For background: I just started investing and saving over the past 1.5 years and am wondering what to do with some money that I currently have in savings. I live in the US and things have been going well with my investments since I started. I know that it is tough to time the market and I'm sure impossible for a novice like me. But I have been reading/hearing a lot about how it has been so long since a correction/recession and based on past trends, one should be coming. So I would like to be somewhat cautious with the money I have to invest.

I am 29, earn around $50,000, no spouse or kids (dont plan on having kids).

- $23,000 Student Loans at 4%

- $6500 Roth IRA (maxed for this year)
- $5000 Personal Investment account
- $6000-$7000 Cryptocurrencies
- $2500 Lending Club
- $1500 Fundrise
- $1500 Individual stocks

I would prefer to keep this money liquid(if that is the correct term) because I have an older car that I may need to replace within the next year, and would like free money to purchase a house in the event of a drop in housing prices or purchase more stocks in the event of a drop in the stock market.

Should I just keep my money in my savings account since I want to keep my money available? Or are there other options I have that are not necessarily long term may provide better returns? Or am I just overthinking this and I should put more in the stock market and not sell in the event of a drop.
Thanks for any advice.

  • "$6000-$7000 Cryptocurrencies" Yikes. You have "savings" of 23k, and 23k of student debt, and of those "savings", 25% is invested in ultra-high risk cryptocurrency investments. On a scale from 1-10, cryptocurrencies are probably at an 8 or 9 risk level. Investments like that should only be taken to the extent that you can comfortably lose them. I'm not even mentioning the other equity investments you mention, which are probably at a similar high risk level. Sep 11 '17 at 19:21
  • Put this into google: "price of btc over time" and consider whether Bitcoin is a stable investment. If you made some money over the past year, great. Even if you didn't, oh well - I recommend you reduce the amount of money you have there as soon as possible. Sep 11 '17 at 19:23

$23,000 Student Loans at 4%

This represents guaranteed loss. Paying this off quickly is a conservative move, while your other investments may easily surpass 4% return, they are not guaranteed.

Should I just keep my money in my savings account since I want to keep my money available? Or are there other options I have that are not necessarily long term may provide better returns?

This all depends on your plans, if you're just trying to keep cash in anticipation of the next big dip, you might strike gold, but you could just as easily miss out on significant market gains while waiting. People have a poor track record of predicting market down-turns.

If you are concerned about how exposed to market risk you are in your current positions, then you may be more comfortable with a larger cash position. Savings/CDs are low-interest, but much lower risk. If you currently have no savings (you titled the section savings, but they all look like retirement/investment accounts), then I would recommend focusing on that first, getting a healthy emergency fund saved up, and budgeting for your car/house purchases.

There's no way to know if you'd be better off investing everything or piling up cash in the short-term. You have to decide how much risk you are comfortable with and act accordingly.

  • I agree with most of this, but OP should also see if they can defer student loan payments (there are many cases where you can). 4% is a pretty good interest rate (even mortgages aren't much lower), and you should avoid paying back low-interest loans unless you absolutely have to. If bank interest rates go up past 4% (it'll take a while, but it could happen), you should pay off the student loan as slowly as possible (w/o incurring penalties).
    – user1731
    Sep 9 '17 at 3:07
  • agree with the original answer. Get rid of debt. There are only 2 sure ways to get rid of student loans: pay them off or die. Empty your non-retirement accounts to pay off the debt. The stock market is near an all-time high. Great time to sell. Same with crypto-currencies. Start fresh with no debt hanging around your neck.
    – rocketman
    Sep 11 '17 at 3:56

An alternative to a savings account is a money market account. Not a bank "Money Market" account which pays effectively the same silly rate as a savings account, but an actual Money Market investment account. You can even write checks against some Money Market investment accounts.

I have several accounts worth about 13,000 each. Originally, my "emergency fund" was in a CD ladder. I started experimenting with two different Money market investment accounts recently. Here's my latest results:

August returns on various accounts worth about $13k: - Discover Bank CD: $13.22 - Discover Bank CD: $13.27 - Discover Bank CD: $13.20 - Discover Savings: $13.18 - Credit Union "Money Market" Savings account: $1.80 - Fidelity Money Market Account (SPAXX): $7.35 - Vanguard Money market Account (VMFXX): $10.86

The actual account values are approximate. The Fidelity Money Market Account holds the least value, and the Credit Union account by far the most.

The result of the experiment is that as the CDs mature, I'll be moving out of Discover Bank into the Vanguard Money Market account.

You can put your money into more traditional equities mutual fund. The danger with them is the stock market may drop big the day before you want to make your withdrawl... and then you don't have the down payment for your house anymore. But a well chosen mutual fund will yield better.

There are 3 ways a mutual fund increase in value:

  • stock appreciation (or depreciation as the case may be)
  • dividends. Stock pay dividends to their shareholders. Mutual funds pass the collected dividends periodically on to their shareholders
  • capital gains. As the fund managers make trades, they have to pass the capital gains tax implications onto the fund holders. They do that through periodic capital gains payments.

Here's how three of my mutual funds did in the past month... adjusted as if the accounts had started off to be worth about $13,000:

  1. VIGAX: $162.15
  2. VASGX: $60.12
  3. VSMGX: $73.33

Those must vary wildly month-to-month.

By the way, if you look up the ticker symbols, VASGX is a Vanguard "Fund of Funds" -- it invests not 100% in the stock market, but 80% in the stock market and 20% in bonds. VSMGX is a 60/40 split. Interesting that VASGX grew less than VSMGX...but that assumes my spreadsheet is correct. Most of my mutual funds pay dividends and capital gains once or twice a year. I don't think any pay in August.

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