mrsteve

iTrader: (1)

So hypothetically, let's say you're about 30 years old. Married. No kids. Just purchased your first house. No consumer debt. Six figures in your retirement accounts. But no other annuities or investments other than a few shares of stock here and there.

You then receive an unexpected significant windfall. You spend a bit on some new toys. Home improvements. But still have a large amount left and not sure where to put it or how to diversify it.

Do you put it all in mutual funds? Real estate? Metals? All of the above?

Ken1997TL

Mutual funds that focus upon real estate and biotech

subinf

Would your suggestion change if there was no wife and no home?

AZuser

Put in all in AAPL stock (on a pull back).

Ken1997TL

Quite likely. Now is a great time to buy a home

Will Y.

I'd talk to a fee-only financial adviser first, particularly as what one wants to do with the windfall may evolve and change over time.
The decisions are very personalized.

mrsteve

iTrader: (1)

I have a financial advisor who isn't paid on comission every time I make a purchase but rather she gets a fee every quarter bases on the value of my portfolio. Is this fee-only? I don't pay her by the hour.

Scottman111

x2

Rental houses are the gift that keep on giving, if you can handle the responsibilities of maintenance and being a landlord. It's not so hard.

Dan

Rental properties and AMRMX.

Anachostic

Personally, I would put it all in a high-income/dividend fund and get "paychecks" for the rest of my life.

aznboi2424

iTrader: (10)

Buy some houses to rent out and some plots of land?
Also buy bruial plots/headstones.

mrsteve

iTrader: (1)

As far as I can tell the problem with buying vacant land around here is there is no tax benefits. Also, the mortgages often require quite a bit down (40% or so). Still considering it but I think something more "liquid" is a better option.

aznboi2424

iTrader: (10)

Considering it? I thought this was a hypothetical?
You can share it with your fellow Azine members

mrsteve

iTrader: (1)

yes yes. hypothetical of course...

aznboi2424

iTrader: (10)

LaCostaRacer

I guess it depends on the actual windfall amount. If you don't have 6 months savings, you should.

A fool-proof thing you could do is hypothetically pay-off your house. Depending on income tax bracket and mortgage interest rate, you would need a 'guaranteed' 7% or higher annual return to beat that idea. That's because you need to make that much return to capture the risk of an alternative investment + the extra income tax paid for capital gains. A good rule of thumb is you need a return of 2x mortgage interest amount to make an alternative investment a better approach.

Another safe and inflation savvy idea would be to pay some mortgage principal down and then place the rest in a ROTH account. That way you could double or triple your investment over many years and not pay taxes when you retire. You also have the option to withdraw the initial investment money if you need to for some reason in the future.

There are much worse things you can do with your money than pay off a mortgage either fully or partly.

mrsteve

iTrader: (1)

We will be putting a good chunk towards our mortgage. We were only able to come up with 5% down when we purchased in June so we are stuck paying a huge chunk of money each month in PMI. We'll be paying down the mortgage at additional 15% to remove the PMI payments.

I don't think we would have enough to pay off our house entirely (depends on what we get for some yet to be sold real estate).

LaCostaRacer

How did this adviser do last year? Did she beat 6.9% when you subtract the quarterly fees? How about 2010, did she beat 12.78%?

If not, you are better off buying an i-share like IVV and calling it a day. Most fee-based financial advisers don't outperform the SP500 which is one reason they charge fees. If you have one that does, then more power to you.

mrsteve

iTrader: (1)

I don't know how she performed. Similarly to the windfall, I also recently inherited the adviser. Doesn't mean I'll keep her for all my investments though. What is a typical quarterly fee? (i.e., percentage of portfolio).

I do have an inherited IRA with her but no other money is currently managed by her (it's sitting in a savings account until I decide what to do).

LaCostaRacer

Before I fired my money manager many years ago, they charge a minimum of 1% but it usually depends on portfolio size. I think I paid 2% at the time.

The thing very interesting is they are not bashful taking their fee but having a sub-par performance. I couldn't believe how much money this money manager could lose in such a short time playing options- ridiculous! I have yet to hear of a money manager that charges a % of the gains. They either like guaranteed fees or commissions mostly.

Fortunately he only had part of the money. The best decision I ever made was canning his ass and taking control of things myself, which was 10 years ago.

mrsteve

iTrader: (1)

I honestly just don't know shit about investing. I've squirreled away as much as I could afford to into my 401k since I started working (about as long as I've been on this forum actually). I really don't even know where to start (hense this thread).

