Hey guys, I am looking to invest some money I am getting from my grandmothers inheritance and could use some advice from people who know a hell of a lot more than me.  

I am a union electrician so I have a pension fund and a 401k through them, I want something that I have control over and access to if needed unlike the ones i have through the union. I have been looking at the T. Rowe Price non retirement investment account because I can invest in mutual funds and stocks like my 401k. Looking to put it somewhere where it can grow.

This it to be for just a portion of my inheritance as I'm not putting all of my eggs in one basket, the other portions will be in maybe CD's, savings accounts, or PM's. I'm thinking maybe investing 20-30k into the mutual funds.

This will be my first time investing and I don't want to waste my grandmothers hard earned money. any help would be appreciated.

Use Vanguard.

There are many answers to your question, and most depend on how old you are and how aggressive you are.  

Seeing your question, it seems like you are very risk averse.  CD, and savings accounts are currently paying squat.

If you have time, consider more risk for more return. Over longer periods of time the stock market will outperform.  Look at the market since election day.  Up 10%.  Cds are paying 1.5-2% per year.

I am looking at the mutual funds for my risky part, and the others to offset the risk. I am 42 looking at retiring in 20 years. If the stock market collapses ill still have money elsewhere.

I'm not a CFA, however i do manage my own accounts and trade on a daily basis, for a working man you would be hard pressed to beat a good ETF like QLD (up 20% since the beginning of the year) or QQQ (up 9%) ytd

Go to this website and watch which etf's money is flowing into and follow the herd  ETF Website click on year to date flow report.

Bigger gun-safes and more Guns!

@ar-jedi

Look also at dividend paying stocks.  Let the earnings be used to automatically buy more stock.

I read a webpage about the best dividend stocks but was wondering. does the stock price still fluctuate like a regular stock but also pay dividends?

Yes.



Dividend Kings

Do you have any debt?

If so I would allocate some of the inheritance to that, some to mutual funds, and a very small percentage to PM, savings account, etc.

Paying debt isn't as sexy as investing but it is a wise choice that I am sure would make your grandma proud. I am sure she would look down with a big smile if you used the money to pay off your house.

My house is my only debt. I bought only two years ago and got a 3.75% rate. The inheritance would not put much of a dent in the mortgage.

It would be a guaranteed 3.75% return though. The stock market averages around 10% historically but that is not guaranteed and the market is at all time highs right now. I don't try and time the market I invest a set amount every month without fail. I would not feel comfortable dumping a large sum all at once  in the market right now. You could lose money, make less than 3.75% effectively losing, make 10% or even make more. Who knows.



Let's say the inheritance is 50k. If you invest it and make 10% you made 5k but you paid $1,875 on the 50k of mortgage you could have paid off but didn't for a profit of $3,125.  Now if you just paid the mortgage you saved $1,875. Is the gamble of the gain in the market  worth a net gain of $1,250? What if the market went down 10% and and now you lost $6,875 because you lost 5k on your investment and had to pay interest on the 50k?

It boils down to your tolerance for risk. Some people would gladly take the chance to earn the spread of $1,250 a year. Me personally no freaking way. If you look at your life like a balance sheet you are essentially investing borrowed money. By not paying it on your house and investing it instead it is basically as if you borrowed on your house to invest. Does that make sense? In other words would you add 50k to your mortgage to put it in the market? If not then by investing this 50k and not applying it to the mortgage that is essentially what you are doing.


My idea is one that will be different than most peoples but it is how I live my life and it has worked very well for me. I used to view my mortgage as an elephant that would only go away after 30 years. Then I got pissed off and started aggressively paying it down and in less than five years it was gone. Do you have any idea how much freedom I now have and spare money to invest now that I have zero debts? It is fucking amazing. Seriously. Different strokes for different folks though.

First, don't do anything rash.
I would highly recommend reading the "Managing a Windfall" page on Bogleheads.org https://www.bogleheads.org/wiki/Managing_a_windfall
Then follow up on their forum for questions and advice.  Bogleheads is the ARFCOM of investing.  The forum is full of very intelligent people willing to share their knowledge with newbies, but they do ask that you first read and understand the basics, such as the above linked wiki page.

Vanguard Funds

VOO
VTI
VUG

I love these threads.

Why do I like these threads you ask?

99% of the reccomendations, while having good intentions, are for investments that have a pretty high standard deviation.

AJ Jedi and a few others are the only ones that ever talk about asset allocation and risk tolerance.

So what does the op do? Go to a pro? There's a damn good chance he's just going to get modern port theory advice which he can get any where but for 2times the fees. Or even worse some annuity/life insurance slinger gets ahold of him.

