Any Financial Experts? - aka, what should I do with my money?

Not an expert. But this is probably what I should have done when I was your age: S&P500 Index Fund by Vanguard, and wait for about 20 years.

 

Save up to buy real estate in the next five years. 401Ks, stocks, mutual funds: unless you are an insider, you are sucker. It's basically gambling unless you actually have a clue what's going on. The entire system is rigged against the average sucker. Only the big trading houses know what's going on, and even then, they are going at it among themselves with super computers and fast trading machines rigged with fiber connections. Don't worry about interest rates. Make it a point to acquire property where you can pay off the mortgage aggressively. Five years of minimal interest while you save for a down payment on property is not a missed opportunity.

At your age, DO NOT PUT money into a 401K, IRA, etc. Real estate is much more certain. This is not the era of Warren Buffet, Warren Cleaver, the Beav, etc. anymore where your investments will skyrocket in the next ten to forty years. Population growth is declining or stabilizing in the first world. The third world countries are imploding. Resources are more costly to obtain (environment, reserves, multi-polar world, etc.). We are not rebuilding from a major world war. The opportunity for Coca-Cola to expand like mad for the next 40 years won't happen. Don't listen to Warren Buffet's bullshit, because he just wants YOUR MONEY to PLAY WITH. Stocks and funds are a HUGE industry, big marketing budgets, and fingers into human resource departments of corporations. Don't fall for Warren Buffet's folksy charm, as all he wants to do is to play with your money.

I'd say f**k 'em. You know what, why don't you give me your money so I can play with it? Yeah right, nuts? Then why would you let some random Porker in NY or Omaha play with your money? Besides the current bull market cycle is over. I have put money into my 401Ks because of company matching (or "free" contributions), but I am seriously considering pulling everything out to pay off the remainder of my mortgage since this current bull market cycle is over. The USA stock market will now stabilize instead of grow, grow, grow because people now realize that Apple has lost the potential to sell 1B iPhones every year to people in China because the China economy is now imploding (it actually imploded a year or two ago, just that the commies are good at hiding shit). Stocks are based on future outlook. The USA will be fine, but the future of stocks ain't so awesome anymore. Also think of what will happen when the baby boomers start pulling out from their 401Ks to pay their medical bills, Lipitor pills, Xanax pills, and make up what Social Insecurity can't cover.

There is a reason why real estate is called REAL estate. Once you get to a certain point with equity, rent out your property and have other suckers pay off the loan for you. Acquire more properties, rinse and repeat. Pay off your mortgage as fast as you can. Even if you do not become a super slumlord, having minimal mortgage or HUGE equity gives you a lot of options. If I had to, I could cash out right now and move to TX to retire. There's a reason why my father and my two most successful uncles are (or have moved) into REAL estate and not in stocks. Property is real. Property increases in value and it can also generate income.

Finally, avoid debt. Avoid car payments, credit card payments, etc. Not saying don't get loans, but if you do, pay them off aggressively. Take advantage of this time in your life (young, no wife, no kids) to get a huge headstart. Eat ramen and discount cereals during this time.

 

I do agree with The Merv in that one should avoid debt. But yes, I currently feel 401K/IRA and low cost index funds are safer investments than real estate.

 

Same thing can happen to stocks. How many people dollar averaged Enron or Worldcom or AMAT to zero? I knew just as people burnt by stocks from Dot Bomb 1.0. Actually, different types. Dot Bomb scam affected more educated workers. Real estate bomb hurt people who should never owned a home to begin with.

