you could use a target retirement fund (something with a target date of 2045 or so might match your risk tolerance) or something like a simple 3-fund portfolio, skewed a bit towards stock to get the risk exposure you want.

whatever you invest in, make sure you max out your roth. the roth is especially nice for your situation since it has special withdrawal rules for your first home purchase.

depending on how much risk you decide you want and how much you expect to put down on a house, you may want to keep some of this cash in something less risky like a high-yield savings account or CD. iow, if you've got a big chunk of this cash in stocks and the market takes a dump, you could find yourself unable to afford a down payment.

this is hardly investing with such a short horizon -- i would keep money i needed in 6-12 months in something liquid -- but with such an appetite for risk something like a small-cap value index might be good.

don't understand how your risk tolerance for the 15k is more than the 85k considering you need the 15k in 6-12 months. Just understand that there is a pretty good chance you lose money within 6-12 months in any stock fund, and especially with a small-cap value fund as tyler suggested. If you don't need the 15k, great, take a gamble.

For the 85k, I would figure out how much you absolutely need in order to make the down payment, and set it aside in lower risk investments (CD, cash, MM, maybe bond funds if you're feeling adventurous) and put the rest in equity (stocks). If you decide not to move forward with the down payment, rebalance your portfolio to make it more concentrated in stocks. Target date like tyler said, or heck, you said your risk tolerance is 3/4, so what about 75% stock 25% bond for now?

Just read the last couple hundred posts and a lot of good points about using Roth as potential emergency funds which leads me to ask if I should move some of my 401k contributions to Roth.

I put 10% of my income into 401k; employer match is capped at 1500 per year so I could reduce % and still maximize that. Checking/Savings balance is roughly 3 months income. Have a home equity line potential of 10k which is my emergeny fund to add to that. Is it worth reducing my 401k contriubtion to, say, 7% to fund a Roth to 5k a year to increase my potential access to emergeny funds?

I'm 35, my 401k is going well as I've funded 10% for ~12 yrs and I've got ~75k equity in my house. I did see a post that alluded to the fact that Roth rules may be changing? My understanding is that Roth is a great way to hedge potential tax rate increases but wasn't aware until this thread that it can be used as an emergency fund.

thanks!

To add, I understand that 401k is pretax and Roth is post, and I pay more tax% than Mitt. =)

Sorry for confusion let me clarify the situation:

Downpayment on home is separated and not part of the 85K or the 15K listed above. That is going to be around 24k + 14K for closing costs (high estimate) as I think there are some grants and maybe tax abatements for first time home buyers in my state.

In addition, I have 100K - 85 of which I was hoping to setup as what would be a retirement fund. The remaining 15K I actually do not need in 1 year but am simply looking for recommendations on high risk high return scenarios.

Are you suggesting I should elevate my risk tolerance on the 85k and be more conservative with a smaller amount of cash?

another note I can add is that I will have about 40k liqui left over not accounted for in the above figures. the Home I am planning on purchasing is well under market value although as at as home sales are concerned it's value will be it's sales price but within 1 or 2 years I believe a refinance if necessary can be done if I somehow needed to pull more cash out.
eg. buying home for around 125K, comps in neighborhood will come in between 175-190, for hypothetical purpose I'll say home could go for 180K. it's a pre-approved short sale, hence the deep discour bank is taking pennies on the dollar so I'm buying built in equity to the tune of about 29%.

My original plan was to let someone else manage the 85 and use the 15 as seed for my own trading escapades. However I don't know if I'd be able to get the best prices considering the volumes I'll be dealing with not will my orders process as fast as I would wish either.

Disco -

You're kind of all over the place here. You need to know exactly how much $ you will need for fixed expected expenses in the near term and be very conservative with that money.

? Emergency fund - 3-6 months of living expenses = conservative (CDs, short term treasuries, savings account, money market account)

? Down payment on house = conservative (CDs, short term treasuries, savings account)

Assuming you have the funds for the above, then allocate below as you wish:

85k Retirement funding = more aggressive assuming you are young and can tolerate swings (total stock market, total international stock market)

15k play money = trading escapades (expect to lose basically all of this some high% of the time)


Letting someone manage your money is fine as long as you know what you are getting for the cost. Try reading over at the boglehead forums if you haven't already before investing. Do you have a ROTH or 401k IRA open yet?

If you can contribute to a ROTH IRA, you definitely should do so to the maximum possible. I don't look at that money as an emergency fund, though. You should have your emergency expenses saved outside of retirement accounts. I guess you could look at it as a backup emergency fund, but I would have 3-6 months of living expenses set aside before funding retirement accounts.

