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I have a few Fidelity accounts including a 401k, a Roth IRA, and a brokerage account.

My brokerage account is empty right now because I sold some Yahoo shares quite some time ago and moved that money out of that account - that was a long time ago. I haven't really invested in stocks in this account so it remains with a very low balance.

My 401k I fund 20% of my check and have around 750k. My Roth contributions for the year are maxed out (I am allowed 6k per year) and have around 50k here. As far as emergency savings I have a good amount here as well enough to cover 2-3 years of expenses. I have 0 debt except for my house payment which I owe 1700 dollars a month with a remaining balance of 180k.

I'd like to take some of my savings and possibly hope to make some gains on it. Is it reasonable to use my fidelity brokerage account and invest in say a mutual fund I like FBCGX or a freedom blend like FHAPX. I'm 41 and don't plan to retire until I am 60 so I don't mind risk. I am thinking to invest around 50k and do not need this money for at least 8-10 years. Is this a sound plan?

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    This question is basically, "Should I invest my savings in the stock market?" I don't think there's any objective answer to this question. – chepner Sep 23 at 18:52
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    This depends entirely on your goals and preferences. What is your time horizon? What do you want to get out of the taxable account? What is your risk tolerance? Of course, you should also ask yourself if it is better to just spend the money on things that will make you happy or if you should just save it instead. – MrMineHeads Sep 23 at 19:07
  • @chepner - Im mainly curious if investing in the mutual fund in my brokerage account is ok if say I have 50k dollars sitting around and the banks arent offering much of anything. – JonH Sep 23 at 19:15
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    @MrMineHeads - I mentioned my age and that I don't need the money for upto 10 years. I already mentioned my risk tolerance. This is all in the question - did you happen to read it or glance over it ? – JonH Sep 23 at 19:16
  • @JonH Nobody but you can decide if you should or not. It's clearly OK; you have the money, and you are legally allowed to invest it. – chepner Sep 23 at 19:21
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Nobody can say with certainty that you'll be better off exposing your savings to market risk than collecting less than 1% interest in a savings account.

That said, your plan to invest via brokerage account aligns with many popular investment priority lists.

Many such lists are something like:

  • 401k to employer match
  • HSA to max
  • Repay high interest debt
  • IRA/Roth IRA to max
  • 401k to max
  • Repay medium interest debt
  • Non-retirement brokerage account investing
  • Repay low interest debt

It's not a one-size fits all list and there are plenty of variations. You have to decide what your priorities and goals are, but if you have only low interest debt and have maxed out your tax-advantaged retirement accounts then investing via brokerage account makes sense.

You could focus on paying off home debt faster if you feel better about guaranteed returns, but historically that money would be better used if exposed to some market risk. As far as balancing portfolio risk goes, make sure you're assessing across all the accounts. Similarly you could look for alternative investments like real-estate or starting a side business.

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  • Good answer, if there is a 50/50 chance I could either lose or gain what's a safer bet you would take? Would you invest in something else maybe an index fund or do something else provided my info that I have already stated ? Or do you believe a mutual fund is the way to go? Trying to understand there are so many different avenues, stocks, mutual funds, index funds, etc. – JonH Sep 23 at 19:19
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    @JonH Are you already heavily exposed to index funds in your 401k and IRA? Personally, I have my 401k and IRA in mutual funds/ETFs, and my brokerage accounts are for higher risk options trading and hoarding of dividend aristocrats. I'm also a landlord, which I like as a form of diversification but is certainly not for everyone. It may well be worthwhile to talk to a CFP to formulate a plan that's tailored to you. – Hart CO Sep 23 at 19:28
  • Would refinancing the remaining balance of the mortgage take that debt from medium to low interest? Would investing at that point make more sense? I think OP should also include their asset allocation for the 401k/Roth, if it was 100% stock that would change where they should be investing via a brokerage account. I've heard 100-your age = % of your portfolio stocks should make up, perhaps they should assure their mix is at a safe ratio. – self.name Sep 24 at 3:58
  • With interest rates as low as they are right now, the OP should be refinancing any significant debt that has higher interest rates. Even if the OP gets interest rates down to 2% on that debt, paying off the debt for a certain 2% return is a better deal than putting it in a savings account for 0.5% or less and much less risky than investing it in mutual funds. – Brian Borchers Sep 24 at 16:21
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The fact is if you pay off the home completely, that is "just like" earning whatever percentage you are paying on the mortgage.

Let's say that is 4%.

With your amazing track record, it sounds like it will only take a year or three to do that.

Over just 2-3 years do you really think you can do better than that tidy and comfortable 4% ?

I say in this situation, in today's market, first utterly pay off the mortgage.

When that is done in a few years, have another go at figuring out how the heck to get any investment returns, in our era's era-of-no-returns.

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    Good advice, what about with the current historically low interest rates though? Would a refinance be wise even if it resets the interest amortization clock? Since the market is on a good run would investing make sense? (I personally feel the market has to almost be out of steam, but I've definitely been wrong before) – self.name Sep 24 at 3:55
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    You can refinance to a shorter-term loan, so the number of years remaining doesn't change. That will let you avoid resetting the interest amortization clock. And you'll get the lower interest rate. – PotatoEngineer Sep 24 at 5:20
  • regarding refinancing. I wouldn't bother. Just put every penny and every second in to PAYING IT OFF. – Fattie Sep 24 at 10:56
  • regarding that the market has "been on a good run". it has ALWAYS been on a good run. and it has ALWAYS been getting smashed. this whole year the S&P has achieved nothing, and there was a big smash in the middle. with the markets there's no difference between "now" and "a few years from now". get the house paid off and congrats! – Fattie Sep 24 at 10:58
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    Long term stock market returns average about 8%, more than you save by paying off the mortgage. – Barmar Sep 24 at 16:13

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