I have a considerable chunk of money parked in a savings account that needs to be invested. The interest on the savings account is so little you may as well say it’s earning zero interest and is losing value due to inflation
I’m currently unemployed and have enough cash to pay my bills for 6 more months in addition to the money in consideration for investment but I need to keep this investment liquid in the event that I may need to quickly turn some of it back into cash. For investment purposes, I would consider this a short term investment until I get back to work.
After consulting with an advisor yesterday the plan is to put it into a mutual fund next week. The fund has historic returns of 4-8% and has a 1.2% admin. fee. The fund has no other hidden fees or additional costs.
My concern is considering the DOW has hit a historic high 4-5 days ago it would appear that I would be buying into the mutual fund at a much higher cost per share. While I completely understand that the average investor should not be trying to time the market and should be investing for the long term haul, due to my current situation and the possible need to access some cash I’m concerned that buying high right now may come back to bite me in the ass if and the DOW drops back down to a substantially lower level in a few months thereby dropping the fund value.
Due to this uncertainty I’m thinking it might be best to leave this money in savings to secure the principle until I get back to work and earning a paycheck. Once I’m working I can better afford to invest long term into the market and ride out any potential short term downswings.
Any thoughts would be appreciated.
As a Certified Financial Planner, my advice to a client in your situation would be to look at a mutual fund portfolio of Gov’t and Corporate, high quality bonds. I know you said the portfolio has an “admin” fee of 1.2%, (which is a little high), but there are usually also sales charges that need to be taken into account. Typically you will buy either “A” shares which will charge you an upfront fee, or “C” shares which carry a deferred sales charge. If you’d like a free second opinion, just shoot me a PM and I’ll be happy to help.
“People sleep peaceably in their beds at night only because rough men stand ready to do violence on their behalf.”
George Orwell
1.2% seems a little high…does investment adviser get anything as well?
quote:
Originally posted by Dragonslayer
As a Certified Financial Planner, my advice to a client in your situation would be to look at a mutual fund portfolio of Gov’t and Corporate, high quality bonds. I know you said the portfolio has an “admin” fee of 1.2%, (which is a little high), but there are usually also sales charges that need to be taken into account. Typically you will buy either “A” shares which will charge you an upfront fee, or “C” shares which carry a deferred sales charge. If you’d like a free second opinion, just shoot me a PM and I’ll be happy to help.
“People sleep peaceably in their beds at night only because rough men stand ready to do violence on their behalf.”
George Orwell
Don’t know Dragon, but I’d take him up on his offer for 2nd opinion, at the very least.
I’m no financial expert but
Look into a Discover Savings account. Pretty sure it has zero fees and a small minimum and yields about 1% interest which is about 10X a normal savings account. Its completely separate from their credit card accounts.
First, Most, Biggest
1.2% is a very high fee. I’d look at some Vanguard funds which charge around .25-.5% and perform well. Not a great deal of difference but it’s all relative.
But, in your situation, I agree that you shouldn’t try to time the market and it might be smartest to stay in cash until you’re drawing a steady paycheck. Getting in now and getting hit by a market correction could cost you 10-20% of the principal. That said, I’m about 90% invested, 10% cash with no plans of pulling money out.
2014 Key West 203DFS
1987 Landau
Wait, you are talking about potentially needing the money within the next few months? Savings is probably best place for it until your situation changes.