I have $50,000 I'd like to invesst. Looking for broad-brush advice.

Howdy, folks. I'm new to this group, but it seemed like a useful place to ask this question:

As the result of a lawsuit settlement, I've got $50k that I'm interested in investing with an eye towards turning it into a down payment for a house (which, for where I live, would probably be about $100k if I want to have the sort of mortgage that won't completely ruin my life.) I'm not necessarily risk-averse, but I'm not much for high-stakes gambling and I'd be inclined to invest the lion's share in low to moderate risk investments, with a small chunk set aside to fool around with higher risk investments.

I'm not a total newbie when it comes to money - I understand how the stock market, mutual funds, etc. work. To be honest, I'm not even sure what questions are right to ask. Should I avoid the stock market completely? Should I hire a personal financial advisor? Is this cost-effective? Maybe just some general advice from people here would be useful. And appreciated.

In other words, what is your time horizon for achieving the $100,000 for the down payment?

One rule of thumb to keep in mind when considering total return percentages on an investment is known as the "rule of 72".

What that will tell you is how long in years it will take to double a particular sum of money at a given interest or return percentage.

Example: An investment that earns 8% annual total rate of return will take 9 years to double - 72/8 = 9. If you can make 10% it would be (obviously) 7.2 years, etc.

In order for your fifty grand to grow to $100,000 you are going to need to be willing to give it some time. An 8% rate of return is reasonable and easily attainable with a relatively conservative portfolio (50/50 bonds/equities). Expecting and seeking more than that in the current environment is going to expose you to considerably more risk. How would you feel if after the end of the first year, the balance of your account had gone down to $41,000 for instance? Then at the end of year two it was $52,500, Year 3 $49,750, Year 4 $55,000, Year 5 $62,500, Year 6 $59,500, etc, etc? You can see this hypothetical scenario has a generally upward trend but it is by no means a smooth ride. You need to ask yourself how much time you want to give this process and exactly how much risk you are willing to take. One way to nail down exactly how you feel about risk is to take a Risk Tolerance Quiz (That is just one. Google "risk tolerance questionnaire" and try out several. They usually don't take more than a few minutes to complete.)

As far as hiring an Advisor is concerned, it is not a bad idea but if you are willing to give the investments a decent length of time to grow, and you can decide on a particular portfolio model that is appropriate for you, you could probably do it yourself by going directly to any number of fund families and opening and account through them. The problem there is exactly which one to choose from. There are scores of Mutual Fund companies and over 10,000 funds available to the public. Sorting through the wheat and the chaff is a daunting task, even for someone who is in the business. Some people will automatically recommend either Vanguard or Fidelity because they are well known, sell funds that have no sales charge and have very low internal expenses. While both those firms have excellent funds that do rather well, finding a fund mix that is both appropriate for your risk tolerance and will get you where you want to get is not easy. Vanguard and Fidelity can keep their expenses low because they cut costs in other areas, namely customer service. You are unlikely to get to know personally an advisor at either firm who you can talk to whenever you have a question. Both of those two firms don't even offer personalized, fee-based, advisory accounts unless the account balance is well into the 6 figure range.

Fidelity Advisory Services Click on "Retirement & Guidance, Investment Guidance then "Portfolio Advisory Services"
Vanguard Advisory Services Click on each link under "Type of Client" to see their account minimums and fees

It's important and very helpful to look at things like Standard Deviation, Alpha, Beta and R-Squared numbers when choosing funds. It's also important to remember this investing mantra: "Past performance is no guarantee of future results". Keeping that in mind, seeking out the help of a Financial Consultant can be very beneficial if for no other reason than to help with the task of finding the right investment mix.

Keep this in mind also: If you hire an "Advisor" you are going to pay for advice, almost always a percentage of the assets under management, but sometimes a flat, set fee. The percentage is rarely more than 2.5% but is often negotiable and can be much less. An advisory account typically requires the investor to sign an agreement that gives the advisor or firm the ability to use "discretion" when trading on your account which means that they do NOT have to contact you each and every time a trade or change is made. If you use one of the major brokerages, you can have your money invested either under an advisory account or as a brokered account or both. If your account is brokered, you and the broker/Financial Consultant* will come to an understanding of your time horizon, risk tolerance and the objective for the investment. A person acting as a Broker MUST tell you when he/she makes any kind of trade or change in your account and you must agree to it and give authorization to do so. A person that acts as a Broker that does not have discretionary authority yet makes trades without consulting the client is in violation of the regulations and should be reported to FINRA as well as his Branch Manager and/or the firms home office.



I hope you found what I have written to be of some help. Best of luck and may all your trades be net gains!

Edited to add the Fidelity and Vanguard Advisory links

It is much appreciated. It'll take some time to digest all of it. Do you mind if I get back to you with some more questions later? Again, thanks.

I have to say that the statements I made about advisory services, etc. apply to the US markets. I am not at all familiar with how the English brokerage and advisory regulations are set up but it would not surprise me if they were similar. Also, I am not familiar with the procedures needed for someone in England to invest in the United States equity market, although I know the EU certainly has a robust collection of Bourse's. As far as the rest, well - math is math no matter where you are and both Stock and Bond issues are available worldwide. So, if you are in England, ignore the appropriate parts of my reply!

I am very curious if England has embraced the idea of Mutual Funds.

I know that one of the largest Exchange Traded Fund managers is Barclays bank, but I don't know if there are Mutual Funds available over there.

As far as more questions, I'll be happy to answer any that I can.

BTW, I think saying you are from the town of "Chavsville" is hilarious.
If you haven't seen this video, you should find it a bit of a good giggle, unless you are a real Chav, in which case, forget I mentioned it!

And I'm planning to keep it in the US for now. As for chavs... well, I live about half a mile from one of the biggest pikey encampments in east Anglia. It's pretty entertaining, innit.

where I just stuck some money https://www.fnbodirect.com/01d/html/en/ - no the return is not as high but it is federally insured - I put some in an IRA that has a certificate at a fixed rate too for 7 months