Investing Funds Instead of Saving

[LevelWing]

First, I'm not looking for financial advice that I'd get from a professional financial advisor, I'm just looking for opinions and how others do it.

How many of you invest your savings instead of putting it into savings? I've got some money that is in savings that I think would be better "spent" if I put it in some sort of investment fund, be it a mutual fund or something else, instead of just leaving it in my savings account. This is separate from retirement funds. It doesn't have to have a large yield, but just about anything is better than what I'm getting now from savings. What I'd really like is something I can dump it into and if I should ever need it for a rainy day that I can get the majority of what I put into it back out (by that I'm referring to fees, not what the market does -- if the market goes down and I lose money, that's how it goes).

What are some ways to accomplish this and what are ways that some of you all save or invest your money?

 

[EdFred]

I have a "zero balance" amount in my savings/checking account. Enough to pay bills for a few years if something happens if my income goes to zero. When I get above that everything goes into investments.

Currently in some tax free municipal bonds and some higher risk (taxable) investments.

 

[RalphInCA]

I have a "zero balance" amount in my savings/checking account. Enough to pay bills for a few years if something happens if my income goes to zero. When I get above that everything goes into investments.

This, although I can't say I have a few years in savings. Probably more like a year.


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[BigSam]

Probably the best route is a tax exempt muni bond fund. ~4-5% dividend, tax-free (depending on your state), fairly liquid, and doesn't tend to fluctuate in value as much as stock-based funds.

There's usually a ton of choices with no load from a Scottrade or similar account.

 

[EdFred]

This, although I can't say I have a few years in savings. Probably more like a year.


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I have no house/car/plane payments, so my "few years" only needs to cover food, taxes, utilities, insurance for one car and fuel to get to where is necessary.

 

[Let'sgoflying!]

I think we need to know your situation. Age? Married? Business or employed? Any notes? Typical monthly expenditures and income? Current nest egg? (To begin with.)
Can you really earn anything in a bank savings account?
I am married with a small business. I need 50K in my business account at any one time to ride the highs and lows. I also have a buffer account 25K. I hate to do that because it earns NOTHING but I also hate bounced checks and being caught during emergencies. My investor has my tiny nest egg in stocks and MFs. Probably crazy but I haven't been convinced of any better way (please don't PM me better offers), and he says much of that is liquid ie I can sell it without penalty and have cash for emergencies within a few days). That is probably better in the long run than cash in a bank account. If it is in a bank account, I figure it is costing me $$ because it is not keeping up with inflation.

 

[LevelWing]

I have a "zero balance" amount in my savings/checking account. Enough to pay bills for a few years if something happens if my income goes to zero. When I get above that everything goes into investments.



Currently in some tax free municipal bonds and some higher risk (taxable) investments.

Some of the funds I want to invest are the rainy day funds in case my income stops, which is why I want access to them quickly with little to no penalty (to the extent reasonable anyway).

The tax free municipal bond is an interesting idea. I'll have to look into this one more. It looks as if with a lot of them I can have near instant access to the funds if needed and they return more than my savings account does.

 

[vintage cessna]

First, I'm not looking for financial advice that I'd get from a professional financial advisor, I'm just looking for opinions and how others do it.

How many of you invest your savings instead of putting it into savings? I've got some money that is in savings that I think would be better "spent" if I put it in some sort of investment fund, be it a mutual fund or something else, instead of just leaving it in my savings account. This is separate from retirement funds. It doesn't have to have a large yield, but just about anything is better than what I'm getting now from savings. What I'd really like is something I can dump it into and if I should ever need it for a rainy day that I can get the majority of what I put into it back out (by that I'm referring to fees, not what the market does -- if the market goes down and I lose money, that's how it goes).

What are some ways to accomplish this and what are ways that some of you all save or invest your money?

S&P 500 index fund with low administrative costs, like Vanguard. However, don't dump all of your money it at once . Invest a set amount every month over the next few years.

If one has invested in bonds over the last 30 years , they have probably done well since interest rates have been declining in that period. Since rates now have no where to go but up, I wouldn't advise in investing in bonds.

 

[German guy]

I'm also interested in this topic. Where would you put $50K - 70K for just one to two years, so that you could still get a hold of it within 4 weeks or so, in case you need it earlier?

The best I could come up with is a saving account, of which the most 'profitable' however offer an APY of barely more than 1%.

 

[Shawn]

I am not a big stock market guy so I am not one for high risk speculative investments. A lot of consensus among financial advisers that I like all advocate for leaving at least 6 month of living expenses in straight up liquid cash in a separate savings account. It is not going to make you jack on a return but the value is in the safety blanket. If you need to dip into to that...on do so if you can replenish the funds right away....anything above that can be invested based on your risk tolerance and long term needs.

That simple concept had taken a world of stress off the "what ifs" when it comes to finances for me.

 

[Art VanDelay]

In answer to the OP's title question - "Well, yeah".

 

[vintage cessna]

I'm also interested in this topic. Where would you put $50K - 70K for one to two years, so that you could still get a hold of it within 4 weeks or so, in case you need it earlier?

The best I could come up with is are saving accounts, of which the most 'profitable' however offer an APY of barely more than 1%.

You can convert a mutual fund or stock to cash in three days, but there is risk, a lot of risk of losing principle if you are talking a 1 or 2 year period in which you need the money.

If I were to buy an individual stock it would be something like D, that I have owned for 25 years. You don't need a brokerage account if you wanted to aquire this stock, they have a direct investment program.

