Question: I have $ 20,000 in excess cash on hand. How should I invest it?
Answer: The question is not a size-fit-all answer because each investor has a slightly different position that depends on their age, income sources and existing investments, among other factors.
Maybe you inherited a little money or got a monster tax refund,
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What is the best way for you to work for that money?
Let us go through some scenarios to see that you may have the most understanding to invest $ 20,000.
Do this if you are starting from zero
(Image Credit: Getty Pictures)
If you do not have an existing brokerage account, then the company 401 (K) Plan Or other investment account, you are an empty slate.
In this case, the easiest way to wet your feet will have to open a brokerage account in Charles Schwab, Fidelity or any other iconic broker and keep a simple ETF portfolio together. (Here is an easy guide for Best online brokers and trading platforms,
You can kick a good starter portfolio with just two exchange-traded funds (ETF )- Mohra Total Stock Market ETF (Vti) and Mohra Total Bond Market ETF (BND).
VTI gives you an exposure for almost the entire American stock market, and BND does the same for the market.
There are two of them Best ETF to buy For their respective asset classes, and both are essentially free to themselves with an expense ratio of only 0.03%. This means that for each $ 10,000 investment, you are paying $ 3 each year.
If you consider yourself a moderately conservative, then there is a solid way to go on the lines of 60% of the 60% of the VTI. (This is what is referred to as one 60/40 portfolio,
If you are young, there is a time horizon of 20 years or more time, or generally comfortable to take risk, you can invest more in VTI and reduce in BND, perhaps producing 70/30 or 80/20/20 portfolio.
Or if you were more conservative, you can increase your percentage in BND.
For just grins, let’s see what a 60/40 portfolio behavior can look like.
Pouring 60% of its $ 20,000 in VTI works for $ 12,000. In the final check, VTI was trading around $ 260 per share, so you would have enough cash to buy 46 shares. This leaves you with $ 8,000 to invest in BND. Bond ETF was last seen trading around $ 73, so you could buy 109 shares.
Once per year, see your portfolio to see if it is away from your 60/40 target and then to buy or sell some shares of VTI and BND to return to where you want to be.
It is a simple portfolio, certain. But this will give you a good start to create your money through investment.
Do this if you already have enough retirement savings or other investments
(Image Credit: Getty Pictures)
Now let’s say you No Starting from scratches. Perhaps you already have a company 401 (K) plan that is well funded and has been appropriately invested for your age.
What now?
Well, 60/40 portfolio of VTI and BND is still a completely viable option. But if you are already on your way for the construction of a proper retirement nest eggs, you can also take the risk of getting a little more creative.
You can try your luck with individual shares or even something more risky, such as Bitcoin or other cryptocurrencyYou can also do Invest in gold Or consider using $ 20,000 as a down payment at a rented house.
Perhaps the best advice here is that you buy something that you are not already. Or, to use financial planning sexes: Diversity.
For example, if you already have a construction of $ 100,000, which is in your 401 (K) scheme, put in one in $ 5,000 or more Gold ETF Like SPDR Gold Ministers (GLDM) will give you an exposure for anything that is not already happening in your retirement account.
The same $ 1,000 will be true of minor allocation of either Bitcoin ETF Like Ishares bitcoin trust (I broke).
Trying your luck as a stock picker or taking advice from mythological money manager Peter Lynch can also be exciting what you know.
That coffee shop down the road that you can often have Starbucks (Sbux), or about the brand of shoes that can proceed about your nephew Nike (Nke).
If you want to start investing in individual shares, just remember to keep your position size moderate. A decent rule of the thumb will not be more than 5% of the account in any one stock.
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