
Ask HN: Any good investments for those saving a substantial portion of income? - ctb_mg
Dear HN,<p>I am in my mid-20s and I&#x27;m banking over 50% of my pay each month. This adds up to about $50k in savings at the moment. I&#x27;m maxed up to match on 401k.<p>The poor interest rates in checking and savings just aren&#x27;t cutting it for me.<p>I don&#x27;t want to risk too much, but how can I better invest this money?<p>For me particularly -- my goals are a nice car (60k), retirement, and I&#x27;d like to be prepared to purchase a home (130k in my area), although I am not immediately interested in home ownership yet...
======
mcot2
Open a brokerage account and invest in index funds. That requires the least
amount of effort and is shown to provide solid gains over time.

You may also want to accelerate your home purchase plans. This is also an
excellent way to use spare cash and you will get a nice tax benefit.

60,000 on a car is just like lighting money on fire, but you probably already
knew that. Try to get as close to 0% interest as you can and don't pay it off
with the spare cash. The money is better off earning 5% in the stock market
and paying a 1.9% car loan (if you can get it).

------
bluedevil2k
All the recommendations for low cost mutual funds are good, but I recently
found Motif Investing ([http://motifinvesting.com](http://motifinvesting.com))
- it's a really interesting way of investing in stocks, based on very specific
sectors. For example, "cloud computing" or "beer". These types of investments
would be difficult to do cheaply with any current mutual find or ETF. It's not
something to put _all_ your money into, but it's an alternative and possibly
interesting way to invest (I am not affiliated with them in any way).

I would also offer a recommendation _against_ an expensive car. Take it from
someone who bought a really nice sports car - the novelty wears off relatively
fast, and after that, you're just left paying hefty maintenance fees. Remember
a car is to take you from point A to point B.

~~~
coldpie
> Take it from someone who bought a really nice sports car - the novelty wears
> off relatively fast, and after that, you're just left paying hefty
> maintenance fees. Remember a car is to take you from point A to point B.

Sports cars are for motorsports. Take her to the track! I'm not exaggerating
when I say track days are the most fun I've had in my life.

~~~
japhyr
A nice middle ground might be a motorcycle. I had a 600 sportbike for a few
years, and it was funny riding an $8k machine (at the time) that could
outperform most sports cars on anything other than a straight-line top speed
test.

But you only want a motorcycle if you have good restraint. Sportbikes are so
capable, it is easy to maim or kill yourself if you don't know how to hold
back. They are just really capable bikes in the low rpms, and then they are
high-end racing machines in the high rpms.

I got my motorcycle in my late 20's, after spending a lot of my life riding a
bicycle. I don't think it would have been good for me to have a motorcycle in
my late teens/ early twenties.

~~~
coldpie
I drive cars on the track in excess of 120 MPH, and I would never hop on a
motorcycle to drive around the block. The fatality statistics are horrifying.
Worse, you have to trust not only yourself but everyone else on the road not
to send your unprotected body through a car radiator.

Good luck to you if that's your thing, but the price of failure is just too
high for my tastes.

~~~
GFischer
How about riding the motorbike on the track? Best of both worlds? :)

------
PeterWhittaker
A) Don't take advice from random strangers, especially those living in echo
chambers.

B) Read, read, read, read, read.

C) After B, decide on your own - you are likely as smart or smarter than any
financial adviser, you need to learn what's out there.

D) Some things that work for me: i) Letting my wife manage my portfolio, for
the most part, she is generally more distant in her judgements; ii) stocks
paying decent dividends with a history of doing so, in a DRIP; iii) reading
the news, looking for things that might cause bumps in depressed stocks (made
good money on Yahoo when Mayer took over); iv) doing "iii" with no more than
5-10% of my portfolio.

------
meric
Put a portion in cash. At some point the market will have another downturn.
The 1987 stock market crash occurred 7 years after the 1980's recession. The
mini-bear market in 1994 happened 7 years after the 1987 stock market crash.
The dotcom bust occurred 7 years after the 1994 mini-bear market. The GFC
occurred 7 years after the dotcom bust and it is currently the 6th year since
the GFC.

[https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&...](https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1396270301650&chddm=486013&chls=IntervalBasedLine&q=INDEXSP:.INX&&ei=2mQ5U8j5I9ChkgWuUQ)

Does it look like a good time to put all your money into a S&P500 index fund?

~~~
bluedevil2k
That's the problem, you can never tell when it's a good time to invest or a
bad time. You think people thought it was a good time to invest in March 2009,
when the Dow was at 6500? Many people pulled all their money out, thinking the
drop would continue. Those who bought were happy. There's an equally likely
chance the market will go up 10% in the next year as down 10%. And, there's
_definitely_ no pattern to the market.

