I have been putting part of my paycheck into a high yield savings account, but haven’t bothered with investing it in a responsible manner partially due a fear of losing the money due to bad investments. I’m finally realizing how much potential money I’ve lost by letting my money stagnate. Please advise me on how to responsibly invest my money, thanks!

  • sugar_in_your_tea@sh.itjust.works
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    2 months ago

    Any good financial advisor would tell you, “it depends.” The variables essentially are:

    • do you have any debt? If so, you should probably put it toward anything with a high interest rate (e.g. >6%)
    • when do you need the money? If <5 years, put it in something safe, like treasure bills, CDs, or a HYSA (should be able to earn ~5%)
    • if you don’t need the money for at least 10 years, invest it for retirement - broad index funds (or target date index funds) are a good bet

    If I assume you don’t have any high interest debt or any short-term (<5 years) expected expenses, I personally would:

    • reserve 3-6 months expenses in an emergency fund; get a HYSA earning >4% interest
    • invest the remainder into an index fund (VOO or VTIAX for Vanguard funds)

    You didn’t specify which country you’re in, but if you’re in the US, take advantage of tax-advantaged accounts, like a Roth IRA, up to the limit and invest the rest into a regular brokerage account.

    If you’re not comfortable with this, find a fee-only fiduciary (look for those specific terms), which should cost something like $100/hr. If you’re not paying for the advice, they’re most likely going to nudge you into a high-fee fund that’s good for them, but not for you. If they pitch whole life insurance or annuities (indexed annuities, or anything that limits downside), run and find a better advisor. A good advisor won’t pitch any products, they’ll explain your options and suggest something, and they should be able to explain their reasoning for making that decision. In most cases, it’ll probably be a few index funds (e.g. S&P 500, international index fund, and bonds) or a target date retirement fund, but the specifics really depend on your situation. Your overall fees for the funds should be well below 0.50%, probably more like 0.10-0.20%, and the funds will likely come from Fidelity, Schwab, Vanguard, iShares, or Blackrock (maybe a couple others I’m missing). If it’s something else, feel free to name-drop one of those I mentioned and see how they react (every financial advisor would know those companies).

    • nieceandtows@lemmy.worldOP
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      2 months ago

      I’m in the US, but on a work visa. I have a 2.875% mortgage, and a 2% car loan that ends soon (but planning to get a second car). We would mostly need the money in the next 5 years, so I’ll start with the hysa and go from there. By the way, is it prudent to take a small portion of it and invest it in more daring ventures like stocks?

      • sugar_in_your_tea@sh.itjust.works
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        2 months ago

        I wouldn’t invest anything you need in the next 5 years. I’d stick it in a HYSA or Treasure Bills (if you’re in a state with high income tax) or something instead.

    • nieceandtows@lemmy.worldOP
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      2 months ago

      Is there a national level recommended fee only fiduciary, or is it better to seek out a local company?

      • sugar_in_your_tea@sh.itjust.works
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        2 months ago

        I’d go local. But if you want something online, I generally trust The Money Guy show on YouTube, and they operate a fee-only advisory called Abound Wealth, so you could check them out if you’re interested. Check out some of their videos and see if you like what they say, I imagine their advisory services would be similar, just more focused on your specific situation (in particular, check out the Financial Order of Operations).

        I like their advice way better than Dave Ramsey (Ramsey is way too anti-debt, and way too aggressive on retirement asset drawdown), and their content is really accessible while not being too dumbed down.

  • tee900@lemmy.world
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    2 months ago

    Money market funds or CDs should get above 5% right now whether thats with a bank or brokerage.

    It depends on your time horizon and risk tolerance. Typically dont buy stocks based on hunches… just buy index funds and/or interest bearing vehicles. I have a small basket of stocks, a lot more index funds, and then the majority of my holdings are in a money market fund in this high interest environment. I would consider rebalancing to more index fund allocation if interest rates diminish.

  • HubertManne@moist.catsweat.com
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    2 months ago

    well first off you can get way better than .o5% right now. what do you have it in checking? I agree with some others. get rid of debt if you have any, fund your ira or hsa or any other tax free things. If you have some sort of match for retirement at work and not taking it sign up for it right away. then honestly see if you can swing a condo or townhouse or something.

  • dhork@lemmy.world
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    2 months ago

    In addition to all of the very good advice in this thread, I will add I am a big fan of Dollar Cost Averaging. If you have a large amount to put into the market, don’t put it in to whatever fund you decide all at once, put it in on a monthly basis. This protects you, to some extent, from the market taking a dump the day after you buy, because you are always buying. And your cost at the end is an average of all the times you bought in, and is not so much tied to prices on the day you bought in.

    This may involve some planning for moving money around, because you will want to keep the remainder in a good HYSA in the meantime.

