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How would you invest $100K?

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  • Lordosis Lordosis 
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    Status: Physician
    Posts: 1863
    Joined: 02/11/2019
    We live in upstate NY in a low cost of living area. If I invest ~50K into the Vanguard New York Long-Term Tax-Exempt Fund Admiral Shares (VNYUX)

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    I also live in upstate NY.  I Have looked at this fund but my understanding is that since it is a long term bond fund it carries significant interest rate risk.   I am not saying that I can predict which way interest rates are going to go but there is more room for them to go up then down at this point.

    Invest the remaining 50K into Vanguard Total International Stock Index Fund (VTIAX) because international stock funds tend to be more tax efficient than US stock funds (is this correct?).

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    International is a little LESS efficient but it does get the foreign tax credit.  Maybe a wash?  I think you would be fine with either in taxable.

     

    I would make sure you are doing your BDR and put enough in taxable to get to 20% towards retirement.

    Paying down loans is not a bad thing either.  You are choosing between 2 good choices.

     

    Good luck!

    “Never let your sense of morals prevent you from doing what is right.”

    #230595 Reply
    Liked by Future Fire
    Avatar Budgetmaestra 
    Participant
    Status: Attorney
    Posts: 41
    Joined: 04/30/2019

    This is what I would do. Max out spouses 401k, and anything else available (backdoor Roth’s, hsa etc), but then go all in on your loans. “Live like a resident”. You will have a pretty large shovel and can mostly pay them off by the time you can start contributing to your work retirement plan. I think you will find it weirdly satisfying to see the debt shrink that quickly. And a 5% guaranteed return is really good.

    Compared to many others at your stage in life you are actually ahead retirement wise so I would worry about that part too much. With loans gone in 18-24 months after graduation your cash flow will be spectacular and you can quickly save up a fowbpaynent, build taxable accounts etc.

    #230612 Reply
    Liked by Future Fire
    Avatar ZZZ 
    Participant
    Status: Spouse
    Posts: 707
    Joined: 06/18/2018

    “Yet not saving at least 20% of my income”

    Paying off loan principle increases your net worth. You are saving.

    Some joker on here recently argued otherwise, but you net worth is
    assets – liabilities = NW
    Increasing assets and decreasing liabilities both increase NW

    #230614 Reply
    Liked by Future Fire
    Avatar Future Fire 
    Participant
    Status: Physician
    Posts: 16
    Joined: 08/20/2018

    Again thanks for the input everyone.

    Looks like we’ll max out tax advantaged accounts and our BDRs. Then hit those loans hard!

    #230615 Reply
    Liked by jhwkr542
    Avatar Infinity 
    Participant
    Status: Physician
    Posts: 92
    Joined: 05/25/2019

    I am quite aggressive when it comes to investing.

    S&P 500 has been appreciated about ~10%/yr in the past few decades.

    So, if you bought S&P 500 with $100K 50 years ago, you would have made a lot of money if it costed 5% (your current student loan interests).

    However, if you bought it 10 months ago, you would have lost money because the stocks have not gone up much since September peak last year.

    To answer your question about what to do with $100K, I need to know how much stocks will go up in the next 20-30 years.

    If your student loan is not tax deductible, your cost will be 5% + capital gain tax when you sell the stocks = ~6.25%.

    Do I think stocks will be up more than 6.25%/year in the next 20-30 years?

    I hope so, but I would not bet my retirement on it.  That is why 4% withdrawal rate rule does not apply to me.

    So, if I were you, I would pay off the loan likes others said.

    If you can get a loan with 3% interests or lower, I would keep the loan and jump in the stocks.

     

    #231135 Reply
    Liked by Future Fire
    Avatar Tim 
    Participant
    Status: Accountant
    Posts: 3088
    Joined: 09/18/2018

    “However, if you bought it 2 years ago, you would have lost about 5%/year because the stocks have not gone up much in the past 2 years.”

    2459 to 3008? Check the math for the last two years. Thanks.

    #231145 Reply
    Liked by Infinity, Lordosis
    Avatar Infinity 
    Participant
    Status: Physician
    Posts: 92
    Joined: 05/25/2019

    “However, if you bought it 2 years ago, you would have lost about 5%/year because the stocks have not gone up much in the past 2 years.”

    2459 to 3008? Check the math for the last two years. Thanks.

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    Oops, I looked at the peak on Sep 21st, 2018 (2924) and thought it was Sep 2017.  Thanks for correction, really appreciated.

    I should have used the “lost decade” between 2000 and 2012 as an example of when we would lose money. I was too lazy, sorry.

    #231147 Reply
    CordMcNally CordMcNally 
    Participant
    Status: Physician
    Posts: 2859
    Joined: 01/03/2017

    Pay the loans off. The benefit goes far beyond a guaranteed 5% return.

    “But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.”
    ― Benjamin Graham, The Intelligent Investor

    #231154 Reply
    Avatar Future Fire 
    Participant
    Status: Physician
    Posts: 16
    Joined: 08/20/2018
    Pay the loans off. The benefit goes far beyond a guaranteed 5% return.

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    Totally agree with this. I’m going to refinance with First Republic at 1.95% and still plan on paying down as fast as possible.

    #231429 Reply
    Avatar hightower 
    Participant
    Status: Physician
    Posts: 1485
    Joined: 12/07/2016

    Yes, I agree with others…pay those loans.  You will thank yourself when they are gone several years down the road.  Take it from experience, it’s really annoying having loans linger as long as mine have;)

    #231459 Reply
    Liked by Future Fire

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