~~~
meric
I suppose you're more of a theory type than I am.

For the record, I invested every dollar I had but $100 into the market between
March and May 2009, though it was not much (several thousand) as I was but a
humble student. I also bought TSLA at $28 and SCTY at $12, and I still hold
both of them.

------
elharo
This is easy. You want a low cost index fund. Vanguard has a number of good
ones. The Vanguard Total Stock Market Index Fund is probably the best bet.
0.05% expense ratio for admiral shares, a bit more for investor shares.
They're a few others that only cover the S&P 500, or include some bonds, or
have more international exposure but at your age and savings level it's not
worth agonizing over the differences. Just go with the broadest, lowest cost
stock fund you can find.

------
DanielStraight
If you are new to investing, I highly recommend watching these videos:

[http://www.bogleheads.org/wiki/Video:Bogleheads%C2%AE_invest...](http://www.bogleheads.org/wiki/Video:Bogleheads%C2%AE_investment_philosophy)

They aren't selling anything, its just a series of simple videos explaining
the basics of buying index funds and why you would want to do that.

------
emacdona
Everything you said makes me think you are heading in the right direction
except for the 60k car :-) Spend 30k on a lightly used car if you want "nice".

It sounds like you have three different goals, and they break down neatly
into: 1) short term: car 2) medium term: house 3) long term: retirement

First: If you can afford to (and it sounds like you can), max your 401k. Your
401k is a vehicle that allows you to "borrow" money from the government and
earn interest on it (by being able to postpone taxes). Personally, I invest
100% of my 401k in an S&P 500 index. I have Fidelity, so my fund is Spartan
500 Investor Class (FUSVX). Use whatever S&P 500 index is available to you,
though. If you still have money left, put it into a Roth IRA. Same deal: index
fund. That covers your long term goal.

Now, for the house. I'm not sure what to say here. Most of my personal savings
is _also_ in the Spartan 500. If you've got a sliding window of 5 years to buy
a house, I'd recommend the same. Convert to something more stable (bonds?)
when you've made some money... then hold on to it while you're waiting to buy
a house. However, consider buying one right now with little money down. Prices
are stabilizing and interest rates are still historically low.

Finally, short term. You're young, so you probably won't listen (and honestly,
that's okay -- I'm not picking on you): don't buy a 60k car. Spend 30k on a
used Audi or BMW if that's your thing. Personally, I would recommend spending
23k on a used Honda. You will be amazed (maybe) at what 23k gets you for a
used Honda. Same deal as the house, though. Buy it now, with little money
down. Interest rates are really low.

Good luck. Mid 20's and already talking about saving half of your pay check.
You'll be fine. Just max that 401k. And please don't get a 60k car :-)

~~~
coldpie
Great advice here. Definitely get into an index, or a handful of mutual funds.
Your bank savings account is losing you money. I'm 100% into mutual funds and
honestly I should just switch over to the index you're using, emacdona (I'm
also at Fidelity). Everything I've read suggests indexes do at least as well
as funds, and it's truly "set it and forget it".

About the car: I agree that 60k is ridiculous, but don't get the Honda. Get a
car you like. Or do get the (used) Honda, and also a car you like. I bought a
2007 Z4 Coupe for less than 24k back in 2011. Taking her up to the track is
literally the most fun I've had in my life, and it's emerging into a full
hobby as I'm trying to get into ChumpCar this year. Motorsports is a great
hobby. I wrote a short article about it a year ago:

[http://www.smokingonabike.com/2013/03/27/programmer-
looking-...](http://www.smokingonabike.com/2013/03/27/programmer-looking-for-
a-hobby-try-cars/)

Life is about fun. If you have financial security in the bag, enjoy it while
you've got it.

~~~
emacdona
coldpie, you are absolutely right: if cars are a hobby, get one you will enjoy
driving. And like you alluded to, there are plenty of options well under 60k.

However, if all you're looking for is to get from point A to point B with a
sunroof, heated seats, and low mileage... you can do all that for under 25k in
a Honda that will last you over ten years. If you want a little more zip,
spring for the V6 ;-)

------
edw519
_I 'm maxed up to match on 401k._

Max it beyond match.

