Dear Ms. MoneiPeace:
I saved $ 100,000 in cash with the idea of making some changes. I still don’t know what those changes should be.
I gave $ 60,000 to my financial advisor, who manages my 401 (k). Of course, he only wants to increase his total assets in order to increase his income from his management fee by 1.5%.
I would like three ideas on where to put the other $ 40,000 available if I find a one-year master’s program, a new home, or a lower-paid job compared to my high-tech job. Something liquid, but with interest and earnings more than bank savings. I’m thinking about the Vanguard index fund. I am alone, I have an apartment and I have no children.
I thought of you as an alternative to my current financial advisor, because I want to diversify.
Cash on Hand Cathy
Send your questions to Ms. MoneiPeace: [email protected]
Dear Cash Cathi:
Congratulations on a good guard. You mentioned several options on where to invest your money and expressed your feelings towards your advisor.
Several advisors manage 401 (k) s unless they are part of a brokerage firm that holds the property. Plans Companies 401 (k) hire an investment manager to oversee the money and work with plan participants. Your company may have checked out a brokerage firm or advisor, but that doesn’t mean they suit you. Do you trust them? Did you interview counselors before hiring them to manage your extra money? Is the counselor a fiduciary, which means he takes care of your best interests?
The 1.5% fee is very high. One percentage is typical, which, in addition to investment management, gives you advice on taxes, financial planning, asset planning and money management. These fees are worth paying if you get value from the connection. Otherwise, you may be paying too much.
You show an understanding of the motivation of the fee. Nowhere do you mention your trust in their advice and guidelines. I feel a question mark about their ability. The fact that you are asking for my opinion shows that maybe it is time to add another professional to your team, someone you trust.
What stands out to me is the wording of your comment: “I gave $ 60,000 to my financial advisor.” Many people say this, sometimes showing a lack of ownership of their money and a lack of understanding of their options. Counselors take instructions from you. Knowing where your money is now invested is key to taking the next step with your savings balance. Remember, you asked that investment manager to oversee the money for you; you didn’t give it. Ask more questions, find out details and make informed investment decisions. This is your money - and your life. You have to take responsibility for that.
For what you pay your current advisor annually, you could hire an objective certified financial planner (CFP) with only fees for a few hours to review your investments. They could instruct you in the best way to invest or save current funds.
As for your next step in investing, it depends on how your other $ 60,000 is invested. A tried and tested rule for money is that the sooner you use it, the less risky places you want to keep it. With your plans in the air, cash, certificates of deposit (CDs), credit unions and banks are the safest, despite low but rising interest rates. You can look beyond your local bank as national discount brokerage firms could help you open an account and then buy CDs, finding the best rates across the country.
The Vanguard index fund is cheap, and many are equity funds. Until you decide what changes you are making, putting that money on the stock market is a bad choice because the market is long-term. There are some Vanguard funds, such as Vanguard Limited-Term Tak-Ekempt Fund VMLTKS,
who invest only in bonds.
If you may need the money in three to eight years, then bonds could be a good choice. Series I savings bonds, also known as bonds, sold by the federal government return over 9%, but purchases are limited to $ 10,000.
The most important thing is to gain clarity about your life choices as you consider your financial options. It’s not clear to me if you didn’t name them because you didn’t decide or maybe you want the money to make more than one. Consider working with a financial therapist so that your life goals match your financial goals.
Read: Skip these “free” sources of financial advice - they will cost you dearly
When it comes to investing, you will be satisfied with your money first and life will help you make better decisions. At this point, I would like to refer to a wise person who told me many years ago: “When you are in doubt, do nothing.
CD Moriarty is a certified financial planner, MarketWatch columnist and personal finance speaker. She writes a blog on MoneyPeace.
.