What is the best way to invest $100,000?

What would you do if someone handed you $100,000?
Do you think you know the best way to invest this money?

money3Americans have a unique challenge in life and have developed an adaptive skill that people from many other countries can barely even conceptualize. Although it’s a very real problem for we Americans, in many parts of the world they’d give almost anything to have this problem.

The problem: Too much choice.

The other day I spent 30 minutes looking around on Netflix for the movie that was an exact fit for my mood at that exact moment. We walk into our grocery stores and have to apply our well-honed, complex analytical skills to decide which cheese to purchase. Want cereal? Flakes or biscuit? Sweet or savory? Real sugar or HFCS? Should my eggs be cage-free or vegetarian fed? Both? But those are $6! Time to paint the living room? Choose from 10,000 unique shades of light brown! Whatever the choice of the moment might be, we in America spend a lot of our time wading through various buying choices and these choices are a reflection of our person and a projection of our aspirations.

I would flip through catalogs and wonder, “What kind of dining set defines me as a person?”
-Jack, Fight Club

If you’ve ever seen a recent immigrant shopping in an American supermarket, it can be fascinating. Often it’ll take them forever to make a decision as they carefully wade into this sea of decision-making. Those of us who have been running this gauntlet for some time now have built up resistance to the sensory overload that is a modern store. We can usually zip through using well-tread criteria and remain unscathed.

When it comes to deciding the best way to invest, it’s not always so easy

Since I recently sold my fourplex, I now have some investment funds to redeploy. After cleaning up some other financial loose ends, I’ll have about $100,000 to invest elsewhere. Getting to this point was easy compared to the next step of actually pulling the trigger. (Incidentally, the first step in getting organized in investing is to sign up for a free account with Personal Capital so you can get a handle on your current situation. You can learn more here.)

Like a freshly arrived Somalian’s first visit to a Seattle Safeway, I’ll admit to being somewhat overwhelmed by my options. So I turn to you, readers, to help me out. What’s your advice for someone with a chunk of change in his pocket?

I’ve been considering a few different options over the past few years I’ve been trying to sell the fourplex. Many of them I was completely ready to move on at various points but since I couldn’t access the funds, they never happened. Some of those ideas have been completely dismissed while others are still being considered.

A few of my favorites:

Is more real estate the best way to invest this money?

Real estate is like a drug, and I’m hopelessly addicted. I love how it’s in my control (mostly) and I love how it’s tangible. With my own effort, I can enhance a property to increase its value. During the depth of the real estate crash, I was licking my chops at some very underpriced single-family homes, particularly in the city of my birth, Vancouver, Wash. Check out the inventory! There are a ton of decent houses available for less than $200,000 right now. Using my funds and tapping our home’s HELOC fund, I could pay cash* for one of these babies. Hard to resist! Rents in that area are pretty low, at maybe $1,200/month for something pretty nice. I could basically earn a 5%+ yield (although surprises always await with real estate!) and potentially also get some additional gain from equity growth as the market improves in that area.

(Interesting side note about this area: A few months back I was looking at what kind of inventory was available and I noticed almost every listing’s status was “short sale pending”. Page after page of listings. Then I read about how companies like the Blackstone Group were buying in big to the single family housing market and renting the homes out. I’m pretty sure these big investment firms were single-handedly driving up the prices. If I could have sold my plex a couple years ago and pounced, I could have already made well over $100,000 down there.)

So if I get lucky, I could earn something close to what I could earn investing more traditionally PLUS there is the potential to hit another jackpot. If the economy got quite hot in the Portland-Vancouver area, a price increase of $50,000 to $100,000 isn’t out of the question. But if the economy was doing that well, a stock market investment could do quite well also.

On the other hand, if I get unlucky, just a few repairs could wipe out every year’s income. Or, even worse, I could get dragged into negativeland and would need to cough up cash to support the endeavor. Additionally, the sporadic, unreliable income is what made rentals so unappealing with my fourplex. If I’m only going to earn 5% or less, I’d better not have to take a bunch of annoying phone calls to get it.

