1

I came by some cash a year ago, so I put $20,000 in a Certificate of Deposit which will end this weekend (at about $20.5K). Now I'm wondering what to do with it. I don't really know much about investing, so I'm wondering what the most logical long-term move would be for me right now.

  • My bank currently has CDs from 6 months to 5 years, all at 0.75% interest.

  • But I've heard that investing in stock indexes is low risk over long periods of time. If I were to put this money in an index now (while the market is plummeting) would this be a smart way to start saving for retirement?

  • Or should I hold on to the cash and try to buy a rental property?

  • Or is there a fourth, smarter option?

Specific Goals [Edit]

I'm specifically looking for a low-risk, low-maintenance option that makes the most sense over a long period time (30 years-ish?). Stashing it away until retirement would be my first thought for the money, but I'm not sure if it might be smarter to keep it available just in case.

About me:

I'm in my 30s, living in the US. I don't own any property. I'm currently making below the poverty line, but I'm getting by. I have no debt. I have $2K in a savings account. I may be moving across the country for graduate school in a little over a year.

  • 1
    As currently written, this is a very broad question that can really only solicit opinions as responses. Do you have a specific goal for the money? If you could edit the question to be more narrowly focused, it may be on-topic. – yoozer8 Mar 18 at 22:03
  • I made a few edits. It is more answerable now? – Hank Mar 19 at 0:06
2

If you don't expect to need the money for the next 30+ years, the best thing you can do is invest in the stock market.

  • The return on investment for CDs is abysmal. They're only a good choice if you need absolute certainty that your investment won't lose value (or, won't lose value too quickly after adjusting for inflation).
  • Real estate is risky, particularly on the small scale. A single stroke of bad luck can wipe out your entire investment.
  • The stock market is also risky, but unlike with real estate, you've got enough money to mitigate that risk by spreading your investment (eg. with a mutual fund, an index fund, or simply buying a wide variety of stocks). Expect your investment to lose value in the near future -- the market is way down, but I don't think it's quite hit bottom yet, and long-term fallout from the COVID-19 pandemic will keep things unsettled for a year or more.
|improve this answer|||||
1
I'm specifically looking for a low-risk, low-maintenance option that makes the most sense over a long period time (30 years-ish?).

If you lived in Finland, and if you were lucky enough to find joint forest ownership for sale, I would recommend investing into a joint forest. It's low-risk, low-maintenance option, definitely. However,

I'm in my 30s, living in the US.

I would recommend a stock index fund, which can be ETF or a traditional mutual fund. Keep in mind good diversification (primarily a world index, not just US index) and low fees. It is not a low-risk option, so you should be prepared for pretty severe swings in its value. However, in a 30-year timescale, I'd say the chances of having more at the end of the time period than now are very high. Select a fund that reinvests its dividends so you don't have to do it manually.

If the swings in stock index values are too high for you, you can reduce the risk of the investment by having part of the money in your bank account. Then you need to occasionally rebalance, i.e. if the stock index goes up very much, sell some; if the stock index goes down very much, buy some extra.

Fortunately, stock markets have become cheaper recently, although the Shiller P/E-10 ratio (CAPE ratio) in US stock market is still above its historical mean. But if you throw a heavy proportion of non-US stocks into the mix, what I said no longer necessarily applies.

|improve this answer|||||
1

I'm currently making below the poverty line, but I'm getting by.

20k alone invested today isn't going to prepare you for retirement. At an 8% average return, in 30 years you'll have about $200k, which isn't a lot to live on today and will likely get worse as expenses like health care (which will be increasingly more important to you as you get older) rise higher than inflation.

I may be moving across the country for graduate school in a little over a year.

Then I assume you'll need the cash to pay for school. Save the cash, avoid student debt like the plague, and use that money to finance your school. With a bette rincome, you can invest periodically over the next 20-30 years (not just in the market, but in a house, etc.) and turn that $20k into millions.

|improve this answer|||||
  • As someone who currently pays 0.0% interest rate (non-state-subsidized) for my relatively small student debt, I have to disagree with avoiding debt. But yes, you have some valid points in here, so +1. – juhist Mar 19 at 14:57
0

What I would do (which I think is the safest given the circumstances) is to take advantages of the welcome offers most of the bank have. They are offering around $500+ cash if you open an account and leave your money typically about 90 day. Most of well known banks here in US offering this bonus cash.

If you can do this persistently do this for say four times in one year, you will end up with $2 grand which is about to %10 return. Besides the money is not locked down with minimum risk possible. Then you have one year to think what to do with it.

|improve this answer|||||
  • 1
    10% non-compounding return. Any other investment will compound over time. – Mark Mar 18 at 22:08

Not the answer you're looking for? Browse other questions tagged or ask your own question.