First ~$5,500 to invest. Open to suggestions

Hey Guys,

I never really had any family money, and after a year in the workforce, I finally have some money saved up to start my own portfolio (Probably going to dump it into a Roth). I can use some help with allocations as I don’t have any research experience since I work in portfolio performance and risk reporting. I was thiking 20% exposure to S&P, but other than that I’m at a loss. Let me know your thoguhts…

Forgot to mention, for some dividend generating holdings, I was thiking verizon & maybe MFA(REIT).

Invest it conservatively in market indices and build slowly. As you get more money and more comfortable with the process, then ease into other stuff. It’s not a race, you’re doing the right thing just by saving.

Thanks - Thoughts on particular indices at the moment?

I’m old fashioned and just tend to stick it all in the S&P or Dow. Things are kind of pricey right now, so maybe break it into thirds and buy in 1/3 next month, 1/3 three months after that and 1/3 three months after that to get a fair average price. After that just leave it in and forget about it for a few years.

I’m assuming your holding period is longer than a year? If you need the cash before then, you might want to put a portion in a treasury fund to add some stability.

go with index funds although i agree that the stock market is pretty expensive right now- up there touching the lunar blemishes.


Congrats on the job and for saving a good chunk of money in your first year. Is it accurate to assume that you’re in your early/mid 20s? Is it also accurate to assume you only have a small amount of investment education? (sorry if this is wrong, I just don’t see any progress towards your CFA so I don’t know if this is true or not)

Is the money you’ve saved in a 401k, IRA or generic brokerage account? This matters because it effects the tax implications of your strategy and the flexibility that you have with this $5,500.

If the money is in a generic brokerage account, I’d ask you if you have any high interest rate debt, like a credit card. Investment returns will never outperform the interest you’re being charged on an overdue credit card bill, so that would be the first thing to do with this money.

If you don’t have CC debt, do you have an emergency savings account? The size of this depends on many factors, but mostly what monthly expenses do you have? If you’re living with parents and have no student loan debt, this may be small, but if you’re on your own and have rent, auto loan, student loan, etc. it might be a good idea for you to first establish a 3 month emergency savings account. This is especially true if you work in the financial services industry (a lot of people get fired when the market is doing poorly. You don’t want your investments to fall at the same time you might lose your job).

Assuming you have that in place…and again, this is money in a generic brokerage account…chose a low cost ETF or mutual fund that will allow you to be diversified. The reason for this is that you’ll be vastly better off by limiting the number of transactions you engage in when your account value is low. For example, I first had a Scottrade account in my early 20s and believe I paid about $8 per transaction back then. If I bought a portfolio of 10 stocks, that would require $80 in transaction fees. This isn’t horrible…but that’s assuming I don’t sell out and tinker with the portfolio…which is what most young guys do when they’re first getting stock market experience. You’ll love a stock one day and then read an article on seekingalpha about how it’s going to go to $0 so you panic and sell. Long story short, most people would have been better off taking the ‘hands off’ approach until they learned more about the industry. Go with VTI or VB or even VTTSX. Low cost, lets you own many companies and you can ‘set it and forget it’.

I’d also encourage you to do a little homework on long term returns from large cap vs small cap, or on income vs growth. What you’ll find is that a young person who is just starting to invest shouldn’t be focused on income investments, especially in a taxable account. You want to buy something that will appreciate for many years without generating taxible income, that way your money can compound and grow faster. A key here as well is understanding that your emotions will be detrimental to your long term returns. The more frequenly you check the account, the more likely you’ll sabotage yourself by selling at the wrong moment and buying in at a higher price. Again, transaction costs affect this as well.

Finally, if this money isn’t in a 401k or IRA I’d ask you why it’s not. If you’re just saving for a few years to buy a new car or something, then this is acceptable, but if this money is for long term growth you should put it into an IRA or roth IRA and take advantage of tax free compounding.

Maybe check out a few of the best sellers, like ‘rich dad, poor dad’ or something like that. In your 20s those types of books are way more impactful than any financial advice you’ll get on here. Fact of the matter is that taxes are a major part of any investment decision and often dominate your actual realized returns more than the investment performance actually does.

^IPS like a boss

husky are you from WA or UCONN?

Northern Illinois …best known for breaking the BCS by making it to the 2013 Orange Bowl

you’re welcome America

awww ok

I’d open a Vanguard account. And then invest in the Sp500, Russell 3000, or some other index like a value index. Savings associated with a Vanguard account will be important over time

Indexing is a sensible approach to take while you are deciding if there are specific investments you want to make. For a small sum like 5.5k, it’s the most sensible thing to do, since most other choices will lead you to too much concentrated risk.

Other things to consider:

  1. What’s your time horizon. If you need any of this money soon, then you should take that amount and put it in a money market fund.

  2. Do you want this money to be all in equities? If you are young and your earnings power is growing, that’s probably not a bad thing to do. However, if this is your entire investment portfolio, there’s something to be said for having a 60/40 stock/bond portfolio, even if you will likely have to implement this with mutual funds or ETFs. A 60/40 portfolio is good if you are worried about overvaluation, because if there is a major correction, you can buy at lower prices when you rebalance. You will also get practice rebalancing portfolios quarterly or annually with a 60/40 split versus a single equity index.

  3. Are you investing this for growth, or are you doing this to learn how to trade. If the latter, then maybe how much you earn/lose is of secondary importance vs learning the mechanics of trading and testing your psychological suitability for that. Trading is different from investing, even though investing requires making trades. It’s a different mindset. I’ve seen advice that says don’t start trading on accounts less than 50k, because transaction costs are very hard to beat below that mark, and it’s frustrating to look at your account and figure out if you want to buy 7 vs 8 shares of SPY.

Just some thoughts for you. Maybe if you can tell us what your goals are for this and what your risk tolerances are, we can tell you a little more.

Also, if it is intended as a real long term investment, and you don’t already have a Roth IRA (and are eligible), it seems pretty sensible to open a Roth and put it there.

Another vote for cheap index funds. If these are long term savings, no need to try to be too clever.

money is fungible, i read it somewhere i swear

The best option for your purposes is putting it all on black at a roulette table.

I was in similar shoes not too long ago. I would not call this advice, I will simply say what I am doing.

I am invested in ETFs, mostly Vanguard as for every need I have, I spent a lot of time searching for the best option and somehow always found Vanguard to be the best.

I hold about 50% US stocks in 3 different funds, small, mid large cap. Allocated based on my risk profile.

After the 50% in the US which is a bit arbitrary (read about home country bias), but based on the correlation of my future needs with US market etc… I split the rest on each country/region according to its GDP. I am building my skills day by day.

I am young, so apart for my safety cushion I am all equity. I will change this if I survived. A Random Walk Down Wall Street and Stocks for The Long Run were great books to get me started. Some people here surely may be against those concepts, but still the books may humble you and make you think more before you trade in and out.

SUNE, LINE, BBEP are my suggestions. You’re welcome.

SUNE, LINE, BBEP are my suggestions. You’re welcome.

Double post, so you know it’s a high conviction idea!