If I went this route, I’d plan to hold for three years minimum, and hopefully five years maximum.  Hmmm…

What about REITs?

Instead of buying real estate that I have to personally deal with, buying Real Estate Investment Trust funds might be the best way to invest this money. These funds let you be invested in real estate and as an investor with others instead of holding the bag all by your lonesome. I have a few REITs already but hadn’t bought in further because I was already so deep in real estate. I’m still considering this direction.

Why not just buy individual Dividend stocks?

If you read my post on Dividend Mapping, you know I’m somewhat entranced by dividend stock investing. Yes, like any investment it carries some risk and has its own share of pros and cons. My favorite things about dividend stocks are that they’ll continue paying as normal whether the price goes up or down. From an income standpoint, it’s a little more “controlled” in the sense that the dividends drip in like clockwork, helping me avoid some of the wild swings of real estate. That stability alone is worth something to me after dealing with the roller coaster of real estate income over the past decade.

I’ve done a bit of looking around at what individual stocks I could pick up, in a modified version of Dividend Mapping. Really it’s closer to creating my own mini mutual funds. I’m pretty happy with my selections so far. I found some stocks that I wouldn’t have otherwise noticed that I really like. So why not just buy in? Well, my track record of buying anything outside of a fund is atrocious. You know how it always rains after you wash your car? That’s how it is with me and stocks. I used to joke to my friends that they’d better sell because I was buying in, thereby guaranteeing a drop. Yes, it’s been that bad. So that eats at me when I consider pulling the trigger.

Could a good ol’ fashioned Vanguard fund be the best way to invest?

In what is probably the simplest approach, I could just buy into one or more Vanguard funds, such as the Total Stock Market Index (VTSMX). They are tried and true and in some ways this would be the lowest risk approach. They also have some managed payout funds that I haven’t really looked into yet. Probably the smartest thing to do from a traditional investing perspective would be the classic combination of total stock market, bonds, some international, etc. to provide the diversity needed down the line.

So on the plus side, there are solid, relatively safe investments available. On the negative side, I’ve felt like we’re overdue for a market correction and buying in now would almost guarantee it! If the market took a fairly big dip, that would certainly make my decision easier.

How about a combo platter?

Naturally combining several different approaches is often the best way to go. It gives you good solid diversity and also lets you catch a wave if a particular sector takes off. But what combination?

I could also dollar-cost-average my way in to some of these choices to protect myself from a sudden drop, but that entails leaving a big sum of money uninvested.

So how do I decide on the best way to invest this money?

I’ve (obviously) never been a very skillful investor. I did well investing in myself (education and career learning) and I got lucky more than once. My lack of confidence in market investing pushed me toward real estate and I was fortunate that my timing coincided with a low interest rate era that caused a big housing spike.

The interesting thing about my current conundrum is that had I received the same amount of money over a number of years, it would be much easier to decide where to put it. It’s the Power of the Chunk in action! Get a big chunk all at once, the stakes immediately seem much higher! Taking a big hit in the market would hurt much more after dropping in a big sum of money than it would before I was using it as income and when it was just a collection of smaller investments (if you follow me).

So here I am, looking at my various options, thinking about what to do next. I can tend to be an over-analyzer and the waiting carries its own danger as well. I’ll be sure to let you know what I decide!

What do you think? What is the best way to invest $100,000? What would you do if someone stopped by your house and handed you a check for $100,000?

Let me know your thoughts in the comments. And if anyone wants to write a guest post on this topic, send me a note through the contact form. I think it’d be great to have a few different voices weigh in on this topic. 

*Paying cash isn’t my first choice, but last time I checked, the credit market was so tight that getting a loan was near impossible even though I wouldn’t be using my income from working to pay for it even if I had a job. It might be possible these days, but I haven’t looked into it. 

