Investing Monies

Quid

So I'm coming back from Iraq with immediate access to about 3 grand and another 3k a few months after. I'm trying to figure out the best way to invest this, but I honestly can't think of what it is I want to use it for. I won't be settling anywhere for quite a few years still, don't need a vehicle, and the only thing I can think of is to have it at least doubled in the next five years or so. Or is that an unrealistic expectation? I've tried looking at stuff like fidelity.com but get confused by it fairly easily. Should I just wait til I get back to the states and talk to a financial advisor?

Go.

Thanatos

You're not going to double it in five years without risking losing it. Just isn't going to happen. You'd need a 15% interest rate on that, which you're not going to see in any well-diversified fund over a five-year period. Hell, you're not even going to see that over a twenty-year period in most well-diversified investments (the 15% interest rate, not doubling it), unless the market goes nuts.

Do you just want extra money in five years? What do you want to do with this money, eventually?

Quid

I honestly can't say. I may just pour it all into my retirement and let that keep growing and if I need cash in the future take out a loan against that. I can't think of anything that I actually need a substantial amount of money for right now.

Mr_Rose

I hear good things about social lending (Zopa.com and friends), but even there you wont get more than about seven percent.
There were some internet bank accounts with silly interest rates back when internet banking was new and scary, but those have mostly dried up.
Traditionally, Government Bonds have been one of the best combinations of ROI and security as you are basically betting against there being a civil war within the period of the bond. The only caveat is that they are fixed term and nearly impossible to get out of once you put the money in.
Basically the only way to get 15%+ out of an investment is to find a good broker and trade yourself, but that takes patience, skill and either nerves of steel or really good research to pull off. I would never recommend it to anyone. Mostly it just makes me wish I had bought oil back when it was dirt cheap before 9/11...

Thanatos

Mr_Rose wrote: »

I hear good things about social lending (Zopa.com and friends), but even there you wont get more than about seven percent.
There were some internet bank accounts with silly interest rates back when internet banking was new and scary, but those have mostly dried up.
Traditionally, Government Bonds have been one of the best combinations of ROI and security as you are basically betting against there being a civil war within the period of the bond. The only caveat is that they are fixed term and nearly impossible to get out of once you put the money in.
Basically the only way to get 15%+ out of an investment is to find a good broker and trade yourself, but that takes patience, skill and either nerves of steel or really good research to pull off. I would never recommend it to anyone. Mostly it just makes me wish I had bought oil back when it was dirt cheap before 9/11...

If you're doing anything other than investing in stocks for a living, 15% is not at all realistic. Even if you are investing in stocks for a living, 15% is probably going to be a really damn good year.

This is going to sound a little weird, but right now, I think I'd put the money in a 1-year CD were I you, Quid. That's a 5.1% return on ING right now (with $3000, that's $150, though it's free money). Right now, we have what's called an "inverted yield curve," where short-term interest rates are actually higher than long-term rates (for CDs, anything over a year at ING, for instance, is only 4.75%, which is only .25% higher than their savings accounts are offering). You take on some interest-rate risk by doing so (if rates drop below 4.75% after a year, you lose out on that), but it gives you a decent return, and you can look at other investments later, if you want.

Depending on how much risk you want to take on, you may want to look at something like an index fund, or mutual fund. If you don't mind taking on some risk, an index fund could get you a better rate of return than just a savings account or CD, but risks losing money if the stock market doesn't do well.

My final recommendation, since this seems like spare money, is to stick it in a Roth IRA, and invest it in an aggressive-yield, small-capital fund. Over a 20-year period, that sort of investment has outperformed every other well-diversified investment since the establishment of the stock market. You wouldn't have access to that money until you turned 65 (unless you withdraw it under certain conditions, like buying a house), but all of the interest you get on it would be tax-free (which is huge), and investing now versus investing five years from now, for someone your age, means around $40,000 more for every $1,000 invested. So, if you put it in there now, you're talking about an expected extra $120,000 versus investing it 7 years from now. In addition, if your income goes up later, you may not qualify to be able to invest in a Roth IRA anymore, which is pretty much the best retirement fund in existance.

Newton

Put it in a Roth IRA. If you can put that first $3000 in before April, you can have it count as your 2006 contribution. Then when you get the second $3000, you can put it in there as well as a contribution in 2007. In my opinion, this is the best thing you can do with that money.

I'm guessing that you are pretty young, around maybe 22. If you put in $3K/year into a Roth IRA until you are 65, then assuming an average 8% rate of return, you will have about $1,150,000 when you retire. If you wait just 3 more years to start contributing the same amount, you will only have about $900,000. If you don't have anything else that you absolutely need that money for right now, go with the IRA. The sooner you start one, the better.

This is where I got my numbers from. You should check it out for yourself. Roth IRA Calculator

Quid

It seems that I should go with the plan of dumping it all into my retirement then.

Though at the moment 3k every year isn't going to be likely unless I make regular trips to Hell.