What to do with $20,000

May 8, 2012 1:40 PM

I have $20,000. I want to do something to make this money grow. Ideas?

I recently acquired a large settlement from a car accident years ago and I have been wondering how to make it grow. I'm quite young and I feel this is a good opportunity to become more financially successful (along with my career of course)

I've thought about purchasing real estate, however where I live (Edmonton Canada) The housing market is at record highs and it would be a foolish time to invest in a house when the bubble may burst any day now. I will probably do this later...

I need some advice on stock, or investments etc. Since this money was basically just given to me, I'm willing to take some risks in certain investments.

I've done my best to educate myself over the last year since I got the money but I still feel lost about what to invest in.

Suggestions from people who have been successful for investing would be fantastic.

posted by Atlantic to work & money (24 answers total)

I will give you the best piece of investment advice you will ever get for free on the internet:

Do not listen to a bunch of shmucks giving you free advice over the internet. Educate yourself, go to a financial planner personally recommended to you by someone who is seeing their money make money, and talk to them.
posted by griphus at 1:47 PM on May 8, 2012 [18 favorites]

What are your savings/investing goals? Retirement? Home purchase? Education for prospective children? Becoming indepedantly wealthy, or supplementing your income?

What is your risk appetite like? Are you comfortable with higher risks, or prefer lower risks? Do you want to manage it yourself, or have someone manage it for you?

What is your time horizon for your investments? I.e. if for retirement, do you want to retire at 50, or 70? The same for the other goals.
posted by the man of twists and turns at 1:49 PM on May 8, 2012

To clarify, these are questions you need to answer yourself ( not necessarily here) before taking griphus's advice. See if you can find a financial planner who works on a fee basis instead of a percentage, as well.
posted by the man of twists and turns at 1:50 PM on May 8, 2012

I don't need financial advice guys... That's not what I'm asking for. I have a stable career and savings as well as a decently wealthy family to fall back on if I were somehow robbed of all my money and incapacitated so I couldn't work.

My risk appetite is high right now because I don;t need this money, it was FREE. I have NO need for it other than to invest. My job is already going to provide me with enough money to retire buy a house, pay for children college etc. I also don't need a financial planner as I know how to personally manage my money. I have not debt or loans to pay off.

I am literally just asking people about their success in the stock market or investment strategies. I'm willing to invest for quick returns or long term. It really doesn't matter to me, I just want to do something with this money. it's not doing any good sitting in my bank at 0.05% interest annually.
posted by Atlantic at 1:57 PM on May 8, 2012

Don't buy life insurance.

I'd dump half of it in a retirement account (Roth if you were in the US, but whatever you've got in Canada should do.)

The rest in a decently interest bearing savings account or CDs.

Now you have some Fuck You money. If, for whatever reason in the future, you need money to buy your way out of a situation, voila!

Even perfectly invested, $20K won't make you a millionaire, but a spare Ten Grand will make you stand up taller and take a lot less shit in your life.
posted by Ruthless Bunny at 1:58 PM on May 8, 2012 [3 favorites]

I'd put it in stocks in a business or field that you know a lot about. Something related to your career maybe. That or the old standby of buy stock in companies you like. I've done pretty well using these strategies.
posted by fshgrl at 2:03 PM on May 8, 2012

Buy facebook stock. YMMV
posted by dydecker at 2:11 PM on May 8, 2012

I don't need financial advice guys

Well, you've asked for financial advice. Ideas for doing something with $20,000 is financial advice. Going to a financial planner and saying "I have $20,000 and I am extremely risk-tolerant, what kinds of opportunities do I have, and should I take advantage of?" should net you some good financial advice. Seeing as how that's what you're asking for.
posted by davejay at 2:11 PM on May 8, 2012 [8 favorites]

Yes I suppose that is financial advice. What I meant was I did not need advice on setting goals or how I should think about my children's college money or something like that.
posted by Atlantic at 2:13 PM on May 8, 2012

Financial advisers/planners don't help you make budgets or setting far-off goals (at least, they don't just do that). They help you grow your money. That's what you're asking for. They'll take your requirements for growth potential (high) and risk tolerance (also high) and say, "This is the class of investment you should be looking into." They're pros at that. They'll pick the right funds or stocks for you. And since you'll be picking a fee-based financial planner, rather than a commission-based financial planner, their advice will not be biased by throwing business investment towards certain companies/individuals.
posted by supercres at 2:16 PM on May 8, 2012 [1 favorite]

I've been fairly successful in the investments I've made. Generally, I invest in companies I've worked for (that haven't had idiotic policies) and companies that make products I use. For example, I use Tide and Duracell batteries - I bought Proctor and Gamble stock.

I also use a financial planner from Assante. This isn't because I need advice (nor do I have any debts or lack of common sense about money). It's because she has access to a lot of interesting mutual funds that I probably wouldn't find on my own. When the Canadian government made it's announcement about donating a ton of money to infrastructure during the recession, she was able to find me a fund that was based on construction companies etc.

Do you want to invest all the money? Because doing some 'life investment', as corny as that sounds, might be interesting. For example, invest 10K in high risk, stick 5K in your RRSPs and then take 5K to travel to Belize.
posted by valoius at 2:18 PM on May 8, 2012 [3 favorites]

Go into town, buy four pairs of John Lobbs and spend the rest of the money on a set of bespoke suits and custom shirts. Save a couple hundred dollars for ties, pocket squares, and cufflinks.