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62 Thoughts on “What is the best way to invest $100,000?

  1. PTNick! Great post and lots of fun to read!!! I’d pay off all our debt. Then I’d purchase all the Vanguard index funds I could afford. Then We’d have one hell of a vacation. Thanks for helping me daydream a bit, PTNick! Have a egg drop Tuesday!

    • Pretired Nick on September 17, 2013 at 1:02 pm said:

      Glad to help, CJ! Even though it’s a little bit stressful figuring out what to do, it’s good to remember that it’s a good problem to have!

  2. First, I love the Happy Endings gif. One of my favorite new shows that ended too soon. ABC screwed the pooch on that one.

    Your intro reminded me a of a book I really enjoyed, too: The Paradox of Choice. Fascinating stuff, with the main idea being that after a certain number of choices, the sheer volume of the selection (& the corresponding effort) has a negative impact on our happiness and causes us stress. Better to have fewer choices (but we still need some…can’t just have one option).

    As for what to do with the money, I dunno. Pupu platter, maybe? Diversification, she is good.
    Done by Forty recently posted…How We Negotiate, Part IIMy Profile

  3. I just recently found myself in a similar situation. I went the Vanguard + Value Averaging route: 90% of my money went into the Vanguard Money Market fund, and the rest went into a Target Retirement fund. Over the next few years I’ll be slowly moving the rest of the money into the Target Retirement fund and absolutely hoping for a ‘market correction’ to cash in on 😉

    In fact, why don’t you go ahead and buy in now to trigger the correction for me 😛

    Great blog, BTW – very inspiring.

    • Pretired Nick on September 17, 2013 at 1:15 pm said:

      I might end up with a similar plan. Although I don’t know if I could do it over a couple years. The amount of income I’d lose by not being invested could be greater than what I’d lose in a market dip.
      You’ll know when I’ve bought in, though, because that’ll be when the sad stockbroker pictures hit the news sites. (:

      Thanks for the kind words. Glad you stopped by!

  4. I’d go with 50% REIT and 50% dividend stocks. Your real estate exposure must be down quite a bit so the REIT will bring it back up.
    The only way to get better with investing is to keep investing and spend some time refining your strategy. You can always default back to Vanguard funds if dividend stocks don’t work out. Stock market seems high at the moment though, but what do I know…
    Good luck!
    Joe recently posted…The Pros and Cons of Working LessMy Profile

    • Pretired Nick on September 17, 2013 at 2:24 pm said:

      That’s exactly how I’m leaning right now, although maybe not 50/50. I’m down quite a bit on real estate, but am still heavily in it (house and two other properties still). I totally think the market seems high right now which is what makes me nervous about diving in all at once!

  5. A good problem to have, no doubt. If it were us, we’d probably just make a schedule say $20K/month for each of the next 5 and drop the money into Vanguard’s total market fund, but we’re pretty averse to trying to time the market and aim for simplicity in most of our investments.
    Mrs. Pop @ Planting Our Pennies recently posted…Understand Your Goals AKA Car Chargers For Everyone!My Profile

    • Pretired Nick on September 18, 2013 at 5:28 am said:

      For sure, I’ll certainly be going in with chunks if and when I do it. I also was thinking $20K a month or so, although if there was a big crash, I might go in more quickly. I market correction sure would be handy right now!

  6. I didn’t realize that was from Happy Endings until DB40 pointed that out…it was pretty funny show. I originally thought about REITS for the same reason that Joe said. But I prefer to invest in REITS and Dividend paying stocks in tax advantaged vehicles. I’m thinking about investing in REITS myself, but that’s because I can’t get into real estate in my area. With the prices that you mentioned and your experience with being a landlord…now might not be a bad time to buy more rental property as the mortgage rates are still relatively low.
    Andrew@LivingRichCheaply recently posted…Are you Lured in by Sales?My Profile

    • Pretired Nick on September 17, 2013 at 8:42 pm said:

      Around here we talk about pretirement most of the time and less about traditional retirement so the tax advantaged accounts have limited value (still important, though).
      I’m still terribly tempted by rental property, particularly with the potential for a nice $50k pop. But I’m also pretty sick of it. It’s a tough one!

