I need to find a better place for money than my mattress.
October 1, 2011 11:08 PM   Subscribe

What's the best place for an American to invest around US$50,000 at this time?

Right now I'm just thinking about finding 10 or so companies that sell consumer goods people will buy as long as money is worth anything (like Coke or Pepsi, McDonalds, Johnson & Johnson, etc), keeping an eye out for a low price-to-earnings ratio and a good dividend history. If it's a good strategy, I'll stick with it. I have a young family, 20+ years til retirement, an emergency fund beyond the sum in question, and neither debts nor a mortgage. I'd characterize myself as very lazy, somewhat risk-tolerant, and someone who expects to see inflation in coming years.

Thanks for any tips!
posted by 5ean to Work & Money (34 answers total) 11 users marked this as a favorite
Buy an index fund. Don't touch it until you retire.
posted by empath at 11:16 PM on October 1, 2011 [6 favorites]

Silver is cheap
posted by evil_esto at 11:17 PM on October 1, 2011

Commodities are not a long term investment.
posted by empath at 11:19 PM on October 1, 2011 [2 favorites]

Silver is cheap

What the flipping Dickens are you talking about??
posted by smoke at 11:26 PM on October 1, 2011

Observe the first 5 answers and then hire a financial planner.
posted by iamabot at 11:29 PM on October 1, 2011 [5 favorites]

Response by poster: Buy an index fund. Don't touch it until you retire.

An index fund - at least for the Dow - would've been a fairly crappy path this year, so far. I know historically it's been a good investment but I think we're watching history start to happen (China and the China bubble, epic debt levels, etc)

Silver is cheap
What the flipping Dickens are you talking about??

I think they meant "relative to gold".

Observe the first 5 answers and then hire a financial planner.

We had our Credit Union guy we were going to go with until we noticed all of his funds were heavily loaded meaning we'd lose 5% before the market had its way with it.
posted by 5ean at 11:32 PM on October 1, 2011

Depending on your time frame, the Dow may still be a very good investment indeed. If you had put money into an index fund in the eighties or the nineties, you would be be sitting quite pretty today. Indexes are nowhere so mercurial as commodities. I'm not saying it's the right answer for you, but I am saying that for low risk you can certainly make some decent money in the medium to long term - and that's not likely to change dramatically in the next twenty years.
posted by smoke at 11:39 PM on October 1, 2011

Then interview financial planners, but you need advice. Look for someone who has been in the business for at least 5 years, who has plans to be in the business for another 10 or so, who will go through your risk tolerance with you and who will be willing to work to find investments that align with those golas that address the concerns you have. 50k is worth a search.
posted by iamabot at 11:39 PM on October 1, 2011 [1 favorite]

Don't buy Silver or Gold. They're being artificially inflated by speculators.

Be careful with the stock market, especially the DJIA, it's being artificially inflated by speculators.

Look out for speculators.
posted by Sphinx at 11:40 PM on October 1, 2011

Response by poster: Be careful with the stock market, especially the DJIA, it's being artificially inflated by speculators.
Look out for speculators.

Is that generally accepted or just speculation?
posted by 5ean at 11:46 PM on October 1, 2011 [4 favorites]

An index fund - at least for the Dow - would've been a fairly crappy path this year, so far.

Then picking stocks would've been a crappy path, too. The point of indexing is that you realize that you aren't going to beat the market except by random chance, at which point you might just as well take the money to Vegas and put it all on red. Indexing protects you from trading and management fees, and gives you far better diversity for each dollar, protecting you from at least some volatility. Obviously not nearly all of it; if the market goes down, you lose money. That's how this works.

But you can do better than just indexing the Dow, if you want all the benefits of diversifying — something like Vanguard's target-date funds (and this whole category of funds) allow you to get a constantly rebalanced mix of US, international, and bond index funds all in one account, with no human intervention required.

Put most of the money in one of these and forget about it for at least 5-10 years. Watching it too closely will only make you crazy and/or increase the temptation to try to time the market, which you probably also can't do. If you still want to make individual stock-picking bets, do it with a small portion of the money, and treat it as entertainment value rather than safe investing.
posted by RogerB at 11:50 PM on October 1, 2011 [5 favorites]

If you are concerned about investing in the Dow, why not diversify buy putting money into index funds that are international indexes? There are very low cost no-load indexes of all types available from companies like Vanguard. I am with the other poster that you are better off with index funds, you can choose one or several differnt kinds. I personally have an emerging markets index fund, social choice index fund, and an S&P 500 index.

