Situation: I have $100k in an IRA with Betterment, plus just inherited $200k - currently cash. I'm 34 years old and salary is $97k, with no debt.


IRA: growth of principle for retirement (in the IRA), plus annual max contrib of $5.5k Cash: relatively aggressive long-term growth for the cash, some protection of principle Home: I'm not hankering to own a home (I'm lazy and prefer renting) but I'd consider it for financial benefit.

Given this and the current economic climate, should I:

A) Put the entire $300K to work NOW in a robo-investor like Wealthfront or Betterment (IRA + taxable accounts). Both services offer auto-rebalance, daily tax-loss harvesting, MPT ETF portfolio for cost of 15-25 basis points / yr. Each service gives one control knob to adjust % holdings in equity vs. bonds.

B) Do A, but keep $100k cash in reserve, in case there’s a big correction coming soon 2015 for US bonds and/or US equities.

C) Do A, and tilt the portfolios to 100% equities (no bonds for now) given current climate. Again, both services let you control % of ETFs in stocks vs bonds.

D) Forget all of the above and buy my first home before interest rates climb? I live in San Francisco (currently most expensive in USA).

E) Something else?

Thanks all!

  • 5
    First of all, let's get one thing off the table. If you are "lazy and prefer renting" (no judgement here), don't buy a home. Buying a home that you don't really want is a bad idea, whether or not it ends up being a good investment.
    – Ben Miller
    Aug 14, 2015 at 0:02
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    The answer is certainly not B. A correction may be coming, but nobody is able to predict such things with any kind of accuracy to be useful. Even if there are, there are so many people trying to predict such things, and you don't know how to figure out which ones actually know what they're talking about. 33% is way too much to keep in cash at your age without a purpose within the next few years, e.g. buying a home. Speaking of buying a home, as @BenMiller commented, don't buy one just for financial reasons. You'll probably regret it. So D is out too.
    – Craig W
    Aug 14, 2015 at 0:13
  • 2
    You are single? As far as buying a house goes - the real question is whether that's your dream, which clearly, it's not. A single person can be happy living in a 800 sq ft apartment, yet once you go house shopping, you buy say, 1500 sq ft. Now, all your expenses go up as well, heat, electricity, etc. Add all the costs of homeownership, and you realize that over time this makes no sense. Few houses come so small and with only one bedroom. I'd recommend investing with a risk level suiting your own risk tolerance. Aug 14, 2015 at 1:30
  • 1
    You don't mention 401(k), does your company offer one, and do they match? Aug 14, 2015 at 12:59

1 Answer 1


E) Spend a small amount of that money on getting advice from a paid financial planner. (Not a broker or someone offering you "free" advice; their recommendations may be biased toward what makes them the most money).

A good financial planner will talk to you about your plans and expectations both short and long term, and about your risk tolerance (would a drop in value panic you even if you know it's likely to recover and average out in the long run, that sort of thing), and about how much time and effort you want to put into actively managing your portfolio.

From those answers, they will generate an initial proposed plan, which will be tested against simulations of the stock market to make sure it holds up. Typically they'll do about 100 passes over the plan to get a sense of its probable risk versus growth-potential versus volatility, and tweak the plan until the normal volatility is within the range you've said you're comfortable with while trying to produce the best return with the least risk.

This may not be a perfect plan for you -- but at the very least it will be an excellent starting point until you decide (if you ever do decide) that you've learned enough about investing that you want to do something different with the money. It's likely to be better advice than you'll get here simply because they can and will take the time to understand your specific needs rather than offering generalities because we're trying to write something that applies to many people, all of whom have different goals and time horizons and financial intestinal fortitude.

As far as a house goes: Making the mistake of thinking of a house as an investment is a large part of the mindset that caused the Great Recession. Property can be an investment (or a business) or it can be something you're living in; never make the mistake of putting it in both categories at once. The time to buy a house is when you want a house, find a house you like in a neighborhood you like, expect not to move out of it for at least five years, can afford to put at least 20% down payment, and can afford the ongoing costs. Owning your home is not more grown-up, or necessarily financially advantageous even with the tax break, or in any other way required until and unless you will enjoy owning your home.

(I bought at age 50ish, because I wanted a place around the corner from some of my best friends, because I wanted better noise isolation from my neighbors, because I wanted a garden, because I wanted to do some things that almost any landlord would object to, and because I'm handy enough that I can do a lot of the routine maintenance myself and enjoy doing it -- buy a house, get a free set of hobbies if you're into that. And part of the reason I could afford this house, and the changes that I've made to it, was that renting had allowed me to put more money into investments. My only regret is that I didn't realise how dumb it was not to max out my 401(k) match until I'd been with the company for a decade ... that's free money I left on the table.)

  • 401(k) miss: D'oh! :-( Otherwise +1.
    – Peter K.
    Aug 14, 2015 at 12:41
  • 5
    To be clear, you want to pay a financial planner for their advice. You do not want a 'free' financial planner. Those people actually make their money on what they sell you, and so tend to have their, not your, best interests at heart. Aug 14, 2015 at 12:43
  • Good point, @chrisinedmonton; edited appropriately.
    – keshlam
    Aug 14, 2015 at 13:52

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