  7. Wow, this is a great pickle to be in. If I were in your shoes, I’d ask myself the following questions:
    – What is this money for? What is the goal of the money? To maximize returns to fuel FI? Bridge money for ER to until IRAs kick in? College funding for Junior? To enable passive income from dividends or rental?

    – When do I anticipate needing this money? 59.5 years or older? Before that? Never? This would influence whether or not I’d invest in tax-advantaged retirement accounts or just a ‘regular’ post-tax account. Or maybe I need it very soon to buy a rental so I’d keep it more liquid (CD, etc).

    – What is the target asset allocation across all my assets and where does it need adjusting? Having a large sum like this makes for great filler to bring the whole thing back into balance.

    • Pretired Nick on September 18, 2013 at 5:44 am said:

      You might win the prize for wisest comment, Buck! I think you’re dead-on that trying to answer this question without a more clear listing of my goals might be rather silly. It’s written in the “pretirement” context, meaning I want to reach financial freedom as soon as possible so I want to squeeze maximum income from this money as soon as possible.
      I’m thinking I may do a post just on goals and situation to clarify where I’m at currently.
      Great, great point on the overall allocation! That’s been a bit of a blind spot and I really should go back and take a hard look at that.

  8. Hello PT Nick! I’m so glad you have this money, and I can see where the big chunk would be a whole different ballgame. Our money never comes in that way, and I am the last person you should listen to with investing advice! I love your enthusiasm for real estate. That makes me shiver in my shoes because I know nothing about it and really wish I didn’t even own a home.

    If I came into that money, I’d pay off my current mortgage and invest the rest with Vanguard. I know I wouldn’t be rich, but I would be able to sleep at night. I love sleep! Or perhaps I’d ask you or Pauline to help me buy real estate and pay you in the profits we’d rake in! :) I look forward to hearing what you decide. I enjoy learning!

    • Pretired Nick on September 18, 2013 at 5:34 am said:

      Wow, you must have a tiny mortgage! Good for you! Basically since I’ve paid off my mortgage and this money has a good chance of ending up at Vanguard, I’m pretty much following your advice as it is. Perhaps you’re a better investor than you think you are!
      You really wish you didn’t own a home? Wow, we need to hear more about that!

  9. Ah, I would love to have so many things to choose from (if I had the money, of course). Lately I have been fascinated by the idea of entering the stock market – dividends also sound good but you need a ton of money to actually feel the money you earn. Unfortunately, the Romanian stock market is as exciting as is a 4 hour long documentary about tomatoes…

    Back to your question though, the safest bet in my opinion would be investing in the real estate market. Even if the value goes down, it normally shouldn’t be as bad as the stock market crashing and burning. Of course, taking the greater risk on the stock market or going the dividends route has the chance of greater profits. However, since you already have experience with investing in real estate and you’re probably better than many at sniffing good deals, I would go that route. Sometimes it’s best to go the boring but safe way.
    C. the Romanian recently posted…Should I Buy a Smaller House Now or Save for a Bigger One?My Profile

    • Pretired Nick on September 18, 2013 at 5:38 am said:

      You summed it up pretty well: there are some pretty major pros and cons with all the options, which I guess is how it’s supposed to work!
      Real estate can be boring, but it’s years of boredom punctuated with moments of terror — just like the stock market, I guess.
      I’m a little burned out on real estate and it can be pretty time consuming so I’m beginning to lean away from that direction.