Also for financial planners, I would add that it is important to find one who is paid for their time and not for commissions on investments. This way their only motivation is finding the best investments for you and they would be less likely to recommend high cost/load funds because it clearly cuts into your profit potential.
posted by treehorn+bunny at 11:51 PM on October 1, 2011

An index fund - at least for the Dow - would've been a fairly crappy path this year, so far.

I'm fairly sure that stock picks from random people on the internet aren't going to fare any better.
posted by empath at 12:05 AM on October 2, 2011 [4 favorites]

I think they meant "relative to gold".

Then they mean 'gold is expensive'.
posted by empath at 12:06 AM on October 2, 2011

Right now? You're probably safest in bonds. Yeah, you'll get savings account-like returns, but at least you won't lose anything.
If you want to buy individual stocks, be a total pessimist. Invest in fast food, canned soup and beans, soda, oatmeal. Come to think of it, though, those are probably all at all-time highs.
posted by Gilbert at 12:06 AM on October 2, 2011

Seriously, we're at an increasingly bizarre/dystopian point in "American financial history" where nobody really has any idea where we're going, or what the end game is going to be.

Ten or fifteen years ago, I'd have told you to do something simple, like "buying" a CD. They used to offer reasonable rates over a reasonable amount of time. Like %6.5/%5.5 over a 12 or 18 month period. I "bought" a 10k CD in 1997 and bought some nice christmas presents with the proceeds. And I was poor as shit at the time.

Today, I can't for the life of me find one for more than %1.5. That's fucking lunacy. That is a clear indicator to me that the current system is on a precipice. As long as you can defend your mattress, and we don't have some sort of hyper-inflation*, I really can't recommend anything safer.

That being said, I'm not a financier, or a banker anymore, or an investment guy. But they're all speculators now.

*unless something changes drastically, we're definitely going to have some hyper-inflation.
posted by Sphinx at 12:08 AM on October 2, 2011 [2 favorites]

Subject to the usual questions about risk aversion, timelines, etc, sounds like what you want are safe, steady, yield stocks with a DRIP program. Pipelines, utilities, telcos. If you think times are getting tough, they're generally counter-cyclical, and cash flow generation typically doesn't fluctuate as much as with consumer stocks. Telcos pay out 4-6% typically, pipes and utes 3-4%. You're not going to get rich, but you're generally protected against inflation, and you don't have to pay much attention. For riskier yield stocks, there are royalty companies that have higher payout ratios, from 7-10%. Off the top of my head I can think of a few restaurant chains, busing companies, etc. I won't suggest anything specific because I know the Canadian market, but that's the kind of investment you want to make if you're lazy, modestly bearish, have a long time horizon and are not looking to be a hero.
posted by loquax at 12:11 AM on October 2, 2011 [1 favorite]

Are you asking for a sure thing? It sounds like you are asking for a sure thing. There is no sure thing.
posted by jabberjaw at 12:26 AM on October 2, 2011 [2 favorites]

25% gold, 25% UST, 25% Index fund, 25% Swissies
posted by dougiedd at 12:33 AM on October 2, 2011

Will you need the money next year for a house downpayment? or for retirement? Presumably, you'll be adding to this investment over time? Do you care about socially responsible investing? How much effort do you want to put into monitoring the investment? How much risk are you comfortable with? These are questions a planner should ask. And if they aren't charging you for their time, they are going to give biased answers. And even the ones who charge for their time may still offer investment products with commissions.
posted by theora55 at 4:08 AM on October 2, 2011

Before following any of the (some very good some not so good) investment advise unthread, I'd suggest you take less than one half of one percent of your cash and invest in yourself as follows : By spending roughly one hour a week reading, in less than a year you'll not only know what to do with your money yourself, you'll be answering questions like this in Metafilter.