Otherwise I would go with a low cost S&P 500'mutual fund.

If you do not want to risk the principle you have to stay with the bank, in which case you are actually losing money since inflation and taxes exceed the interest you could make.

 

[vintage cessna]

Had to edit the stock recommend , symbol is D, not DOM

 

[German guy]

You can convert a mutual fund or stock to cash in three days, but there is risk, a lot of risk of losing principle if you are talking a 1 or 2 year period in which you need the money. [...]

Admittedly, my knowledge in the regards is minimal. I however also thought that funds or stocks are pretty risky for such a relatively short term.

 

[jheyen]

Roth IRA

No penalties or fees for taking it out and any earnings are tax free forever. You can do $5500 now and $5500 January 1. If you have a wife, she can do the same thing.

If you make too much for a Roth, just do a non-deductible IRA and then convert to a Roth the following year. You just pay tax on the gain.

My two cents.

 

[Zeldman]

Poor people save money. Rich people put their money to work for them.

 

[EdFred]

Poor people save money. Rich people put their money to work for them.

Hard to have money to put to work if you don't save money to get to that point in the first place.

 

[Gsxrpilot]

Poor people save money. Rich people put their money to work for them.

Having been poor in the past, I'd say there is a minimum threshold that has to be met before you can put your money to work for you. So start by saving and once you've saved enough, then you can make it go work for you.

With no debt and good credit (only to be used in an emergency) I don't keep much in liquid savings.

 

[vintage cessna]

Admittedly, my knowledge in the regards is minimal. I however also thought that funds or stocks are pretty risky for such a relatively short term.

You share the same problem with millions of risk averse passive investors .

The Federal Reserve has been punishing savers for a long time now, longer than I ever anticipated. You use to be able to get a satisfactory interest rate on a risk free CD.

I have no clue when those days will return.

 

[Let'sgoflying!]

Roth IRA

Isn't it true that a Roth is taxed when you put it in. Assuming you are above the minimum threshold to be taxed at all (and probably if you have money to do a Roth, you are above that threshold).

And, with a traditional IRA there is no tax to put it in. So if you don't live too high when withdrawing, there is the opportunity to minimize your IRA tax even below what a Roth is taxed at.

 

[Zeldman]

I started at age 10 with the first 20 bucks I ever made.

Make 100 bucks, invest 10. Simple. My dad made me do that. It has worked for me since. The important point is to start somewhere. There is no need to start "big".

And believe me when I was in my 20s I barely had two nickels to rub together. I knew where the soup kitchen was, but I never stopped the 10% investment.

I don't have a savings account. Even my emergency money is interest bearing and I can withdraw from it when I need to without penalty.

Thanks pop. I did listen to you at least once...

 

[jheyen]

A Roth IRA is funded with after tax dollars. I should edit my original post because it is a non-deductible IRA rather than the traditional.

 

[JOhnH]

Isn't it true that a Roth is taxed when you put it in. Assuming you are above the minimum threshold to be taxed at all (and probably if you have money to do a Roth, you are above that threshold).

And, with a traditional IRA there is no tax to put it in. So if you don't live too high when withdrawing, there is the opportunity to minimize your IRA tax even below what a Roth is taxed at.

You pay tax when you earn the money. You don't pay tax when you deposit it to a Roth because you have already paid it.

 

[Jimmy cooper]

First, I'm not looking for financial advice that I'd get from a professional financial advisor, I'm just looking for opinions and how others do it.

How many of you invest your savings instead of putting it into savings? I've got some money that is in savings that I think would be better "spent" if I put it in some sort of investment fund, be it a mutual fund or something else, instead of just leaving it in my savings account. This is separate from retirement funds. It doesn't have to have a large yield, but just about anything is better than what I'm getting now from savings. What I'd really like is something I can dump it into and if I should ever need it for a rainy day that I can get the majority of what I put into it back out (by that I'm referring to fees, not what the market does -- if the market goes down and I lose money, that's how it goes).

What are some ways to accomplish this and what are ways that some of you all save or invest your money?

First you should save enough money to live easily for a Year if unemployed. Then put your money in index funds. These funds will outperform most financial advisors.

 

[JOhnH]

First you should save enough money to live easily for a Year if unemployed. Then put your money in index funds. These funds will outperform most financial advisors.

That is good advice. I would add that when you do start investing that you do so with the intention of never needing to withdraw it until you retire. You can adjust and re-balance your portfolio as appropriate,but if you find your in the position where you need to withdraw to pay bills or to buy that toy NOW, you are probably going to wind up with a less than optimal return.

Now that advice doesn't mean you cant liquidate one investment to take advantage of another, but if you are forced to liquidate to scrape up working or living capital,that is not good.

 

[LevelWing]

First you should save enough money to live easily for a Year if unemployed. Then put your money in index funds. These funds will outperform most financial advisors.

That is good advice. I would add that when you do start investing that you do so with the intention of never needing to withdraw it until you retire. You can adjust and re-balance your portfolio as appropriate,but if you find your in the position where you need to withdraw to pay bills or to buy that toy NOW, you are probably going to wind up with a less than optimal return.

Now that advice doesn't mean you cant liquidate one investment to take advantage of another, but if you are forced to liquidate to scrape up working or living capital,that is not good.

As I stated in the OP, I'm not trying to invest for retirement, I already have that. I want to take the money I have sitting in my savings account for a rainy day and invest it so it's actually doing something, rather than nothing. A few good suggestions have been made and I'll look into those. I hope to not need those funds but should I need them, I'd like them to be a little more than what I started with.