WAY OT: Money Gurus, recommend good places to park money

Submitted by Rodriguesqe on

It's bonus season, and I am guesssing there are some other MgoEmployees in a similar spot as myself, and if theres one thing I know about this board is there are plenty of bright people who also happen to be dying for an excuse to mention how successful/smart they are.

So here it is: I have too much money to keep in a checking account - I'm thinking no more than a few thousand dollars should be placed there. I have no anticipated major expenses for at least a year, though possibly next year I might. Saving accounts offer little yield, even a quick google search told me CDs are offerring just 2.25%, which comes out to $22.50/$1000 for a year, which doesn't really move my needle. I could also purchase a stock with a good annual dividend, I found ATT had a dividend yield at 5.3%. I am not risk adverse - dropping it on oil futures has crossed my mind, but practically speaking I am looking for something safer.

So, have at it titans of finance. Give out some good investing advice to your MGoBrethren.

alum96

March 1st, 2015 at 1:41 AM ^

Second the P2P lending if you want something conservative and get some sort of reasonable rate.  You can get what you'd get back 15-20 years ago in a 3-5 year CD (i.e. 6-7%) with these. 

Stock market has been up or flat essentially every year since 2009 so everyone is quite fat and happy there - so we probably are due for a real correction there in the next 18-24 months which will awake people once more to risk.

maizeonblueaction

February 28th, 2015 at 6:55 PM ^

had a 10K windfall, and had a similar dilemma. Obviously savings accounts, etc. are terrible, so I started day trading just for fun. I have a strategy I stick to pretty religiously of never buying into companies that are priced at a peak, hold a few days until I get about a 3% gain, then sell and move on, and I've made maybe $2,500 in a month and a half doing that. My friend says it's a terrible idea and has been pushing me to mutual funds, which I've been resisting, but we'll see.

trustBlue

February 28th, 2015 at 11:01 PM ^

I'm not a stock market genius, but ive traded stocks, fx, futures, etc. and I have to admit I cringed when I read your trade strategy.  This is a perfect recipe for picking up a high percentage of small wins, that get wiped out by periodic large losses.  Hope it works out for you though. 

MichiganG

March 1st, 2015 at 9:36 AM ^

As others have implied, this probably has more to do with your timing than making good picks. When the market is going up as a whole, it is very easy to be lulled into believing you know what you're doing. Making picks that go up in value the last several years is easy; the risk is that picks don't go up as much as the market itself, which many amateurs ignore when they're "doing well". The other risk being, how well do you do when the market starts heading down?

alum96

March 1st, 2015 at 1:45 AM ^

So you've made 25% in 6 weeks trading in and out.  If I annualize that you are either going to be the greatest trader of all time ....or you may have just began trading when the market began a 5 week upswing ;)  I believe Feb 2015 was the best month in 4 years on the indexes. 

But if you can continue that for 2 years let me know and I'll give you all my savings.  I want in on the next great hedge fund trader early.  :)

Wolverine In Iowa

February 28th, 2015 at 7:10 PM ^

Yep - first things first.  Get rid of any credit card debt or car loans, and then make sure you're maxing out a Roth IRA contribution (and getting at least 100% match on a 401(k) as well).  Then you can pay off your house, if applicable.  Not as much fun as putting money to "work" in investments, but getting rid of debt is the greatest investment you can make if you have debt.

Rodriguesqe

February 28th, 2015 at 7:45 PM ^

I do have some low interest student loans still. I've contemplated just paying them off. It's highly desirable, but I don't know if its smart. I also have a mortgage that I'm paying PMI on, though it doesn't amount to much either. I could get to 20% on my mortgage (and drop the PMI) or kill the balance of my student loan debt, but I don't think I can do both with this money. And the PMI + student loan interest combines to not a whole lot. I don't have any credit card debt or have car payments.

ZooWolverine

March 1st, 2015 at 8:55 PM ^

For our house, I have two options to drop PMI:
- Pay down to 80% and get an appraisal to show it hasn't gone down in value
- Wait for it to go down to 78% of original appraisal. Even if I pay the loan back faster, the PMI only goes away when it was originally scheduled to hit 78%, not when it actually does.

I wouldn't need to refi for either case, those are the terms with my lender.

As much as PMI bugs me, paying off a low-interest loan faster to get rid of it doesn't make as much sense as investing the money, at least not in my case.

