Learn me: What to do with some extra cash?

I'm 26, debt free, with a good chunk of savings earning 1.75% interest in a money market account. This used to be my house downpayment fund/start a business fund but now it looks like I will be continuing to rent for the next couple years at least. I already max my Roth IRA and 13% of each paycheck goes to my Roth 401K. The rest goes to a Capital One 30 Savings account/ that money market account I mentioned earlier.

Now that it looks like I wont be buying a house, I'm thinking I should probably do something more productive with it. I started looking at some of the Vanguard "All in one/Life Strategy" Funds but I really don't know where to start. What do you guys think?

Miata

Geez, you save even more hardcore than I do!

Go have some fun! Buy a nice home theater setup (If you're a movie watcher like the wife and I), take a vacation, buy that insane RC car you've always wanted, get a track rat or a project car.

You need to do something sensible like buy an old Turbo Porsche.

I agree that if you do a mutual fund, Vanguard is the place.

Insider trading.....

chuckles wrote: I agree that if you do a mutual fund, Vanguard is the place.

This. I'm in the Wellsley income fund, it won't knock your socks off by rollercoasting but it will provide steady growth. It's averaged 7% annually with no nasty surprises. Get out of that money market account quick, 1.75% sucks.

https://www.google.com/#q=vanguard+wellesley Check out the interactive graphic at the top of the page.

A nice scotch, perhaps.

EvanB wrote: Miata

No! I already have a cheap RWD car and I've only put ~300 miles on it since August 2008!

z31maniac wrote: Geez, you save even more hardcore than I do! Go have some fun! Buy a nice home theater setup (If you're a movie watcher like the wife and I), take a vacation, buy that insane RC car you've always wanted, get a track rat or a project car.

Trust me, fun is the name of the game for me. I work really really long hours which makes me depressed so I go big on my time off. Traveling, toys, adventures. I'm always on the move which just makes me exhausted and kills me at work but hey, I'm having fun. I love my home theater setup and my girlfriend bought me a RC plane for my birthday.

Cotton wrote: You need to do something sensible like buy an old Turbo Porsche.

This is actually on my 5 year plan.

yamaha wrote: Insider trading.....

Hook it up!

RossD wrote: A nice scotch, perhaps.

Bleh!

Pretty much the only reason I have all this cash is because I have 2 roommates and live for almost nothing (like $300 a month including utilities). That'll change next year when I move in with my girlfriend (and most likely lose my 2 car garage ,insert unhappy face).

I use the Vanguard total market fund. Not a huge return but it's steady and safer than a fund that some hotshot runs with stock picks. VTSAX if you have enough invested with them to get admiral shares. ($10,000 I think?) The expense ratio is ridiculously low (.05%). The regular shares are VTSMX.

No stock picking fund will ever outperform an index fund in the long term. Short term they might but if you're buying to hold for many years then get an index fund. All in my opinion, obviously.

dculberson wrote: I use the Vanguard total market fund. Not a huge return but it's steady and safer than a fund that some hotshot runs with stock picks. VTSAX if you have enough invested with them to get admiral shares. ($10,000 I think?) The expense ratio is ridiculously low (.05%). The regular shares are VTSMX. No stock picking fund will ever outperform an index fund in the long term. Short term they might but if you're buying to hold for many years then get an index fund. All in my opinion, obviously.

Admiral shares are 10k for certain ones, but there are sectors that require 100k.

You could always have an episode like Tony

My stuff is in Admiral shares, .18% expense ratio. The regular shares are .25%, still very low. I've been happy with it, but keep in mind I'm taking a long range view of 15 years or so before I start tapping it. My long term plan is to pull it out over a few years starting at age 64, take the 401k tax hit, then put it back in an Admiral fund and take only the dividends.

Pretty much the only reason I have all this cash is because I have 2 roommates and live for almost nothing (like $300 a month including utilities). That'll change next year when I move in with my girlfriend (and most likely lose my 2 car garage ,insert unhappy face).

You answered your own question. Save it for building or renting a really kickass garage!

you should buy a boat.

Blow and hookers.

Land that you could build on. Not to say that you should only buy land where you want to build, but where building a house or commercial building would be a feasible and likely endeavor.

Land is not a liquid asset; be careful with property taxes and other potential expenses and realize it can take years to sell when/if you decide you want to sell.

You mention a "start a business" aspect to this funding...Why not use some of the money to at least get started in pursuing this? Invest in yourself by taking classes, buying some tools of the trade, and start giving yourself experience in whatever idea(s) you are drawn towards. This way you'll be learning it as a hobby now, with the potential to turn it into something more later.