From 2004 to 2008, people were doing stupid shit like 0% down mortgages with monthly payments they could not afford. The bottom line is that stupid is stupid. I saw many many loan applications that went like this during that time:

Occupation: Janitor
Annual Income: $80,000 (obviously overstated and not confirmed by the loan officer)
Mortgage Amount: $550,000
Purchase Amount: $545,000
Downpayment: $5,000

I'm not advising Chase to be stupid. I sold a house in 2002 and did not buy until 2010. Yup, that's how long I waited. The next five years is a good time to buy a house. The real estate market is hardly risk. Values haven't even fully recovered, rents are rising, people need a place to live. Risk is mitigated by having sufficient down payment. My advice is 30% or higher. Heck, anyone who put 20% down during that time would have been fine.

Safe stocks are fine. However money put into an IRA/401K cannot be removed without penalty. Money should first be put into real estate while young. Renting is lame.

 

Individual stocks are very risky, and indeed Enron is a good example of the game being somewhat rigged. Index funds are different though.

Real estate, like most investments, carry high risks on short term. Risk is somewhat mitigated over long term. Index funds, AFAIK, carry probably lower risks than real estate.

 

You are in a different position with wife, kids, family and a job situation. You are also looking at the most recent past history and being freaked about it.* I should point out that you also own a house! You made it a priority that you could purchase a home with a sufficient down payment BEFORE dicking around with maxing IRA, 401K, QQQ, etc, because you didn't want to rent and be lame.

I rest my case.

* Also, I can't emphasize this enough. Don't count on the past. The winds are shifting. Stocks won't grow as much in the next five to ten years like they have in the past five years. Expect real-estate to take off. Rents have been rising like mad in the past two years and housing prices are starting to catch up.

 

Well, for investing on index funds I tried to see if things were stable over long term in recent and past history.

As for owning a house, I would definitively recommend that. Minimize debt as much as possible. That applies to credit cards, loans, and most definitively mortgage.

Mortgage may be as low as 3%. But it's loaded to the front significantly. Paying as much as possible can be very beneficial indeed, and this year I'll do my best to pay some of it. Putting down 30% if that is possible is a IMO good advice. Not having to pay mortgage is IMO a huge benefit. I know because my parents have been in that situation ever since I was born. My grandparents helped my father with this. My situation is a little different however.

If however, we are talking about investments (real estate other than the house one lives in), I still feel index funds are safer. Also, putting all your money in paying your mortgage can be risky IMO. I would balance between paying my mortgage and investing in index funds, and having liquid money in say a Credit Union.

I eat my own cooking: I have money in S&P500, 401K, Traditional IRA, and Roth IRA. I also have some money on other mutual funds but to a lower degree and Berkshire Hathaway (which is not exactly a mutual fund, investment house or business but a weird combo of things). I will put money down towards my mortgage hopefully this year and have done that in the past with good results.

 

Of course, you need liquidity!

For someone single and under 30, their liquidity requirements / reserves should be much smaller than yours or mine.

Again, I am not telling people to be stupid: no research, no liquidity, overreaching, etc.

Just saying if @SoupRKnowva can knock out 65% equity in a home before he is 33, and 105% in two properties by 36, HE IS ALL SET FOR LIFE. He has a lot of choices right now and doesn't need to live in the Bay Area, Los Angeles, or New York. Many places in the country offer far more bang for buck in housing.

 

This is very true. However, if I was under 30, w/o kids and stuff, I feel I would have been much better of today if I had put my money in index funds than what I did: Putting money in the bank, CDs, money markets, and worse (stock market).

It's just my opinion of course. I'm far from a financial expert.

 

The Dow Dogs (VZ, GE, etc.) I've had for the last 10 years have done well (think good dividends too), but my position is minimal in the stock market. Basically kids' college fund.

 

Yes, stable companies can make for very good investments IME. My understanding is the S&P500 (and other index funds) is basically tracking a bunch of those to make for a more stable investment.

I don't have the college funds set up yet, but I may need to start doing that.

 

Roth is nice is that you can take the amount you've contributed out at any time.

Food for thought: You don't want to be 60 years old and still be paying mortgage. Avoid being a lifelong renter if you can. As for this nonsensical perceived risk with real estate, buy a house under your means, not over it.