  10. I don’t really think there’s a “best”, as it really depends on the individual. If it were me I would simply be putting it into more of the same investments I already have, which falls into your Vanguard route. I don’t really care much whether the market will correct soon since it’s a long-term decision. And the research shows that a lump sum investment performs better than dollar-cost averaging about 2/3 of the time anyways. But I don’t know much about real estate so it wouldn’t be a serious option for me right now like it is for you. I’m also not a big fan of the dividend stock strategy, but that’s another discussion.
    Matt Becker recently posted…5 Simple Questions to Ask Before Investing in AnythingMy Profile

    • Pretired Nick on September 18, 2013 at 5:41 am said:

      The best way to invest could depend a lot on individual situation and goals, that’s a good point. It’s mostly about income for me right now but I should really do a post just on my goals and current situation to clarify where I’m at right now.
      Can you share a link on the research you’re referring to? I’d be interested in reading more about that.

  11. Great post Nick. First, I would love for someone to drop by and hand me a check for that amount. That would be a great day. I am all about diversification. Since I don’t own any real estate outside of my residence, I would do a few things. I would first buy another project vehicle, since that is my hobby. You need to have fun sometimes, right? I would then invest in some dividend stocks, some REITs, and then my retirement account. I think that would give me my best bang for the buck.
    Grayson recently posted…The Financial States of America – Interactive MapMy Profile

  12. I’d put half into Berkshire Hathaway. Buffett has crushed the S&P 500 for the past 40+ years. I’m not even worried about Buffett buying the farm. BH has a strong portfolio of holding and I’d expect continued success for many years after he moves on.

    As for the other half, I don’t have a clue.
    Mr. 1500 recently posted…SUCCESS!!! (and Sir Silly Sock Sweatband Head)My Profile

    • Pretired Nick on September 18, 2013 at 8:54 am said:

      Very interesting approach! I actually was just looking at their stock and was wondering how smart it’d be to jump in. It sure is hard to think about putting half on anything. I feel like I’m basically putting half on black in Vegas.

  13. I think the easiest thing would be to put it in Vanguard funds. The question is always when is the best time, although it probably doesn’t matter you plan to keep it there for 10 years or so.

    That being said, I also have the real estate but and could buy a place outright were we live for $100K. In fact that is my dilemma right now. Should we put down 25% to 50% and take a mortgage on a rental while prices are so low or wait a year or two when we would have enough cash for right now prices and hope they don’t go up? It is a very good problem to have, but that doesn’t make the decision any easier.
    Kim@Eyesonthedollar recently posted…How Far Would You Drive to Save Money?My Profile

    • Pretired Nick on September 19, 2013 at 8:52 am said:

      It’s a classic conundrum, that’s for sure. With real estate, I think you’re more likely to wait too long than to jump to early, but every situation is different.
      I’m pretty sure at least a chunk will end up with Vanguard, but I’ll admit to being a little tempted by the rental house prices.

  14. When I opened my ROTH IRA I was 23 years old and totally overwhelmed by the fund options. (I’ve totally been in that same situation with netflix, surfing through for 30 min trying to match my taste and my mood). I just went with a target retirement date fund which has served me well. I’ve since used the vanguard total stock market index fund as a place to grow my money. Another great (and safe) return.
    Stefanie @ The Broke and Beautiful Life recently posted…“Oh Shit, Yeah That Thing” BudgetingMy Profile

    • Pretired Nick on September 19, 2013 at 8:54 am said:

      I’m a big fan of the Vanguard total market fund. I’d feel a lot better buying into that if we were in the midst of a correction, though. That’s be a very typical move of mine to buy right at the top! That’s one reason I do like the dividend strategy, though. It wouldn’t hurt as bad on the income side if there is a big dip.

  15. I ran into a somewhat similar situation about 6 months ago albeit with a much smaller sum. My goals were more short-term (we’re saving up for a down payment on a primary residence). I didn’t want our money sitting in a savings account earning less than 1% (even less after taxes!). So, I moved into a muni bond fund (through Vanguard). The dividends would be much higher than the savings account interest and it would be tax-free. Made sense, right? Plus, Bernanke and the Fed has explicitly stated they’d keep interest rates low until 2015. Seemed like a no brainer to me. I pulled the trigger and then less than 2 months later the Fed started hinting at ending QE and interest rates shot up. I pulled out before too long (would’ve been much worse if I stayed the course), but did end up with a loss.