For putting some or all of it into mutual funds, I also like my Vanguard funds, but don't rule out funds from other consistently top rated companies either. I like to spread it across a few funds of different types. Both the Target and Index funds are great for easy investing, but I would put some into at least one more aggressive fund as well. But since you probably already have a lot of fund based investments through your current retirement savings, maybe start dabbling with investing into individual stocks.

I've found racing to be by far the most effective means to divest funds. It conveniently reduces them to heat and rubber dust, and if you either place poorly or register under an assumed name, there's barely a paper trail.

You could always donate it to the mndsm needs nitrous for the challenge car spool is driving fund.

Buy a small shop, then you don't have to worry about the garage situation.

dculberson wrote: I use the Vanguard total market fund. Not a huge return but it's steady and safer than a fund that some hotshot runs with stock picks. VTSAX if you have enough invested with them to get admiral shares. ($10,000 I think?) The expense ratio is ridiculously low (.05%). The regular shares are VTSMX. No stock picking fund will ever outperform an index fund in the long term. Short term they might but if you're buying to hold for many years then get an index fund. All in my opinion, obviously.

Thanks! This is what I've heard about before and I knew was out there, I just need to read more. So is VTSMX an index fund then?

Curmudgeon wrote: My stuff is in Admiral shares, .18% expense ratio. The regular shares are .25%, still very low. I've been happy with it, but keep in mind I'm taking a long range view of 15 years or so before I start tapping it. My long term plan is to pull it out over a few years starting at age 64, take the 401k tax hit, then put it back in an Admiral fund and take only the dividends.

So this is for your 401k? My Roth 401K is with Principal and pretty limited for what you can invest in. My Roth IRA is Vanguard VFFVX.

ultraclyde wrote: Pretty much the only reason I have all this cash is because I have 2 roommates and live for almost nothing (like $300 a month including utilities). That'll change next year when I move in with my girlfriend (and most likely lose my 2 car garage ,insert unhappy face). You answered your own question. Save it for building or renting a really kickass garage!

I can't build one, because the game plan is to move to the East Coast in 2-4 years. Renting isn't an option because the amount I'll be paying to rent a home will be tripling and I wont have as much disposable income.

Kendall_Jones wrote: you should buy a boat.

Got two of those, down from 4 earlier in the year. I do want another, but it'll be a few years because the next one will be bigger and I'll have to switch the TDI Jetta to a truck.

RossD wrote: Land that you could build on. Not to say that you should only buy land where *you* want to build, but where building a house or commercial building would be a feasible and likely endeavor.

Hmmmmmm.....I think that might be too illiquid for me right now. I want to be able to turn to cash should I want to start a business or invest in something if the opportunity arises.

dculberson wrote: Land is not a liquid asset; be careful with property taxes and other potential expenses and realize it can take years to sell when/if you decide you want to sell.

Yeah I agree.

Driven5 wrote: You mention a "start a business" aspect to this funding...Why not use some of the money to at least get started in pursuing this? Invest in yourself by taking classes, buying some tools of the trade, and start giving yourself experience in whatever idea(s) you are drawn towards. This way you'll be learning it as a hobby now, with the potential to turn it into something more later. For putting some or all of it into mutual funds, I also like my Vanguard funds, but don't rule out funds from other consistently top rated companies either. I like to spread it across a few funds of different types. Both the Target and Index funds are great for easy investing, but I would put some into at least one more aggressive fund as well. But since you probably already have a lot of fund based investments through your current retirement savings, maybe start dabbling with investing into individual stocks.

Trust me, I really want to. I just haven't come up with an idea that sounds good enough to fully commit to yet.

motomoron wrote: I've found racing to be by far the most effective means to divest funds. It conveniently reduces them to heat and rubber dust, and if you either place poorly or register under an assumed name, there's barely a paper trail.

Depending on where I move this upcoming January, this might happen. I held on to my Mustang for the past 5 years while hardly driving it. If I can find a place to store it where I live now, I want to start racing it again. Right now it's 3 hours away in my grandmas garage.

Here's another question. Should I max my 401K or invest in one of the previously mentioned funds, or some of both?The cash I'm investing I would probably not need anytime soon, but it would be nice to know I could get access to it if an opportunity rolled around or I needed a downpayment on a house. Though I believe you can take money out penalty free if it's for a house.

401k's are penalty free if it's a house.

Enyar wrote: Trust me, I really want to. I just haven't come up with an idea that sounds good enough to fully commit to yet.

Granted, this is coming from somebody who isn't realistically any closer to achieving this goal than you are...But if you just wait for an idea to come to you, it probably never will. This could be a golden opportunity to pursue your passion(s) and actively seek out the idea(s). Speaking of commitment, I would argue that it's actually surprisingly similar to dating.