Return on investment: people treat you better and give you things when you look nice and presentable without being flashy.

Or, you know, put it in a mutual fund. In your situation, I'd go with the clothes.
posted by backseatpilot at 2:21 PM on May 8, 2012 [8 favorites]

Great time to buy property.
posted by hworth at 2:27 PM on May 8, 2012 [1 favorite]

Scott Adam's one-page financial advice. You really only need #8, and feel free to make the split 60/40 or 90/10 or even 100/0.
posted by Mr.Know-it-some at 2:28 PM on May 8, 2012 [2 favorites]

I like using high-risk money for peer-to-peer lending. You could look into Prosper or LendingTree.
posted by tau_ceti at 2:33 PM on May 8, 2012

The rest in a decently interest bearing savings account or CDs.

Do such things exist any more? I recent had a similar amount of money to invest, and while I had always had "CD ladder or the like" in my head as a good stable place for about that amount, the interest rates are SO LOW right now that I just ended up leaving it in an ING savings account, which is earning barely more than it would if I Ron Swansoned it into buried gold safes. Which is to say, I'm watching this thread with great attention.
posted by flaterik at 2:34 PM on May 8, 2012 [2 favorites]

Have you read some of Mutant's posts?

It gives you another perspective and it sounds like it is successful.
posted by Wolfster at 2:37 PM on May 8, 2012 [1 favorite]

If you don't know much about stocks and investments, and are willing to risk this money, then use it to teach yourself about stocks and investments. I'd read all kinds of investing books and articles, watched a load of business news, but until I had actual money at stake, none of the lessons seemed to sink in.

I'll mention a couple of specific investments I'm long below, but it's for illustrative purposes and this is not investment advice. I'm very much a rookie at all this myself and continue to look for a financial planner I'm happy to work with. However, most of my actual retirement savings are tied up in retirement accounts or company stock plans they can't administer, so many of the ones I want to work with aren't interested in working with me at the level I am at and I don't need to pay a fee to someone to set up a CD ladder.

I started pretty conservatively, I bought about $1,000 of SPDRs every couple of months from late 2008 through mid-2009. They return about 2% in annual dividends, and have gained over 30% in value since then. I was lucky on the timing of when I started, as that seemed to be around the bottom, but I didn't try to time it, I was just looking for a low cost way to get started in something that tracked the market. I don't know if you can buy them in Canada, but they're a good foundation for my portfolio. The investment materials they send out have a ton of good info in them and having them helped me understand what I wanted as an investor.

From there I ventured into individual stocks, mostly blue-chip, dividend paying. I've had some hits and misses there, but I learned from my misses and I'm pretty happy with most everything in my portfolio. Whoever you use to buy, set your account so you receive paper copies of annual reports and other filings and then read through them. They all have good information. AT&T are kind of my benchmark in this area, it pays about a 6% dividend and the price stays pretty constant. If I can't beat that and I'm still happy with their fundamentals, then I might as well put my money there.

Once I had a fairly consistent number coming in through dividends and a pretty good understanding of the fundamentals of a stable company I looked for more growth. I won't mention specifics here, the funds and individual growth stocks I own I've had for too short a period to draw any conclusions about what's working, however I'm learning a lot about what I can tolerate as an investor and, again, the filings make great reading.
posted by IanMorr at 3:15 PM on May 8, 2012 [1 favorite]

The Best Investment Advice You'll Never Get
posted by kdar at 3:29 PM on May 8, 2012 [2 favorites]

Why not save it all for your retirement? I put the $40K from my high school graduation party in my Roth IRA and have never regretted my decision.
posted by lotusmish at 8:56 PM on May 8, 2012

In situations like this, I would say that you have three financial markets options. I'll provide an overview as I don't know enough about your situation and expertise to go into too much detail:

1) One or two diversified index funds. We're talking the S&P 500, FTSE 100, etc. This is the long-term and low-risk option for fairly consistent growth. This approach is not sexy, but it's easy, extremely hands-off, and recommended by people like Warren Buffett and Ramit Sethi (discussion).

2) Diversified and personalised portfolio. We're talking domestic and foreign equity and funds, plus some extras if you have the funds. With $20k you're probably looking at index funds again, but with the added fun of an emerging markets fund or two. A good role model is Yale's 'money guru', David Swensen (example, particularly the left sidebar… but requires updating to the 2012 economy).

3) Individual stocks and shares, using your own knowledge. Put x% of your $20k in a diversified index fund (x >= 0, see 1). With what remains, invest in businesses and/or sectors that you understand. This topic is huge… I suggest buying some books and learning (through the books and by actually investing some money: any losses will likely be worth it as a learning experience).
posted by fakelvis at 11:58 PM on May 8, 2012 [3 favorites]

(Obviously, the above suggestions are simplifications. Great advice is everywhere on the Internet. For example, the Scott Adams advice Mr.Know-it-some posted above is also great.)
posted by fakelvis at 12:06 AM on May 9, 2012

In this economy, look for the highest return, with less taxes. Me I like Municiple Bonds and Roth IRA's.
Dividends from Muni's are federally tax deductible and sometimes state tax decuctible. Your money is squirreled away and if you want you can get dividends a couple times a year or reinvest them. If you look around you can find some with a return as high as 5%
posted by PJMoore at 6:29 AM on May 9, 2012

The Best Investment Advice You'll Never Get

Woooow that is a really long-winded way of saying "put it in index funds."

To the OP: index funds.
posted by !Jim at 6:32 PM on May 9, 2012