I wish you luck op.

There are a lot of good advisors out there, it's just tough to find them because unless you were referred to them, they probably won't take you.

Then you run into the problem where you may ask friends who they use, your friends may think. They are doing well, but in reality aren't.

So yeah good luck op.

About ten years ago I got a similar windfall.  I put it in a savings account and maxed my 401k contributions for the next few years, offsetting the difference in my paycheck with the windfall money over time.  I had a decent set of investment options in my 401k though.

tru dat....thanks for posting that.

^^^ these

the actual cost of holding the mortgage is not 3.75% -- it's more like 2.75% due to the mortgage interest deduction on your taxes.


and, the value of the house can't go down 10%?


and by applying the 50K directly to you mortgage you are essentially increasing the concentration of real estate as a component or your investments.  read that again: you are concentrating your money into a single asset class.  this has risk implications, no matter what you are concentrating money into: cash, stocks, bonds, precious metals, real estate, or frozen concentrated orange juice.  over-concentration in a single asset class INCREASES, not decreases, portfolio risk.  

in one breath you say that the "the [stock] market is at all time highs" and in another the implicit assumption is that real estate is not, and the 50K will be "protected" by investing it in your home.  this is not true.


you traded liquidity for a fixed asset that has a very high transactional cost and which is influenced by a *lot* of environmental factors outside your control.  local auto plant closes down?  your home loses value, no matter how much of it you own.  national economy in the dumper?  your home loses value, no matter how much of it you own.

here's an interesting calculation:
https://www.ar15.com/forums/t_1_5/1578081_-ARCHIVED-THREAD----How-Old-Where-You-when-Your-401K-Hit--100-000.html&page=7#i45023245

note that "paying cash for a house" and "paying off the loan on a house as aggressively as possible" are not all that different.

and now see:
https://www.ar15.com/forums/t_1_5/1578081__ARCHIVED_THREAD____How_Old_Where_You_when_Your_401K_Hit__100_000.html&page=8#i45049417

ar-jedi

Yes you do get some tax deductions on the mortgage interest paid but OP is talking about investing in a taxable account so any gains he has will be taxed. I figure the tax implications will about be a wash. Save some on mortgage tax and pay some on investment earnings.


I get what you are saying about the house value possibly going down, etc but he already owns it. You make a good argument for not buying a house period but if you already own one it doesn't really matter if you pay it off or have a mortgage those risks are the same unless you are suggesting walking away from a mortgage. Your argument makes no sense assuming OP plans on paying as agreed.

To further clarify OP already bought his house. The value of the house can go up or down and it has no impact on his mortgage amount or the interest rate. His house value could fall in half and he would still have to pay  3.75%. Houses typically do go up over time but I wouldn't really lump your home in with other investments because you need somewhere to live. My house is paid for and I don't plan on selling it. I would like to live here until I die.

i said no such thing.


and, if the OP can't pay as agreed?

tell me which of these situations is better, and why:
1) you have 110K in the bank, and a 100K mortgage note (say at ~4%, resulting in about $700/mo payment).
2) you have 10K in the bank, and a no mortgage.


well you should.  for many folks it will be the single most expensive purchase they ever make.  
and, as i noted earlier, over-allocation in a single asset class increases financial risk.

You said what if the house loses value or the auto plant shuts down?
My point is if you own a house it losing value happens if you have debt on it or not. If you are worried about it losing value don't buy one. Having or not having a mortgage has no bearing on that happening unless you are saying if my house value tanks I am am bailing and not paying on it. The risk is there either way.

I personally would prefer to have 10k and no mortgage than 110k and a 100k mortgage. That is a personal question though other people prefer different things. How did you pick 100k? Why not refi the house and pull the equity out and have 210k in the bank and a 200k mortgage, or 310k in the bank and a 300k mortgage?

My position is that by purchasing a home you are allocating to that asset class regardless if you have a mortgage or not. You seem to imply if you have a mortgage the house doesn't count. If you bought 100k of stocks on margin would you not say you own the stocks?

And yes a house is an investment but it is different. You need a place to live. If you don't buy a house you have to rent something. Rent goes up over time. House values normally go up over time. It makes sense to buy a home even if you have to take a mortgage out to do it. As much as I hate debt I get that. That being said even the debt lovers do not normally say hey go out and borrow all you can and take that money and buy gold, stocks, bonds, etc.

Look there are plenty of successful people that do things your way and plenty of successful people that do things my way. There really is no right or wrong answer because every situation involves risk and different people view risk differently and have different tolerances for risk.

All  I was trying to do was point out a different way of looking at things for the OP by sharing what has worked for me.