Author Topic: How to Invest $100k  (Read 3489 times)

SHDL

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Re: How to Invest $100k
« Reply #10 on: October 01, 2018, 12:21:43 PM »
What are the best options in T bills and/ or Series I Savings Bonds that will not lose much value with rising interest rates or inflation?

With I Bonds you get protection of principal plus inflation adjustments (plus favorable tax treatments), which is great.  The catch is that there are quite a few restrictions: you have to be a US person to buy them, you can't put in more than $10k/year, you lose the interest if you sell too quickly, ....  I use it as a place to keep my rainy day funds.

With T-bills you will not lose your principal if you hold until maturity (no matter what happens to interest rates), but you will not get inflation protection (beyond what the yield at the time of purchase gives you). 

(BTW, when I say "risk free," I mean "risk free under any reasonable circumstance."  If Trump instructs the Treasury Department to default on its debt then all bets are off.)


Ross812

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Re: How to Invest $100k
« Reply #11 on: October 02, 2018, 06:16:34 AM »
For cash:

Look at ICSH 3 month average duration and yielding 2.56%. VMMXX (Vanguard money market fund) is better than most savings and money market accounts offered by banks at 2.1%. SUB and MUB are good if you are looking for tax free income. VCSH has a 3.42% with an average duration of 2.8 yrs. Alternatively you can build a 4 year CD ladder on IB yielding 3.1% right now; this is the least liquid option, but has the highest risk adjusted return.

Actively managed funds:

You will have a hard time finding a better blended mutual fund than Wellington.

 
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winjitsu

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Re: How to Invest $100k
« Reply #12 on: October 02, 2018, 06:21:02 AM »
Legit the easiest, lowest fee way to manage your money is to choose a Vanguard (or Schwab or others) target retirement for your age (something like 2055 / 2060). It starts with a large equity allocation, but allocates more and more to fixed income as you get older.

BG2008

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Re: How to Invest $100k
« Reply #13 on: October 02, 2018, 08:30:43 AM »
Mike Tyson once said that "everyone has a plan until they get punched in the mouth," have you ever experienced financial losses before?  Do you know how you personally react to experiencing 1) mark to market paper loss and 2) permanent impairment.  You probably want to explore this a little better before you make your allocation decisions.   

Jurgis

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Re: How to Invest $100k
« Reply #14 on: October 02, 2018, 10:08:57 AM »
For cash:

Look at ICSH 3 month average duration and yielding 2.56%. VMMXX (Vanguard money market fund) is better than most savings and money market accounts offered by banks at 2.1%. SUB and MUB are good if you are looking for tax free income. VCSH has a 3.42% with an average duration of 2.8 yrs. Alternatively you can build a 4 year CD ladder on IB yielding 3.1% right now; this is the least liquid option, but has the highest risk adjusted return.

Do you have an opinion about ISTB and FLOT vs your choices?
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SharperDingaan

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Re: How to Invest $100k
« Reply #15 on: October 02, 2018, 03:14:10 PM »
Very, very boring - but what's wrong with just using the money to pay down your mortgage?
Then if you want to invest - do it with the montlhy interest that you will be saving as a result. You'll get practice, & if you're investment goes to zero, you dont really lose anything.

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apparat

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Re: How to Invest $100k
« Reply #16 on: October 03, 2018, 08:16:53 AM »
If you have any interest in owning real estate, do it now. You are in the perfect spot, and most don't realize it until it's too late. What I mean is that you have great resources for someone your age. Most go buy their primary residence. Once you do, you are f*cked because then any future properties are either labelled as 2nd homes or investment properties, which subject you to the Wall Street money machine scheme. You get nailed with all sorts of additional requests, must put up 15-20% minimum, and, just because, usually pay at least 75 basis points more just bc its not your "primary residence". However if you can rent now, then buy a property you want to own as an investment, but live there for a month or two until you find a quality(with tenants, always choose quality over quickness) tenant on a long term(2+ year) lease, you're golden. Especially if you can swing a 15 year mortgage. You can apply for this loan as a first time homebuyer(not sure if there are still breaks), put down 3.5% or even in some cases nothing, AND get a super low "primary residence" rate. The beauty is that you close on this, find a good tenant, and then still be eligible to buy your next property as a "primary residence" and get all the breaks once again.
Interesting, but don’t you need to stay in the property for 1 year as your primary residence before being able to rent it out? Overall not a big deal but wanted to be sure I understood what you’re proposing.

