Comments on: Reader Email – Investing

By: » Weekly Roundup - Soccer Madness Edition @ fivecentnickel.com

Sun, 16 Sep 2007 03:03:00 +0000

[...] JLP answered an investing question from a reader. [...]

By: Golbguru

Golbguru — Fri, 14 Sep 2007 06:58:21 +0000

I agree with you (and Dylan above) 3~5 years seems too short for getting into the market. If you pick of a 5 year window and travel backwards on the S&P, the last 5 years seem pretty good (even with the current tension); but one more 5-year-step back and it’s all trouble. In fact, look at the last 10 years, I have a feeling that you need to think at least 15~20 years before things can turn around and yield *enough* returns.

Also, the reader says “I’m trying to maximize return for whenever another investment idea comes along.” — sounds like he is looking for some liquidity. A high yield savings account might just be right for him [or if you think the interest rates are going to go down soon - a very good possibility btw; then a CD might probably work better]

By: tiredoflosing

tiredoflosing — Thu, 13 Sep 2007 23:06:43 +0000

i am a very nervous investor. NO RISK My financial advisor sold me Annuities. I want to see an increase each month on my bank statement. This isn’t happening. I am thinking of going to CD’s instead. Her argument is :With Inflation and taxes, I will get a negative return. Doesn’t the same apply to Annuities, just at a later date. Isn’t it true that at the end of say 5 years, I will probably earn more with a CD ? thank you

By: Tim

Tim — Thu, 13 Sep 2007 05:24:42 +0000

so maintain the $8k as an emergency fund. or, put $4k in IRA, the other $4k as emergency fund.

By: Dylan

Dylan — Wed, 12 Sep 2007 19:08:28 +0000

I tend to think of 5 years as being too short-term for stock market investments. You really need to be in for decades (plural) to reasonably mitigate the bad timing risks.

I’m not talking about time until retirement, but actual time invested in the market. Most people continue to invest after they retirement.

By: Esmo

Esmo — Wed, 12 Sep 2007 18:15:00 +0000

Real estate would be fairly difficult now; value is more arbitrary in a turbulent market and would likely be a good savings strategy in 3+ years. Real estate has been on the rise since we were born in the 80s, so we’ve never really experienced a downturn in the real estate market (and thus real estate “experts” have no advice).

A 3-year CD interest rate isn’t that much higher than the current bank savings rate (I get 5% on mine at Citibank). If you really want to do something entrepreneurial, I’d get started now and experiment – it’ll give you experience for larger projects later on.

I have roughly similar stats as you, but I’m still investing a portion of my savings (checking/savings accounts both reached goal amount; 401(k) and stock purchase automatic) in the stock market because I am interested in it.

By: Customers Revenge

Customers Revenge — Wed, 12 Sep 2007 15:08:05 +0000

My advice is that the reader should pick an expertise to develop. If he doesn’t know about real estate then he better get educated before investing. If he doesn’t know about the market then he also better get educated. It really sounds like he wants to do something entrepreneurial, like a real estate or business venture he mentioned. These are awesome uses for the money but why wait 3 yrs in that case? Take a few months to learn, pick a small project, and get started.

For general “invest and forget” just go for the standard index funds. In that case forget the 3 yr time horizon and just come to terms with the fact that the reader is going to save and not invest.