You have some money to invest, and you are not sure where to turn? I get asked all the time, from people that have some money to invest and they don’t know where to turn. If they have several hundred thousand dollars or more, they can command more attention and higher levels of service, but what if someone only has a more modest sum to invest, say $30,000 from the 401(k) left an a previous employer’s plan? Maybe they inherited $70,000, or accumulated $50,000, in addition to a full-funded emergency fund of 6 months of income- where should they turn? Here are some of the options people have today:
- Day trade: buying and selling securities on a daily basis is often an option that appeals to many people, however most people lose a lot of money doing this, even though some books, websites, commercials and seminars tout the millions you can make by doing this.
- Hire an adviser: some professional money managers will help people invest modest sums, typically they will be investment sales people at the bank, insurance company or a professional with less experience- but not always. Most of the products will pay a commission to the adviser. This doesn’t mean that you should be suspect of their recommendations, but it does mean you should be cautious about the products sold. Annuities are common in this situation, are controversial and you should read up on them before investing. Most professional money managers don’t like, I however like some of the features, but think buyers should be careful since most complaints I hear and the industry reports are from annuity sales.
- Become an expert: if you like reading many financial books and taking courses, and are able to comprehend sophisticated information, then take your time and delve into it, but at the end of the day, having someone help you that does it full-time help you may make a lot of sense.
- Index investing: with little experience you can be a passive investor in various stock and bond markets, and buy no or low cost index funds. If you decide to explore this very common route, be sure to take your time to learn about asset allocation, different index options, and a host of other things related to investing. This is definitely not as intense as trying to become an expert, but there is a learning curve.
- Do-it-yourself but with help: Many of the investment firms offer various levels of online and telephonic help. You can do various types of research, self-education, and talk to trained people online, but just like with index investing, I recommend people take time to read a few good books on investing first. Also, it seems as if every other day, new services are offered online. For example FutureAdvisor.com provides some nice online services for the do-it-yourselfer. The options continue to be expanded online as investment and financial technology firms go after the vast underserved low and middle market investors.