Note I feel strongly even if you do hire an advisor you need to know something about the markets.
posted by Mutant at 4:29 AM on October 2, 2011 [25 favorites]

Mutant is right, although I'd add the caveat that investing on the basis of WSJ news flow is a terrible idea. Use it to educate yourself about how the markets work, not to generate stock tips.
posted by pharm at 6:02 AM on October 2, 2011 [1 favorite]

if you're lazy maybe a financial advisor could be a good idea -- provided it's a good one . otherwise be prepared to diversify and check on your holdings monthly or so.
shame that retail US retail investors are more or less excluded from the corporate bond market..
posted by 3mendo at 6:27 AM on October 2, 2011

What's the timeframe? Is this money that will, pretty much guaranteed, sit until retirement? Then you have time for risk. Investment is about timeframe and risk-reward comfort.

If you need to hang onto the cash for two years before you use it as a down payment for a house, don't put it in the stock market- half of it could be gone in two years (*). If you are going to hold it for 20+ years, then the stock market is a better choice.

Second, what's your attitude toward the money? Are you *saving* it, or *investing* is? Because investments are gambles. Can you tolerate loss? (For me, I can tolerate loss fine, as long as my mutual fund outperforms the S&P. Otherwise, what am I paying for?) However, if you are not comfortable with those few days where the Dow drops 1000 points and 17% of your book value disappears, then go for different options. (Remember, when you own stocks, you own stuff, not money. The dollar value on your statement isn't liquid cash, it's just the approximate amount of money you'd get if you sold all that stuff on the day the statement was printed.) You might put it into a capital preservation fund, or an income generating fund. An income generating fund is one that invests in stable companies that pay dividends. The classic case would be for the trust fund that needs to generate income for the scions suckling at its teet. You don't care so much about increasing the principal, as long as you don't lose much and there is cashflow. Using it as savings, you'd just reinvest the income. A capital preservation fund is even more conservative. You put money in there simply to try to hedge inflation. If inflation is at 4%, you hope your fund is making at least 4% so you break even.

(*) This is generic advice, not a prediction that today's stock market is going to crash.
posted by gjc at 6:55 AM on October 2, 2011

IANAFP, and all the usual disclaimers apply, especially that this is not financial advice. If it were my $50K I'd split it between Treasury Inflation Protected Securities and utility stocks that have a Dividend Reinvestment Program such as Duke Energy or Southern Company.
posted by ob1quixote at 8:03 AM on October 2, 2011

Build or buy a tiny house on land you or your family already owns. Rent it out for $300 a month to one person. Minus insurance, that is about $3,500 a year or 7%.
posted by cda at 9:16 AM on October 2, 2011

cda: you have to subtract construction costs.
posted by leotrotsky at 11:03 AM on October 2, 2011

Anybody who has seriously studied this issue knows that empath has provided the correct answer.

Note that, depending on who's asking, the correct answer is not always "buy index funds." There are a number of sophisticated investors who could benefit from other advice. But for 80 to 90 percent of the populace, empath's answer is right on.
posted by Mr. Justice at 2:35 PM on October 2, 2011

re. "Silver is cheap."

The posted is likely referring to the fact that silver just dropped 30% or so in a world of rampant money printing, cascading sovereign debt defaults, market implosions, and inevitable bond-market risks (with a dash of unwound derivatives exposure the "value" of which far exceeds the economic output of the entire globe).
posted by rumbles at 6:45 PM on October 2, 2011

Oops: I meant: "The poster" ...
posted by rumbles at 6:45 PM on October 2, 2011

5ean: "An index fund - at least for the Dow - would've been a fairly crappy path this year, so far."

And did awesome the year before that. And absolutely abysmal the year before that. It is fundamentally important that you understand this about trading: today's losers are often tomorrows winners, and vice versa. If you're investing long term, you should look at long term returns instead of short term volatility.

5ean: "Is that generally accepted or just speculation?"

I don't really follow the DJIA since what defines the american economy is less and less "industrial". The S&P 500 is the more widely followed index anyways. My take: stocks are down, bonds can basically only lose value at this point, and commodities look overpriced. Only one of those three options actually has managers handling your investment for you: stocks. When the China bubble bursts, it'll be to America's benefit, both from
posted by pwnguin at 10:17 PM on October 2, 2011


Simply because all central banks are printing money to solve the economic problems; they have next zero knowledge about the consequences of their actions.
posted by raymorphic at 11:04 PM on October 2, 2011

Why gold might be a bad investment
posted by sharkfu at 7:59 AM on October 3, 2011

« Older Is he a jerk? I can't seem to get over him.   |   The footnotes! Newer »
This thread is closed to new comments.