  • PowerCrazy@lemmy.ml
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    2 months ago

    Vanguard. You can either invest directly with them, or open whatever brokerage service if you want to gamble on stocks in addition to being responsible.

    Invest around 30k in each of VEA VSS VYM, enable DRIP and then you can have 10k to yolo on GME or whatever if you want.

  • filister@lemmy.world
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    2 months ago

    First you need to educate yourself on different investment strategies, but a broad MSCI World can easily give you the peace of mind and diversification.

    Check https://www.justetf.com/en/academy/etf-for-beginners.html which is providing very good starting point. There are more articles there that will describe the basics.

    The best advice is not to invest in single stocks and always keep your investment portfolio diversified.

  • Steve@communick.news
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    2 months ago

    Actual instructions are big for an internet comment, and dependant on your specific situation and needs. I’ll recommend some reading.

    If you don’t want to spend a lot of time.
    Go straight to The Index Card
    Bonus points if you read Pound Foolish first.
    They aren’t long. They explain what to do, and what not to, respectively. They were kind of written as a pair.

    If you’re willing to take a longer journey.
    Start with The Richest Man in Babylon, explaining why investing is a good.
    Then read A Random Walk Down Wall street, describing all the ways you could invest, but probably shouldn’t.
    Then move onto the other two I mentioned first.

    If you read all of them you’ll know more about finance and investing than 90% of people.

    These books are all quite US centric, but the basic principals are the same everywhere. Though some of the tax advice you’d want to check into locally.

    • astrsk@fedia.io
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      2 months ago

      How does one find a good financial advisor? How do you spot flakes or bad ones?

      • sugar_in_your_tea@sh.itjust.works
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        2 months ago

        Ideally, you should be paying them for their time, and they shouldn’t be getting any commissions other than you paying for their time. Look for a “fee-only advisor” who has a license that lists them as a fiduciary, which means they have a legal obligation to act in your best interests.

        But honestly, you probably don’t need one. Personal finance is relatively simple:

        • keep 3-6 months cash in an emergency fund
        • pay off high interest debt - where high interest is usually something >6% or so
        • invest in low-cost index funds - if you’re unsure, find a target date retirement fund with fees <0.20% (anything up to 0.50% is still “low” though)

        But if you’re not confident, find a fee-only fiduciary advisor to educate you about investing. A good one will help you feel more confident and provide options, they won’t be pressuring you into any particular decision.

  • wuphysics87@lemmy.ml
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    2 months ago

    The generic advice is diversify and invest in the riskiest options you can stomach when you are young. For me, that means low cap index funds.

      • wuphysics87@lemmy.ml
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        2 months ago

        Yea vanguard is good I hear. I have a bank account with bank of america, so I use merrill. Chase has their own investment firm. Most large banks have bought one. Take your comfort where you find it with banks. I’m honestly not a fan.

        There are also independent ones. I also have an account with tiaa, but that’s only for educators. You might find something tied to your industry as well.

      • wuphysics87@lemmy.ml
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        2 months ago

        Also why index funds. Low cap in particular. Index and mutual funds are both collections of stocks. You spread your risk that way. Stocks rise and fall rapidly.

        The difference between them is that mutual funds are managed. People will try to predict the market and build and change them. It gives people the impression that someone’s working to make sure they have the best fund possible, but the reality is that predicting the market is basically impossible, so you pay extra for that self assurance. Index funds are static so they are cheaper

        Both mutual and index funds are built of a collection of stocks from various companies based on what is called their market capitalization. That’s roughly what a company is worth in it’s entirety as well as its ability to generate revenue. Large caps are things like your giant tech companies. Medium caps are smaller. Something like walgreens. Low caps are companies that have just ipo’d.

        The reason for choosing low caps is they have a much larger potential to grow in value. Apple isn’t going to double in value, but a new start up could. Spread your risk around many startups and a few are going to increase in value many times over. But it also mitigates your risk as it’s a group rather than just one.

        Low cap is a long term plan. Buy when you are young, and hold onto them for 20 to 30 years. IMO it’s the best tradeoff between growth and safety. Leaning more on growth.

        When you approach or after retirement, trade them for something really stable like US treasurey bonds. Those hardly grow at all, but they also tend not to lose value either.

        I also don’t actively invest. Your job will set aside a percentage of your salary that goes directly into an investment account. That percentage is something like 5%, but in workday or whatever your job uses, you can set how much you want. I’ve set mine as high as 30% before. Try to keep as little cash in your bank account as possible with a rainy day fund set aside. Cash doesn’t grow in value. You don’t want a lot of it.

        So what happens to the money your company puts into the investment account? It is automatically invested into something of their choosing. Typically something middle of the road because it is the same for all employees regardless of age. So what you want to do is log into that investment account and change what it is automatically buying to whatever it is that you want. Set it and forget it.

        This stuff can get really complex, so listen to what several different people have to say. This is just what I do.