At current returns and tax rates, investing pre-tax dollars will probably get
you more bang for your buck that almost anything else.

~~~
seivan
In Sweden these kinds of schemes just pushes up the tax to the future once you
take the money out.

And in Sweden pensioners are the hardest tax - making this a horrible deal.

~~~
rg81
Interesting. Most companies nowadays offer a "Roth" option for 401(k) which
takes contributions with _after tax_ dollars so when you are ready to get your
money back out at 59.5, all of the growth is tax free. You only have to pay
taxes on what your employer matches.

~~~
inyourtenement
For myself (young-ish, high-ish income) I've determined that Roth is a bad
deal.

Conceptually, Traditional and Roth are about equal. Paying taxes now vs paying
them in retirement is a wash, all else being equal. But with a Traditional
401(k), the tax savings are at my highest marginal tax rate. In retirement, I
would not expect to be in the same tax bracket.

~~~
arielweisberg
A Roth is a better deal than post tax investing. It's not either or depending
on income.

The advantage of a Roth is that you control it and it isn't in expensive
employer controlled funds. I say max out your Roth and then max out your 401k.
If your spouse works, max out their Roth IRA as well.

Definitely take advantage of any tax incentives being offered over post tax
investing.

edit I misread. I would take the employer offered 401k with the 17.5k
contribution limit. Get the money out there earning for you.

You can do your own Roth IRA. That is what I am talking about doing separate
from your employer. I would max that out first assuming the funds are better.

I prefer today dollars (401k) over future dollars (Roth) so the 401k is more
attractive to me modulo terrible fund selection. edit

~~~
inyourtenement
Oh, I should have clarified. I was thinking of Roth 401(k) vs Traditional
401(k).

I do have a Roth IRA because there are income limits for the tax deduction
from a Traditional IRA. And as you say, any tax-advantage is worthwhile.

------
tomp
[http://wallstreetplayboys.com/sp-500-surpasses-1700-the-
worl...](http://wallstreetplayboys.com/sp-500-surpasses-1700-the-world-is-not-
ending/)

TL;DR: invest in a low-fee, broad stock-market index (e.g. S&P) every month;
over a long time horizon, it should perform well, even if the market doesn't
go up (example in article: June 2007 until March 2013 - 5% annualized return).

------
cik
There are some things you can do, while you're searching - full disclosure of
course, I do all these things.

First off, get a high interest savings account (or several) from your bank(s).
In Canada, ING Direct does decent things (though there are better). At the
very least, while you're figuring out what to do with your money, have it make
more interest for you.

Secondly, look at preferred shares. They're less volatile than shares in their
parent company, and they pay higher dividends. The obvious drawback being the
rate of return over the long term is significantly lower than the indices
themselves. Banks, at least in Canada are a great example of this, though the
same is true of insurance, and power companies.

All investments bring risk, there's no such thing as a guaranteed return. And
of course, investments in preferred shares are a risk, like any other stock.
That being the case, they're a risk I can accept.

~~~
aestra
>First off, get a high interest savings account (or several) from your bank(s)

Online savings accounts give a higher interest rate than any B&M bank out
there, not that the interest rates are actually high. Compare here:
[http://www.nerdwallet.com/rates](http://www.nerdwallet.com/rates)

------
fsk
Rule #1 - an emergency fund of 6-12 months living expenses, in checking or
money market. (Putting more than this in cash is a bad idea, because the
interest you earn doesn't keep pace with inflation.)

Long-term savings should be in stocks (or gold or silver).

Lazy allocation #1: 100% in S&P 500 index fund.

Lazy allocation #2: 50% in S&P 500 index fund, 50% in gold/silver ETFs (like
GLD, SLV, PHYS, PSLV).

Advanced #1: Pick individual stocks in addition to index funds.

Advanced #2: In addition to gold and silver ETFs, also take physical delivery.
(a hedge against the possibility the the PM ETFs will default, see MF Global)

Note: The stock market is a risk, but over a 5+ year time period it should do
better than 0% in a checking account.

------
refurb
Do some reading: Intelligent Asset Allocator by William Bernstein[1]

The book is actually a quick read even if you're not a math whiz (which I'll
assume you are). It goes through a review of how to allocate your money across
a number of investments and explain _why_ it makes sense not only from a
theoretical perspective but also based on historical returns in the stock
market.

You can also pick up other books by William Bernstein that cover the same
thing in different degrees of detail.