MichiganG

March 1st, 2015 at 9:48 AM ^

Paying off a house is almost always one of the worst financial decisions someone can make. Mortgages tend to be the cheapest debt you can get, especially these days, and from a purely financial perspective your expected returns would be much higher over the long-term if you had that money at work for you in the market. If you invested that money for the long-term, chances are that as you got older you'd have enough money to pay the house off (which may actually make sense once you're in retirement and your portfolio mix starts to become more conservative), plus have additional funds.

That said, there are people who are seemingly pathologically anti-debt and if they derive significant unhappiness from carrying debt then I don't blame them from paying off their house. That decision just comes with an enormous financial cost.

powhound

February 28th, 2015 at 7:04 PM ^

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LSAClassOf2000

February 28th, 2015 at 11:43 PM ^

The way to normally test for this sort of thing - in my experience - is to write back and explain that while you will not give them any sensitive information, you are willing to give them a P.O. Box in the United States to which they can mail a check and, if needed, a note that you are authorized to endorse the check. Tell them that you will then take it to a bank and deposit the funds in your account and await further instructions, but first you will set aside a modest administrative fee. 

uminks

February 28th, 2015 at 7:07 PM ^

a Roth IRA in a no-load index fund, lets say one that follows the S&P 500. In a bull market just stay in the S&P 500. If you can time the start of a recession or bear market, just switch over to a 10 year G-Bond.  If you're young you can stay just stay in the S&P 500 fund and don't worry about it for 40 years. You can contribute 5,000.00 per year.

Farnn

February 28th, 2015 at 8:43 PM ^

This is probably the best advice here for someone looking to start investing long term for retirement.  I was recently looking at the growth of the S&P as well as the DJIA over the last 35 years(when my parents bought their house) and both have gone up about 20 fold, exactly the same as the house.  I had gone into the research thinking the house would have had a greater return but it was pretty even.  And the stock market is a lot less work than owning a house.

WolvinLA2

February 28th, 2015 at 7:09 PM ^

Speak to a professional. My financial advisor is a Michigan grad whose office in in Ann Arbor. If you want, you can email me and I can give you his info. Not that all these suggestions aren't good, he's a bright guy who can talk to you about your goals and help you do what makes the most sense. He's helped me do well, so I'm always happy to give referrals.

Dustin dot schmuldt at gmail

WolvinLA2

February 28th, 2015 at 9:12 PM ^

I'm not charged anything when I speak with him, and pay nominal fees annually on the money I invest with him.  He makes most of him money from the funds where he invests my money.  He gets paid (for example, I don't know the numbers off the top of my head) 1% when he invests my money in XYZ fund, paid by XYZ for finding them customers, to put it simply.  And I am sent a list every year of every fund he works with and the fees he gets (so I can check if he is simply investing my money with the people who pay him the most).  But the fees he charges me are small, and very transparent.

alum96

March 1st, 2015 at 1:50 AM ^

There is a conflict of interest in being paid that way obviously.

Not saying it is "wrong" because a large portion of the industry is paid that way while the other is fee only.  But it's not a free lunch - the expenses on those type of products tend to be higher so that they can pay said financial advisor the commissions. 

Again not saying he is a bad person in any way - specific firms are set up this way and good, average and bad people work at those type of firms and even fee only firms.  But if someone is not tied to a person like this already it is better IMO to find someone who is not getting paid to peddle a suite of products due to the conflict of interest. 

Sledgehammer

February 28th, 2015 at 7:11 PM ^

Slighty different question, I am young and have a little disposable income per month. I would like to start doing something with the money other than sticking it in a savings account. I am thinking more long term. I also don't have a lot of upfront cash at the moment. Any advise for a noob is appreciated.

Wolverine In Iowa

February 28th, 2015 at 7:23 PM ^

I know I sound like a Dave Ramsey shill, but his advice is impeccable.  First, make a budget.  Then build a $1000 (one thousand) beginner emergency fund in a savings account.  Then, destroy your credit cards, and list your debts (not including a mortgage) in order from least amount owed to largest amount owed.  Each month, with any leftover money from your budget, you knock out your debt, smallest to largest amounts.

When you have no car loans or credit card debt left, you then need to build a liquid (like a money-market account) emergency fund equal to about 3-6 months of your budgeted outlays.  Once that is built, you max out your retirement savings (at least 15% of your gross income) in 401(k) and Roth IRA contributions.  Save money and pay cash for a new house!!  Weeeeeee!!!!