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There seems to be a glut of information and I don't know where to start.

My situation is:

  • No debt/kids
  • Own Home and Vehicles
  • Have a years worth of living expenses in my savings/checking
  • Max out my 401k and Roth IRA
  • Have a lot of money in a money market
  • Save about 5k/month

I feel like I should be doing something better than a money market. And I guess I should have a traditional IRA too? Also, I have a broker managing my Roth IRA and hes lost money over the past 3 years.

I want some advice on what to do with the money I save, money in the money market and where to start my education on managing my excess money and turning it into residual income so that I can retire early.

  • 2
    You could take a trip to Vegas ;) – user4835 Mar 11 '12 at 4:46
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    Describe your tolerance for risk. – MrChrister Mar 11 '12 at 6:21
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    If it's true that your Roth IRA has lost money over the last three calendar years, I would look for a new manager. Since March 2009, the S&P 500 is up approximately 100%, and other assets like bonds and commodities are also up significantly. It's hard for me to imagine how one could have been invested to have lost money over that period. – Jason R Mar 11 '12 at 13:56
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    There are a lot of investments available depending upon your interests, skills, and risk tolerance. You could invest in securities in a non-tax-sheltered brokerage account, invest in real estate, or start a business. You are in a very favorable situation that I think a lot of people would envy. :) – Jason R Mar 11 '12 at 13:58
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    Man, I wish I had these problems! ;) – Steven Mar 16 '12 at 14:08
3

People have asked a lot of good questions about your broader situation, tolerance for risk, etc, but I'm going to say the one-size-fits-most answer is: split some of your monthly savings (half?) into the VEU Vanguard FTSE All-World ex-US ETF and some into VTI Vanguard Total Stock Market ETF.

This can be as automatic and hassle-free as the money market deposit and gives a possibility of getting a better return, with low costs and low avoidable risk.

2

There's a few different types of investments you could do.

  • As poolie mentioned, you could split your money between the Vanguard All World ex-US and Vanguard Total Stock Market index. A similar approach would be to invest in the Vanguard Total World Stock ETF. You wouldn't have to track separate fund performances, at the downside of not being able to allocate differential amounts to the US and non-US markets (Vanguard will allocate them by market cap).

  • You could consider investing in country-specific broad market indices like the S&P 500 and FTSE 100. While not as diversified as the world indices, they are more correlated with the country's economic outlook.

  • Other common investing paradigms are investing in companies which have historically paid out high dividends and companies that are under-valued by the market but have good prospects for future growth. This gets in the domain of value investing, which an entire field by itself.

Like Andrew mentioned, investing in a mutual fund is hassle-free. However, mutual fees/commissions and taxes can be higher (somewhere in the range 1%-5%) than index funds/ETF expense ratios (typically <0.50%), so they would have to outperform the market by a bit to break-even.

There are quite a few good books out there to read up about investing. I'd recommend The Intelligent Investor and Millionaire Teacher to understand the basics of long-term investing, but of course, there are many other equally good books too.

1

Since your 401k/IRA are maxed out and you don't need a 529 for kids, the next step is a plain ol' "Taxable account." The easiest and most hassle-free would be automatic contributions into a Mutual Fund.

Building on poolie's answer, I think mutual funds are much more automatic/hassle-free than ETFs, so in your case (and with your savings rate), just invest in the Investor (or Admiral) shares of VEU and VTI.

Other hassle-free options include I-Bonds ($5k/year), and 5-year CDs.

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