[1] [http://www.amazon.com/The-Intelligent-Asset-Allocator-
Portfo...](http://www.amazon.com/The-Intelligent-Asset-Allocator-
Portfolio/dp/0071362363)

------
hughes
The Couch Potato Investment Strategy[0] is a great place to start. It focuses
on total-market strategies that are extremely low in cost and dead simple to
set up. You will most likely beat any actively managed mutual fund[1].

[0] [http://www.moneysense.ca/invest/couch-potato-portfolio-
frequ...](http://www.moneysense.ca/invest/couch-potato-portfolio-frequently-
asked-questions)

[1] [http://www.businessinsider.com/sp-indices-versus-active-
fund...](http://www.businessinsider.com/sp-indices-versus-active-funds-
spiva-2014-3)

------
jesusmichael
If you go to a financial advisor... he's going to talk asset allocation and
diversity.

I was in the same situation as you. I got some good advice and purchased real
estate. I bought a home for myself and and a rental, got another rental 2
years later and 4 more over the next 10 years. 20 years later and I have $2M
in equity in property that has never been underwater and a nice annual income
stream(60K+) that I don't do much for.

Real estate has its ups and downs but its not as volatile as the stock market
and is an asset that can not only generate capital gains but also income.

.02

------
Tycho
Something like this maybe? Peer-to-peer lending (with risk-pooling) that cuts
out the spread taken by banks

[http://en.wikipedia.org/wiki/Zopa](http://en.wikipedia.org/wiki/Zopa)

~~~
bluedevil2k
I tried Prosper a few years ago, put in a few thousand dollars, spread it over
50 loans, and saw about a 4.5% return when factoring in IRR. I think I've read
the returns from others are about the same.

------
vishnugupta
While I will not be able to advice you about the choice of investment owing to
my nationality, I highly recommend reading following books. Cover-to-cover if
you can.

1\. The Intelligent Investor by Benjamin Graham. 2\. Irrational Exuberance by
Robert J. Shiller. 3\. Thinking, Fast and Slow by Daniel Kahneman.

OK, here's advice anyway :). Please, please do diversify your investments
across different classes of products ; Equity, Debt, assets such as Gold or
land and so on.

The proportion may vary according to your risk appetite, but do diversify.

------
akg_67
1\. Invest in Yourself.

2\. Value experiences over things.

3\. Avoid borrowing money as much as possible. Avoid debt.

4\. Keep an emergency fund.

5\. Invest in low cost Index mutual funds/ETF.

6\. Read following books: 6a. Your Money or Your Life: 9 Steps to Transforming
Your Relationship with Money and Achieving Financial Independence. 6b. The
Millionaire Next Door: The Surprising Secrets of America's Wealthy 6c. A
Random Walk Down Wall Street: The Time-Tested Strategy for Successful
Investing

------
ktavera
AA+ rated municipal bonds can have great rates of return, low risk and usually
the capital gains are tax-exempt. You can purchase bonds through online
brokers (I use TD Ameritrade). There of course are other bonds; corporate,
treasury and CD's you can set up in bond ladders to generate income and
reinvest after maturity into another bond but those are generally subject to
standard tax rates.

~~~
bluedevil2k
I would caution against bonds, especially US Mutual bonds, right now. It's a
common belief (which of course, could be wrong), that interest rates have to
rise in the next few years, which would greatly decrease the price of these
bonds, resulting in losses. Also, many munis (and therefore their bonds) have
outstanding debts through pensions or overspending that makes repayment dicey
at best. Even the AA+ rated ones - don't forget, S&P rated all the mortgage
bonds at AA+ as well, and look how those turned out.

~~~
refurb
You are correct that bond values will fall if interest rates rise, but bond
prices are inversely correlated with stock prices, so they are a great way to
diversify risk and maximize return.

~~~
bluedevil2k
Not true at all! Over the past 85 years, the correlation between stocks and
bonds has ranged from -93% to +85%, with an average of 10% and a standard
deviation of 40%! That indicates they are only very slightly correlated, and
not enough to create a general rule.

[http://media.pimco.com/Documents/PIMCO_Quantitative_Research...](http://media.pimco.com/Documents/PIMCO_Quantitative_Research_Stock_Bond_Correlation_Oct2013.pdf)

~~~
refurb
Thanks for sharing that.

However, that paper only looked at the correlation between the S&P500 and
_long-term treasuries_. A well diversified portfolio should have a mix of
bonds including commercial bonds.

The disclaimer in the paper points this out: _Bonds are represented by long
treasuries (Ibbston) which should not be interpreted as a full sample
representative of the bond market. Different asset class proxies will have
different results._

The data that I've seen on stock-bond correlation shows a pretty consistent
negative correlation over the 1927-2010 time period. It's not perfect, I
admit, but it serves you well when you're trying to minimize risk.

