up until the point that i really need it, I could be earning like 10-15%…” Well, my dumb luck was that that every time i did this, when I needed the funds, it was always during when the market was “correcting” for some random short term news. So it was actually worse for me to leave in the market, than had I just taken the 5% cd….If you are sure you are going to buy a house in 2 years, I wouldn’t even keep all the “other” 80k in the stock market.

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