I have a bit of a problem. I can’t seem to pull the trigger on any stock purchases. I have about 15k invested in 2 vanguard indexes and two dividend stocks, but I can’t seem to get up the nerve to invest the 100K + I have sitting in a boring savings account. Jacob has convincingly argued – at least to me- that index funds are not the best way to go, but as I work full time currently my time and confidence picking stocks is limited.
About my situation:
I’m in the capital accumulation phase, and figure I need 3 to 5 years more of solid savings to reach my FI goals. My savings are way more important than investment income but I feel I need to see that income start rolling in or I will never fell confident to step out of working, and also to get my SO on board with the idea.
Also I have about 16k of student loan debt at 4.25% - over the next 7 years it will be gone at the current rate.
What does the forum suggest? Index funds and forget about it for a while? Stick with savings until the Eurozone crashes? Pay off the student loans right away?
Thanks guys- this forum is my go to source for inspiration on FI
Cheers
Frozen by fear - Investment question
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OurLifeInc.
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An easy way to earn 4.25% really quickly would be to pay off your student loan. Especially if you have 100k sitting there and you don't know what to do with it. Might as well be debt free.
As for your situation...I wouldn't do anything until you are comfortable with the decisions you are making. I started investing when I was just out of college. Up until that point, I read everything I could on the subject. I am certainly no Warren Buffett, but I understand the decisions I make and am comfortable with the outcomes, whatever they may be.
You really just need to find an investing style that fits your temperament. For me, it is a basket of 25 to 30 dividend stocks hand picked by me. Your psychology may be different.
As for your situation...I wouldn't do anything until you are comfortable with the decisions you are making. I started investing when I was just out of college. Up until that point, I read everything I could on the subject. I am certainly no Warren Buffett, but I understand the decisions I make and am comfortable with the outcomes, whatever they may be.
You really just need to find an investing style that fits your temperament. For me, it is a basket of 25 to 30 dividend stocks hand picked by me. Your psychology may be different.
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TheLuckyWizard
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The fundamental flaw with your understandable position is that you [falsely] assume that $1 today = $1 tomorrow and that it is safe from volatility. $1 today will likely buy 90c of bread next year... Looking at today's futures yesterday's dollar bought more of almost everything. Today it buys 98.8% the sugar it did yesterday. 99% silver, 99.4% oil, etc.
The dollar fluctuates in value from minute to minute, like virtually everything in existence.
I would argue that your "safe" position is actually quite risky because all your eggs are in one basket. There are also countless fundamentals (and history) pointing to a continuation of the downward trend in the dollar's value.
...
I would not try to time any market events, especially when all your net worth is in one position. I would just choose a diversification strategy as a fortress and explore market timing/trading/acceptable risk from that position of safety.
I wouldn't be in a hurry to pay off student loans. 1) They are tax deductible. 2) There are many grant and forgiveness programs. Perhaps your next job will have one. 3) Student loans are a very political issue with many millions of people that want their now 1 trillion in debt bailed out... It could happen. 4) A negative dollar balance is protection from inflation if the rate is reasonable (in the ballpark of real inflation).
The dollar fluctuates in value from minute to minute, like virtually everything in existence.
I would argue that your "safe" position is actually quite risky because all your eggs are in one basket. There are also countless fundamentals (and history) pointing to a continuation of the downward trend in the dollar's value.
...
I would not try to time any market events, especially when all your net worth is in one position. I would just choose a diversification strategy as a fortress and explore market timing/trading/acceptable risk from that position of safety.
I wouldn't be in a hurry to pay off student loans. 1) They are tax deductible. 2) There are many grant and forgiveness programs. Perhaps your next job will have one. 3) Student loans are a very political issue with many millions of people that want their now 1 trillion in debt bailed out... It could happen. 4) A negative dollar balance is protection from inflation if the rate is reasonable (in the ballpark of real inflation).
You have $100K doing nothing and $16K of debt at 4.25% (after taxes)? By all means, pay the debt. That's a no-brainer -- and you still have $84K to invest (or not).
As for what to do with the rest, you are not comfortable yet with a particular strategy, so you need to keep studying/looking at them until you are.
I think you have this idea that its "all or nothing" -- that there is a "right" answer as to where to put ALL of your money. But none of us know the future, so any answer we give could prove to be "right" or "wrong" in the future.
So stop thinking about putting everything in one basket. If there is an investment you want to try, put $10K or $20K in it for a few months and see how you sleep at night about it. You really have to be comfortable with it or its not worth doing. But you will only know if you are comfortable until you try it out a little bit.
As for what to do with the rest, you are not comfortable yet with a particular strategy, so you need to keep studying/looking at them until you are.
I think you have this idea that its "all or nothing" -- that there is a "right" answer as to where to put ALL of your money. But none of us know the future, so any answer we give could prove to be "right" or "wrong" in the future.
So stop thinking about putting everything in one basket. If there is an investment you want to try, put $10K or $20K in it for a few months and see how you sleep at night about it. You really have to be comfortable with it or its not worth doing. But you will only know if you are comfortable until you try it out a little bit.
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George the original one
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secretwealth
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JohnnyH has a great perspective, and something any investor needs to ask (and anyone who has any money in their pocket is a de facto investor): What is going to be more valuable in the future? At the moment, you are acting as if you think the U.S. dollar will be more valuable in the future than other options. Do you really think that?
Dragline- shocking I know- that's why I've posted - I want to make smart choices and my inaction in and of itself is dumb- I've taken some advice and divided the portfolio of cash in to 2 pots- 40% for individual stocks that I want a stake in and 60% for vanguard indexes that I can use to diversify. I've got 9K in funds and 12K in individual stocks now so I'm starting to make some progress. I just need to pick the right 4 or so indexes to make the initial 3K purchase and then I can drip feed them monthly on whatever dips occur.
Johnny H- Philosophically I agree, I'm trying to get myself over the fear that another big dip is around the corner and if I time it wrong I'll be losing years of growth.
Secret wealth- no doubt the US dollar is not the store of value I am currently hoping for,
Cheers
Johnny H- Philosophically I agree, I'm trying to get myself over the fear that another big dip is around the corner and if I time it wrong I'll be losing years of growth.
Secret wealth- no doubt the US dollar is not the store of value I am currently hoping for,
Cheers