    That leads me to my question – what’s your goal? Short-term? Long-term? How risk averse are you currently? Those factors matter.
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    • Pretired Nick on September 19, 2013 at 8:56 am said:

      Dang, that’s the kind of story that keeps me up at night! Your questions are really the crux of the decision-making that I need to do. I definitely need to flesh out my situation and goals.

  16. I would invest $25,000 in another property then invest $75,000 in index funds. Total Stock Market Index with International and Emerging Markets. The US market has been on a tear, that can’t last forever. Buy Panera bread stock, I recently bought that.
    Charles@gettingarichlife recently posted…Forget The Latte Factor, What Your “Things” Really Cost YouMy Profile

    • Pretired Nick on September 19, 2013 at 9:00 am said:

      The $25,000 amount isn’t really enough to do anything with real estate. I’d have negative cashflow for sure.
      I’m a little more inclined to buy an index fund over any individual stocks, since I don’t trust my own brilliance enough. That said, I have found a few I like lately. I’ll take a look at Panera….

  17. I’m with Buck in that giving you advice without knowing your specific goals for it is like shooting in the dark. If you’d like to replace your rental income, you could go with one of the Vanguard (or whomever) stable income funds in a taxable account. You likely won’t get as much as you did via actual real estate, but it would bring in some income. If you need the income later, even up your desired asset allocation (even if it’s all an index fund!)
    Mom @ Three is Plenty recently posted…Credit Card Travel NotificationMy Profile

    • Pretired Nick on September 23, 2013 at 10:25 am said:

      I agree with him as well, Mom! I think this is my current default plan. I think real estate can perform a bit better — on paper. But in reality, I find surprises tend to bring you back to about the same as you’d make elsewhere.

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  19. Very interesting article Nick! I sure wish I knew the “best way to invest” anything…

    In the absence of having that knowledge myself, I’ll choose to buy the Vanguard total US stock market index fund and let it sit and compound for the next 50 years.

    I know I don’t have the appetite for risk that is involved in real estate investing, or I might choose that option in theory. I could see if that’s your thing that you could do quite well for yourself there.

    • Pretired Nick on September 25, 2013 at 12:58 pm said:

      Wow, 50 years! That is a really long time and I don’t expect to live that long! (: I’m sure most of it will end up with Vanguard, but still weighing my options.

  20. Very interesting problem. I wish I had that problem!! :))
    Yeah I know this will sound like a cliche but I would do something similar to Warren Buffett. I just saw an interview he did and I’m plan on doing that with my savings (mine not as big as yours yet though)…but it’s a start and we’re almost out of debt. I’m going to do a lot more research but I think that he has some great ideas and obviously some great statistics to back him up. Anyways….those are my thoughts on it.
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    • Pretired Nick on September 25, 2013 at 1:00 pm said:

      Yeah, one of my considerations is just buying into BH. However, even Buffett says he’s having trouble finding anything to buy right now so I think I may imitate him a bit and keep my powder dry for awhile longer.

  21. I’d likely put most of the money on my mortgage and pay down a considerable amount. I know that may not be the best way to invest it but it’s definitely safe.
    SuburbanFinance recently posted…Buying Your First HomeMy Profile

    • Pretired Nick on September 29, 2013 at 8:20 pm said:

      I don’t think that’s a bad approach at all, SF! In fact that’s basically what I did with past windfalls. Unfortunately(?) I’ve already done that so I don’t have a mortgage right now. That’s a good thing, but it does make the next step more complicated.

  22. I don’t think I’d trust any investment opportunities in my country, so I’d probably buy a lot of gold coins and place them in a safe deposit box at a bank.