Similarly my brother has a large windfall but he has no house, no debt, nothing. Problem is he only makes about $16/hr so he would have a tough time qualifying for a mortgage.

LaCostaRacer

By the way, you should ask how well she has done. A great benchmark year is 2008. If she beat -40.6%, she outperformed the general market in a bearish environment. If she didn't work then, she has not experienced a real bear market and probably shouldn't be managing your money. My loss was -17% that year.

LaCostaRacer

Oh the money management fees I gave were annual fees. Good luck in what ever you do. My best advice is to pick a good manager or do some of the advice I already gave you on the mortgage and ROTH. Remember, you'll beat 80% of the managers doing one simple thing: buying IVV i-share that models SP500. You thoughts on precious metals are not a bad way to go either for some of the funds. You can go to bulliondirect and store stuff in they're vault as well for no charge which is a screaming deal. The big idea is DIVERSIFICATION.

mrsteve

iTrader: (1)

She has worked for my parents for 20 years. She isn't a rookie but that doesn't mean she is making her clients money either.

I'll certainly ask those questions the next time we meet.

leedogg

Talk with the advisor and see what they recommend about paying off your mortgage vs investing it. I would think that if your paying more in interest than you could earn investing it, the mortgage would be the way to go? I'm in a...similar boat.

mrsteve

iTrader: (1)

My mortgage rate is just 3.75%.

We've decided to buy a single family home after the first of the year and keep our townhouse as a rental/investment property. We should net $2-300 a month on rent vs. mortgage/taxes based on what we used to pay in rent for a similar property in the same development.

Scottman111

Along the same lines, ever consider buying and renting a vacation property? Some extended family of mine have done it and it works out well. They rent it out to people they know on the days they don't want it, so basically they plan out the times they want and schedule people around them (months in advance of course). People like it because it's private and cheaper than basically any other comparable option.

mrsteve

iTrader: (1)

Growing up we had a rental/beach house in Delaware. Most of my memories of the place revolve around helping my dad fix the place up. Too much work. My brother and I thought about it (and together with combined funds could buy a place outright) but I'd rather just rent someone else's home for a week every year.

Scottman111

Very true, they are a lot of work. Whenever I use it they ask me to work on some stuff since I have construction experience and other small things like mow the yard.

There are three couples that co-own it, so the work is spread out little by little over the year when each couple goes down there, so it's not as bad. It's also 14 hours away from everyone, so that makes things like emergencies tough. However, that's what good neighbors are for.

LaCostaRacer

A couple things to keep in mind. For a rental, you'll get to depreciate the property which works pretty well for a townhouse (as opposed to a SFD that has a land component that doesn't depreciate). That's a great benefit.

The downside, is you need to account for vacancy, repairs, and a management fee if you plan on having somebody else manage the property.

You're doing the best thing if you buy another house and rent the current 3.5% property because you won't get any 3.5% loan on a rental property if you go and buy one and need a loan. Investment properties are about 1% higher even with stellar credit.

mrsteve

iTrader: (1)

We are leaning towards just selling the townhouse and not fussing with a rental. Prices in our neighborhood are on the rise pretty dramatically. We are looking to build so we'll likely be in the house until next Spring/Summer.

MR1

Looks like you are still weighting options. Take a breath before final decisions. What's the big rush?

aznboi2424

iTrader: (10)

A dollar today is worth less tomorrow?

mrsteve

iTrader: (1)

There is no big rush. I don't even have it all yet.

Fibonacci

I would change my handle from Mrs. Teve to Mr. Italia. You won't look nearly as cool rocking a 458 when you're 60. Just an idea, hypothetically speaking of course.

LaCostaRacer

It's hard to get good advice on the internet. I would suggest that you talk to somebody.

I would certainly not put all my eggs in owning a big-ass house- even if you can pay cash. If you can't pay cash, then all the more reason not to buy tor build the big-ass house.

There's one thing about money is often happens: easy come, easy go.

Fibonacci

If you are not confident you will make smart choices on your own, seek out trusted advise from close confidants first.

Barring that, check a financial advice specific forum such as Kiplingers, WSJ, CNN Money or Jemstep for example, not a car forum.

mrsteve

iTrader: (1)

I hope you guys know I wasn't looking towards AZ for my investing advise. Just curious what other people's opinions/suggestions were. I don't intend to blindly follow a bunch of you guys on here but I appreciate the input.