There are a lot of financial professionals who read this blog as well as savy personal investors. If you have responsible advise, please leave it. Especially if I forgot something important.
hi [Old Friend],
I think you should slow down and take a little time. I'm not a professional public market investor so I don't really want to be telling people what to invest in. Also, it's not my place. You have to make these choices yourself. Here's a step by step plan that will need to be adjusted for your risk tolerance and when you want the money.
Basics of Investing
- Be aware that 85% of all mutual funds underperform their benchmarks. that means that 85% of fund managers are not as good as putting the money in a simple index fund that mirrors the S&P 500, Dow jones, Nasdaq, etc.
- Be aware that actively managed funds charge you a lot of fees, around 2%. that makes it even harder to beat the averages.
- You want to be very well diversified. Diversification helps spread the risk over a lot of stocks and funds. If I could remember the math from business school, I could prove it to you. just trust me, you want to be diversified.
- Transaction costs (aka the cost of a trade are pretty low) - like $10-$30, so it's not imperative that you buy into the market all at once. this way you can put 20-40% of your money to work now and ease into the market, rather than plunging in at once.
- Go into Schwab, tell them you want to meet with a representative.
- Tell them you want a very passive, low cost investing strategy that uses a lot of indexing. (this is one of the big strategies that Schwab has been built on, so they will know what you are talking about). Another FYI - Schwab is where I have my money.
- Tell them you want a lot of diversification, across Small Cap, Mid Cap and Large Cap, and you want Global diversification, i.e US, Europe, & Asia, (and some emerging markets).
- Tell them you want diversification across Stocks and Bonds (you want high quality corporate and treasury (government bonds), stay away from anything mortgage or "high yield."
- These are all plain vanilla ways to invest but they are very effective and it's simple so you won't be ripped off by commission looking people.
- A good asset allocation for you would probably be: 60% stocks, 20% bonds, 10% precious metals and 10% cash. A good US vs. International allocation would be 50% US, 35% Europe and Asia and 15% Emerging Markets.
I would print this email and go over it with the Schwab Rep.
Best of luck,