    • Nichole on December 27, 2014 at 2:51 pm said:

      Yikes. I see your point however I could never store gold at the bank. The main advantage of owning the yellow medal is no counter party risk which is exactly what you get when you store it at the bank. Look up Doug Casey, James Turk, Jim Rickards, or Mile Maloney if you have questions about this. They are very clear about the various aspects of gold.

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  24. Install solar panels on your primary residence and view the reduced utility costs as a dividend! :) Not entirely facetious as the savings could be invested in smaller, regular dollar-cost-averaging increments (to ward of the market correction fear of a large lump sum investment).
    Hopefully that wouldn’t eat up the entire $100k, so you’d still have to figure out what to do with the rest. How much of your net worth is in residential real estate? I recently noticed over a third of mine is, and I decided that’s enough exposure to one sector for me, at least for now. If I had that amount to invest, I might look at commercial REITs, then see if I could find some exposure to hedge funds (one of the funds in my 401k offers a bit of that, but I don’t know if any funds are out there that offer it for after-tax money).
    I’ll mention I too have a lousy track record investing in individual stocks, so whenever I have some extra cash to invest (usually one or more orders of magnitude *less* than your current amount!), I’ll generally invest it with my portfolio manager at Morgan Stanley, who’s been earning pretty decent returns for me.
    Good luck whatever you decide!

    • Pretired Nick on October 7, 2013 at 9:18 am said:

      Excellent call, Suman! I’ve been thinking a lot about the solar panel thing. My home is perfectly positioned to take advantage. Only thing is there is some potential we’ll be downsizing relatively soon so I wouldn’t really gain the benefit. If I knew I’d be here awhile, I’d already have solar in-place. My favorite part about it is it’d lower my monthly bill cost, making the money I need invested even lower.
      I probably have more than 50% of my net worth in residential real estate so I’m nervous about buying more.
      As far as Morgan Stanley goes, I’d take a hard look at their fees and think about moving to Vanguard. It’ll make a big difference!

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  26. Bradley on December 19, 2013 at 1:08 pm said:

    This is a question for all the posters — there seems to be a significant emphasis on dividend paying stocks amongst the pretirement crowd. What types of dividends are you guys receiving? Most of the big blue chip stocks I look at are 2-4 percent, yet I see talk of 7+ percent. It seems like those stocks would carry a lot more risk to hold, or am I missing something?

    • Pretired Nick on December 19, 2013 at 3:08 pm said:

      Hi Bradley, I won’t speak for everyone, but I know many people look at dividend income as part of the mix. They’ll also count on relatively small growth of the stock + the dividend. So maybe you get 4% dividend plus modest growth in the stock to get you to the 7% (but you can’t necessarily count on the growth so you have to be careful). My ideal situation would be to get all my needed income from dividends and look at growth as gravy, but the important thing is to remember you’re looking at things over a long period of time which is why I’ll often use a 5% guideline, which should be a relatively safe target over the long haul.

      • Bradley on December 19, 2013 at 5:45 pm said:

        I’m definitely long haul at age 40 with a stay at home wife and two kids, but I’m in the process of moving the chess pieces to be able to sign off from the day job by no later than age 45, possibly cutting back to 30 hours next year as a “first step” so I can focus a little more on my own little endeavors to raise cash. My net worth is decent and slowly growing, and I’m 100% debt free including a paid off home.

        Do you ever discuss actual stock names in your blog comments? I would love to do that with similarly minded people, share ideas of dividend stocks. I have a few in mind I don’t own yet.

        • Pretired Nick on December 22, 2013 at 7:10 am said:

          Right on, Bradley! Your situation is very similar to mine at 40 (except I had no kids at the time). I don’t mind if people discuss their stock picking ideas in comments, but I don’t spend much time talking about my stock picks in my posts mainly because I don’t want people to assume that I’m some genius investor. You might check out dividendmantra.com. Great discussion of a lot of great dividend stocks over there.

