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I just sold my house and now money in the bank. I don't want the stress of owning a property right now, but I know it would be a bad idea to just let this sit in my bank account while inflation reduces it.

My dad suggested I talk to a Certified Financial Planner, and I've been researching it here, but it seems like there are a lot of ways of being duped by them. I would be comfortable with a fiduciary, but I get the sense I have to have millions before one of them will talk to me.

Either way, I don't know if either of them is necessary. Last I heard, ETFs outperform mutual funds and advisors anyway. If I don't want to invest in another property, and I don't want to spend a lot of effort researching and fiddling with my investments, would it be a bad idea to just dump it all into an ETF and not worry about it?

I'm 40 years old and live in America. I've already put all the money I can in my IRA for this year, and I'm currently unemployed (by choice). I'm a good programmer, and though I haven't researched how bad the economy really is, I consider myself to be in the 90th+ percentile, so I don't think it's good be super difficult for me to find a job if I want to. After all, there are still plenty of ads on this site that I would be very qualified for ;) Besides, I have a lot of funds to live off of at the moment.

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    What's the goal for this 200k? ETF's expose your money to risk, how much risk you are comfortable with should be a function of your goal.
    – Hart CO
    Commented Sep 1, 2020 at 18:44
  • We need more information: How much risk can you tolerate? What is your investment horizon (i.e. how long do you intend to tie up the money in an investment)?
    – Flux
    Commented Sep 1, 2020 at 19:12
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    Finding a certified financial planner that you pay for advice without investing through them seems like a good starting place. They will assess your total financial situation and help you form a plan that suits you.
    – Hart CO
    Commented Sep 1, 2020 at 19:17
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    What you do with the $200K might come down to how long you plan to be unemployed, and how much you will burn through per month while unemployed. It's also not clear from your last paragraph if you wish to be employed or not- maybe because you don't even know yet?
    – TTT
    Commented Sep 1, 2020 at 19:18
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    @CluelessFinancial By tolerance to risk, we mean something like tolerance to volatility, long drawdowns, or even the impairment of principal. For example, if you invest in the stock market, you could see 50% of your investment wiped out in an instant, whereas such a situation is less likely with AAA bonds.
    – Flux
    Commented Sep 1, 2020 at 19:20

2 Answers 2

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What you probably want is a Fee-Only Financial Advisor.

You pay them like a consultant and they recommend the best investments they know of given your objectives and level of fear. Their compensation is not tied to commissions on financial instruments they sell you. Which means, they are not recommending lousy investments just because their salary depends on doing so. Their source of funds is simply the direct consulting fee you pay them.

That said, your ETF plan is not hardly the worst. A good index ETF has an extremely low expense ratio, and that is the surest way to make money - not lose it to fees.

You might also look into what an Endowment is, and how universities manage them. This is invested for very long term growth with little concern for volatility, which is very similar to how a young person should invest for retirement.

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If you are new to the world of financial investing, I would suggest using what is called a "systematic investment plan". This comprises investing a fixed sum of money at regular intervals into, for example, a passively managed index fund. For example, you could invest , say, $1000, or any amount of your choosing, every other week into SPY which passively tracks the S&P 500 index. If the price of SPY falls you will get more shares with your $1000 and if it rises, fewer shares. Over a period of one to two years, you will end up dollar cost averaging. This way of investing will ensure that you get exposure to the stock market but at the same will also ensure that you are not putting all of your eggs in one basket at the same time. There are also hundreds of other actively managed funds whose performance you can read about on Fidelity, and decide whether you want to allocate some of your money to any of these funds.

Unlike when you have your money in a bank where its nominal value is more or less preserved but there is no protection against erosion of real value owing to inflation, it is possible that you might lose the nominal and the real value of your investments if the market tanks. But since you would not be putting all of your money at the same time in the market, and also would be buying when the market tanks there are reasonably good chances that over the long run you will do well, and end up beating inflation and increasing the real value of your account. But, finally, it comes down to your risk appetite, and, as someone pointed out, what amount of draw-down in the interim you are able to tolerate. In general, trees tend to grow, and so do businesses and the stock market that comprises them, but there are no guarantees.

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