When you apply for your next mortgage to finance a primary residence purchase, is rental income counted directly against your mortgage payments or is it added to your debt/income ratio (which wouldn’t be great)?

Gregmal

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Re: How to Invest $100k
« Reply #17 on: October 03, 2018, 08:25:46 AM »
If you have any interest in owning real estate, do it now. You are in the perfect spot, and most don't realize it until it's too late. What I mean is that you have great resources for someone your age. Most go buy their primary residence. Once you do, you are f*cked because then any future properties are either labelled as 2nd homes or investment properties, which subject you to the Wall Street money machine scheme. You get nailed with all sorts of additional requests, must put up 15-20% minimum, and, just because, usually pay at least 75 basis points more just bc its not your "primary residence". However if you can rent now, then buy a property you want to own as an investment, but live there for a month or two until you find a quality(with tenants, always choose quality over quickness) tenant on a long term(2+ year) lease, you're golden. Especially if you can swing a 15 year mortgage. You can apply for this loan as a first time homebuyer(not sure if there are still breaks), put down 3.5% or even in some cases nothing, AND get a super low "primary residence" rate. The beauty is that you close on this, find a good tenant, and then still be eligible to buy your next property as a "primary residence" and get all the breaks once again.
Interesting, but don’t you need to stay in the property for 1 year as your primary residence before being able to rent it out? Overall not a big deal but wanted to be sure I understood what you’re proposing.

When you apply for your next mortgage to finance a primary residence purchase, is rental income counted directly against your mortgage payments or is it added to your debt/income ratio (which wouldn’t be great)?

From my experience, and I know several who have had it work exactly like this, is that if you currently have no ownership of a primary residence, you can apply for a loan as a primary residence. The second the loan is finalized, you can do whatever you want. I suggested he live there a couple months simply to save on rent until he found a quality tenant.

Following the rental agreement being signed, one in their mid 20's or whatever can go back to renting, or staying with their parents(easily the most cost effective way), and then immediately, or whenever they feel like it, go seek out another property. As long as you present the contract proving the other one is rented, the next one can be coded as a primary residence rather than an investment property. If you're total cost of the first property is $1500 a month, and you get $1600 in total rent, the mortgage equation gives you credit for the additional $100 a month in their debt to income equation.

The above is typically rare because most people don't have the funds to do this in their mid to late 20's, and those that do, typically look to buy their own home before buying an investment. But if you can do it, you'll save a ton of money on stupid fees that apply to 2nd homes and investment properties.

sundin

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Re: How to Invest $100k
« Reply #18 on: October 03, 2018, 09:32:38 AM »
I'm in a very similar situation but in my late 20's. I think the idea of buying is largely a great investment choice, especially with the 5% or so down. I would certainly rent out and live with my parents for the time being.

Considerations on my end are primarily to do with  the housing bubble in Tor and where the current credit cycle seems to be. Forecasted interest rates probably don't bode well for prices in the near term.

The other benefit is realizing primary residence exemptions for land transfer taxes and or other available credits depending on where you're from.

Ross812

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Re: How to Invest $100k
« Reply #19 on: October 03, 2018, 10:53:57 AM »
For cash:

Look at ICSH 3 month average duration and yielding 2.56%. VMMXX (Vanguard money market fund) is better than most savings and money market accounts offered by banks at 2.1%. SUB and MUB are good if you are looking for tax free income. VCSH has a 3.42% with an average duration of 2.8 yrs. Alternatively you can build a 4 year CD ladder on IB yielding 3.1% right now; this is the least liquid option, but has the highest risk adjusted return.

Do you have an opinion about ISTB and FLOT vs your choices?

FLOT may be superior to ICSH, I looked into it a while ago and ICSH was providing higher returns when ishares dropped the management fee but FLOT send to have closed the gap and has even less interest rate exposure.

VCSH has a better yield but lower credit quality vs ISTB. VCSH isn't a free lunch and would react more to a sharp market drop, 4% standard deviation vs 1.4%.

I think brokered CD ladders offer the best risk adjusted returns for individual investors. It is a market that isn't open to institutions. You get b rates on CDs issued by A to AA rated banks and FDIC insurance.
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