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500k to invest with retirement needs already met

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Money Talk > Investing, Stocks and Bonds

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lifeisprecious
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500k to invest with retirement needs already met  Reply with quote  

I am 41, my wife is 36, and we have two little kids. We are both from very modest backgrounds and have no real knowledge about money. Her business has done really well- don’t ask me how!- and over the last few 2 or 3 years we have been able to save a lot of money since we live pretty simply, and we now have $1.8 million in Fidelity. I don’t use any advisor services, but we have about two-thirds of it in a mutual fund that tracks the S&P 500. I see a lot of financial advice for books telling you how to make money, but I don’t see many telling you what to do if you have made some and what to do with it.

Question: If I have about 500k to invest, without having to worry about my future needs, what should I do?
Post Sat Aug 13, 2016 5:38 pm
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oldguy
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quote:
Fidelity. I don’t use any advisor services, but we have about two-thirds of it in a mutual fund that tracks the S&P 500.


I would keep right on doing that.
In general, professional managers (pension funds, union funds, mutual funds) are able to beat the SP500 Index only about 15% of the time. And that makes sense - the SP500 has a longterm average return of about 11%/yr, a manager needs to get about 13% to 14%/yr to pay his overhead. An that manager is selecting stocks from that same population of stocks that average 11%/y - it's tough to get a 14% return for a population that average 11%. (That's what we do - and have done for about 50 years).
Post Sat Aug 13, 2016 6:42 pm
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danerlavigne
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Are you trying to be aggressive?
Post Mon Aug 15, 2016 7:44 pm
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lifeisprecious
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Oldguy, thanks. Sometimes we think simple things need to be more complicated.
Danerlavigne, great question. I think that you can be aggressive in our position with at least some of the money. Problem is you may need a lot of education to be aggressive, and we are pretty much clueless.
Post Wed Aug 24, 2016 11:38 am
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oldguy
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Problem is you may need a lot of education to be aggressive, and we are pretty much clueless.


You are right about simple/complicated. Here is the dichotomy of investing - in theory it is complex, when reduced to practice it is simple. There are 1000's of books on how to 'beat the market'. Elliot waves, fibonnaci ratio, stocastics, head & shoulders formations, cup & saucer, derivatives - put options, call options, straddles. But like I said earlier, the professional managers are able to beat the market only 15% of the time. The answer is - DON'T try to beat the market - the longterm generic market return is 11%/y, accept it - you can become wealthy at 11%/y.

Risk - you don't need a lot of education - the Law of investing - risk and return are directly proportional. And when you find an investment that is a "sure thing", both 'safe' and high return, that simply means that you do not yet understand the risk. So - if you want to be aggressive and go for high risk (15% to 20%) you go into penny stocks, derivatives, the Nasdaq, etc. (However, the investors that jumped into the Nasdaq about 20 yrs ago (hoping for >15%/y) are still waiting to get their money back - that may have messed up some retirement plans?
The 'moderate risk' level gets you about 10% to 12%/y, that is fairly reliable over over the 30-yr wealth-building cycle that most of us have. (Before we switch to wealth-preservation).
And the low-risk items - CDs, savings, bonds - give you safe storage of money - but no growth they merely offset inflation, protect the purchasing power of your money for the far-future.
So the key is - you must take adequate risk to outpace inflation to build wealth, ie, purchasing power.
Post Wed Aug 24, 2016 4:44 pm
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