          • Bradley on December 22, 2013 at 3:02 pm said:

            I’ll leave the stock picks for elsewhere then. The reason I commented on this particular article is a good chunk of my net worth is in cash right now, part of which came from selling a rental house I had (it was time for several reasons). I’d load up on dividend stocks but then I’d be doing so at market all-time highs. For the time being I think I’ll watch closely and start nibbling on any dips while the money earns a whopping 0.8 percent in savings :) It’s a good problem to have, to be sure! But it’s really bugging me that I can’t come to peace of mind of what exactly to do with the cash. I’ll figure it out over time.

            Did you ever decide what to do with your 100k, or are you still sitting on the majority of it? And you need a confirm you are a Cardinals fan check box instead :)

            • Pretired Nick on December 22, 2013 at 5:52 pm said:

              No, that’s basically what I’m doing right now. I did buy a little bit of stock but mostly I’m just waiting a bit. It’s tough. I know if I buy now the market will crash (because it always does when I make a big buy). But I feel like a chump for waiting, too. Worse, I’m in the process of selling another piece of real estate, so I’ll have even more cash to deal with. I will probably pick up some REITs in the short run here because I’m not as worried about those taking a big dive.

              Cardinals? Ah man, that hurts!

              • Bradley on December 23, 2013 at 8:14 am said:

                Sounds like you have had the same luck with the market as I. What I did last week was move 10k into Scottrade to have ready to use if I saw something dividend-related that I wanted on a dip. Haven’t spent a penny of it yet. Where I live (PHX) it feels like the real estate market run up has already happened so I wouldn’t consider buying property here right now. There’s no obvious place to me to put the money. The only thing really suppressed at the moment is commodities and I have a little bit of that tucked away already.

                Are you purchasing REITs in an IRA or in a standard trading account?

                • Pretired Nick on December 23, 2013 at 4:22 pm said:

                  I do everything these days in vanguard (just closed out my scottrade account, actually). They have a REIT dividend fund I’ve had my eye on. My typical answer when there’s nowhere to put money, though, is to pay off debt, especially your home (so you can pull it out again via a heloc if the market dips). Unfortunately, you’ve already paid off your house so you’re in the same boat as me — waiting. Frustrating!

                  • Bradley on December 23, 2013 at 8:57 pm said:

                    haha yes operation “eliminate all debt” is complete and was a great success. I actually nibbled at a dividend stock today and as always happens like clockwork, it dipped immediately after I bought it. Classic. I’ll be holding it for awhile so no biggie. Like you I have some additional cash on the way so the frustration of earning piddly interest in the bank is only going to mount moving into next year. I’ll nibble at the market here and there just to have some small bases, but I refuse to push a ton of chips into it at these levels, even if interest rates are going to be suppressed into at least 2015.

                    What’s the ticker for the REIT fund at Vanguard? I’d love to look it up. I have a Vanguard account but it’s currently empty. I do own about 10k worth of a real estate fund in my 401k.

                    • Pretired Nick on December 24, 2013 at 9:33 am said:

                      The one I’ve been looking at is VGSLX. Worth a good look at least. Sounds like we have a lot in common — you’re like my pretirement twin!
                      Since you don’t have anything in Vanguard, be sure to keep an eye on your expense ratio for any funds you own. It can make a big difference.

                    • Bradley on December 29, 2013 at 8:32 pm said:

                      I definitely keep an eye on the management fees when it comes to funds. I hate the fees in my 401k but understand it’s a necessary evil.

                      Oddly enough the stock I bought a week ago (COP) is up nicely since my purchase after an initial dip, and I probably just jinxed it by saying that. I do have my finger on the trigger to build up a bigger dividend earning stock portfolio and hope to add a little more to it this week. I’ll keep my eye on VGSLX as well. Here’s to bigger strides toward retirement in 2014.

  27. Pingback: What do you do when there's nowhere to invest? | Pretired.org

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