~~~
bluedevil2k
I've also heard the saying "in a panic, all correlations move to 1".
Basically, when the market goes down like in 2008, everything goes down.

------
chiph
Look into an Health Savings Account (HSA). Unlike a Flexible Savings Account,
what you deposit can stay in there past a year and lets compound interest work
for you. When you reach retirement age, you'll have a nice fund to pay for
medical expenses that medicare won't pay for.

Caveat: Only suitable if you don't have any ongoing expensive medical costs
(diabetes, children, etc).

------
aymeric
Has anyone tried [http://wealthfront.com](http://wealthfront.com) or heard
anything about it?

~~~
smartician
I read this article and the comments, and was appalled that the Executive
Chairman of a wealth management company doesn't seem to know the difference
between marginal and effective tax rate:

[https://blog.wealthfront.com/college-vs-retirement-
savings-s...](https://blog.wealthfront.com/college-vs-retirement-savings-
silicon-valley/)

I'd stay away.

~~~
refurb
Wow! I had seen that article a while back, but never read then comments. The
marginal vs. effective tax rate thing is something he should know.

Also, he seems to like to extrapolate trends that include the cost of tuition
being $500K in 20 years. Sure if you straight line the recent growth, but is
that really likely?

------
rhgraysonii
Medium to high risk vanguard funds have done very well for me and since they
are index based it is much lower risk than just day trading.
[http://www.mrmoneymustache.com/2011/05/18/how-to-make-
money-...](http://www.mrmoneymustache.com/2011/05/18/how-to-make-money-in-the-
stock-market/)

~~~
seivan
Do you pay a fee for them?

~~~
hibikir
Vanguard fees are about as low as they get in the business. They are not one
of those companies that sell an easy, computer managed fund, and then charge
you 4 times the market rate in fees for it.

The sleaziest I have seen was 401k providers that actually offer funds that
have very low fees, and then it's the provider itself that tacks on their own
management fees that are many times the size of those of the index fund.
Yikes.

~~~
aestra
There is an interview with the founder of Vanguard in this video:

[http://www.pbs.org/wgbh/pages/frontline/retirement-
gamble/](http://www.pbs.org/wgbh/pages/frontline/retirement-gamble/)

The video is all about investing in your 401(k). Highly recommend watching.

------
bavcyc
Read Graham's Intelligent Investor, there are also books which provide
examples or slight alternatives to Graham's approach. Also sites similar to
Mr. Money Mustache may provide guidance that is helpful to you (or not).

Regarding the home purchase, consider loaning yourself the money from the 401k
rather than paying someone else interest.

------
fluffyllemon
I would suggest checking out index funds from Vanguard (or Fidelity or
Schwab).

Also, you may want to post this to:
[http://www.reddit.com/r/personalfinance/](http://www.reddit.com/r/personalfinance/)

They're a very reasonable and helpful community.

------
mhb
Permanent Portfolio forum:

[http://gyroscopicinvesting.com/forum/permanent-portfolio-
dis...](http://gyroscopicinvesting.com/forum/permanent-portfolio-discussion/)

------
bybjorn
> although I am not immediately interested in home ownership yet...

You should be, as this is one of the best investments you can make. At least
in my part of the world :-)

~~~
EliRivers
Which part of the world are you in? If I had to design a truly terrible
investment, I'd end up with something that looked an awful lot like housing.

~~~
bluedevil2k
In the US I wouldn't call a home a terrible investment. It's not a great one
either. The pluses are - tax privileges and the old mantra "you have to live
somewhere", but the minuses are property taxes, lack of liquidity, and
transaction costs. The problem when evaluating a house as an investment is
that there are hundreds of markets, so no rule is good. Washington DC or San
Francisco is a far different market than Austin or Dayton, OH.

~~~
EliRivers
I would. It's illiquid, not fungible, prone to bubbles, deteriorates all by
itself, costs money just to own, laughable transaction costs, massively
impractical to sell or buy in convenient units, generates no income (unless
you rent it out, but most people don't - they live in it); just an awful
investment. I literally struggle to think of another mainstream investment
that is this bad.

------
leftcoaster
Take this question to the bogleheads forum.