Country you live in: Canada

Money to invest: 50k

Risk Tolerance: Low-Medium

Timeframe for investment: Looking to park money @ higher yield than savings account (best I can get in Quebec is ING @ 1.35% and GICs are only 2.25% for 5 years)

Debt: 0

Any other information you might have that would help us:
I'm starting to build a dividend growth portfolio of stocks for long-term investing. But with my spare cash I would really like to be doing some passive investing that is relatively liquid (I could lock it in for 1 year if need be). I've looked on google and the best suggestion I've seen is to use banks like Ally that offer higher rates than ING but they are not available in Quebec. I do not want to invest in mutual funds. I'm already using my TFSA limit. I haven't contributed to RRSPs as I am moving out of the country next year.

Any suggestions? Thanks in advance.

How about paying back the rest of CANADA you thieves..........

we measure emergency funds in terms of expenses, not income.

i think counting on a HELOC as part of an emergency fund is a bad plan.

keeping part of your emergency fund in a roth is fine, but it's mostly designed as a workaround for being, say, a fresh college grad who wants to start saving for the future but can't fully fund both a roth and an emergency fund.

anyway, the general rule of thumb is to fund things in this order:

1. emergency fund (i like the suze orman rule of 8 months of expenses)
2. 401k up to company match (freeeee moneeeeeeeeey)
3. roth
4. 401k up to max, assuming your 401k has things worth buying
5. taxable investment account

fanmail,

nice posts

this is not a timeframe. we need to know that.

i don't know what most of these acronyms mean nor do i know anything about investing in canada. that said, for a maximum one year horizon, i agree with google: put it in a high-yield savings account. if you want to gamble a little more, buy bonds. a lot more, stocks.

why do you not want to invest in mutual funds? how about ETFs?

edit: lol you said low-medium risk. keep it in the bank, ami.

what does this mean?

This forum requires that you wait 25 seconds between posts. Please try again in 10 seconds.

Why is roth 3 and 401k max 4?

My understanding is 401k is pre tax, which allows me to more easily fund using my current income. Roth is post tax, which is a hedge against potential future tax rate increases.

thanks!

yea you're right, sorry. Timeframe would be up to 1-2 years as I might need to buy a house within that period.

ETFs are ok and might be an option to the savings account. Mutual funds are pretty bad in general because the Fees and the inability to control my own investments are not to my liking, not to mention most mutual funds don't even perform well.

thanks

a roth is more desirable because:

- you fund a roth with post-tax money, so you "own" 100% of the value of your roth. you only "own" a percentage of the value of your 401k since you will have to pay taxes on the $ as you take them out.

- a roth is substantially more flexible than a 401k. you can withdraw principal without penalty, special rules for your first home purchase, etc.

i don't understand the bolded statement. a roth and a 401k are both equally trivial to fund.

this ain't no savings account i ever heard of.

looks like you've got some studying to do about mutual funds -- these are pretty ignorant claims. for example, VTSAX, vanguard's total us stock index mutual fund, charges a whopping 0.06% ER. if you can do better, quit talking to me and get out on the dance floor.

your one valid point is the lack of "control". you can definitely hold exactly what you want by buying individual stocks, but it's a ****load more work and it's going to be essentially impossible to achieve the same kind of diversification you can get from buying a mutual fund. if these tradeoffs are worth it for you, then by all means, start reading up on P/E ratios and getting busy with quarterly earnings reports.

I think he's talking about ETFs vs Mutual Funds. I personally prefer ETFs since they allow for flexibility in entry/exit. Regardless, 90% of people should be holding almost exclusively broad based indexes regardless of whether it's thru an ETF or a mutual fund.

Hey 2p2,

I live in Florida, and have ~100k to invest. There's no specific timeframe, but I just have all this money sitting in my boxes in various poker rooms. I have less that ~1k in bills monthly, and ~22k worth of student loans. I made over ~400k last year playing poker but only have 1/2 the action. I'm up over ~150k this year (1/2 action).

I want to invest in something very stable/low variance.

Help please, thanks!

"subtle" brag about your winrate...

what is the interest rate on your student loans? unless they're absurdly low, start by dispatching these loans.

"very stable/low variance" = high-yield savings account.

Not bragging just stating income. Any other suggestions than a savings account?

Hi 2P2,

I'm a Senior in college and I recently received a $10K cash scholarship. Fortunately for me, my tuition is already covered, so I have that $10K to do whatever I want with. I'd like to invest that money rather than letting it sit in a savings account. I have a full-time job offer after graduating (AKA all the financial security a 21-year-old with no debt needs), so my risk tolerance is moderately high. However, I'd like the possibility of pulling that money out in a year or so to maybe buy a car or something of that nature.

I'm strongly considering mutual funds. Any advice on specific ones, or how to really go about beginning to invest?

Thanks.

I plan to withdrawl from my 401k when I'm retired, however, so my marginal tax rate may be much lower than it currently is.

I already own a home, access to principal w/o penalty does seem advantagous.

I mean 10% of my pretax income > 10% of my post-tax income.

Bags, I would say to get involved in agriculture. It's the best investment out there right now for next 10-20-30 years. Silver is really good as well. PM me if you wanna know some ways to invest. GL.

This is not appropriate advice.