------
ct
Look into selling covered calls or vertical spreads for part of your portfolio
as recurring monthly revenue.

~~~
mrfusion
I'd be interested in learning more. Can you explain it, or point us to some
reading material?

------
bushido
First things first: we don't have enough information to make suggestions as
investing is a lot more about risk management than returns. There have been a
few suggestions that could be great in other circumstances, but without
knowing the OPs risk thresholds are most likely ill-advised.

1\. the OP states that "I don't want to risk too much"

2\. risk is a very subjective/relative concept - the only thing the OP has
stated that risk can be related to is "checking and savings just aren't
cutting it"

3\. based on that alone the safest assumption is that the OP's risk capacity
is relative to dismal returns from savings and checking returns - that barely
keeps up with inflation

\---------------

To OP:

1\. Nothing wrong with a lower risk capacity - maybe you need to work your way
to managing higher risk

2\. For short term goals (< 3yrs)- choose very safe investments as you cannot
afford fluctuations

3\. For long term goals and retirement - taxation is just as or more important
than returns - interest income, capital gains and qualified dividends are
taxed differently. With that in mind, looks like most if not all your current
savings and investments are 100% taxable.

4\. There are a number of ways to deal with taxation, best to find a good
investment adviser who has a good understanding of risk management, taxation
etc.

5\. If you want to self manage - and don't know your tolerance - look into
doing a funnel - i.e. keep 10% in highly liquid investments (Cash, Money
Market etc), 20% in government/high quality corporate bonds(short-medium
term), 70% in investments with additional risk (ex: 30% in managed high yield
bonds, 40% in equity index funds -- if you're risk tolerance changes you could
increase your equity). [change ratios to match your needs, risk etc. note: try
and maintain at least 3 levels]

6\. Research re-balancing strategies.

7\. Read some books:

a. The richest man in Babylon(fiction) - read first, no particular order after
this

b. The Ivy Portfolio

c. The intelligent asset allocator

d. The permanent portfolio

e. The Investor's Manifesto: Preparing for Prosperity, Armageddon, and
Everything in Between

f. Value Averaging

------
wes-exp
[https://www.futureadvisor.com](https://www.futureadvisor.com)

------
seivan
Cheap/Free Index Funds

------
jafaku
I'm a little surprised no one suggested Bitcoin.

~~~
gebe
He asked for (relatively) low risk alternatives though.

~~~
jafaku
Invest little money then. That could still become a significant retirement
fund for him after a few years.

That said, I think Bitcoin is low risk if you secure your coins properly. I
don't think there is much risk of the price going down to zero.

------
stygiansonic
Firstly, I'd recommend this book:
[http://www.bogleheads.org/wiki/Bogleheads'_Guide_To_Investin...](http://www.bogleheads.org/wiki/Bogleheads'_Guide_To_Investing)

It's easy to grasp and straightforward. Some basic ideas from the book:

1) What is your timeline? You seem to have multiple goals/timelines (car,
retirement, home) and you need to define each clearly so that you can save for
them in the proper manner. Needing money in 5-10 years for a house going to
present a different goal than needing it in 30+ years for retirement.
Generally, the shorter the time-frame, the less-risky the investment. If you
need it in <=5 years, I would stay away from equity, but that is me. Once you
know your goals and timeline you can figure out what kind of expected return
you want to target.

2) Risk tolerance: You touched on this, but again, you need to clearly define
what you mean by "I don't want to risk too much". How affected would you be if
your investments were down 30% in one year? Would you hold or panic and sell
to avoid further losses? Answering this question is a lot easier to do when
you haven't lived through a huge market drop. (People tend to overestimate
their tolerance for risk)

3) What is your financial situation? I assume no debt if you're saving 50% of
your pay each month, but if you do have any debt, you're probably better
paying that off before choosing to invest. Talking a financial planner (who
isn't trying to sell you product/services from his/her institution) is a good
way to figure out a plan in this respect. I would also ensure you have a
decent emergency fund - depending on your situation, 6 months is usually
enough.

4) Other assets: If you have a decent 401k match (as you indicated) this gives
you a little more flexibility since you already are saving decently for
retirement.

5) Taxes: This matters a lot and tax rates for different investments can vary
quite a bit. I'm not familiar with US tax code so again, this is something you
should talk to a financial planner or accountant to understand.

Having said all of that, I'm personally pursuing a passive, asset-allocation
plan. I'm mostly invested in Vanguard Index ETFs with a percentage allocation
of bonds, US equity, Canadian Equity (I live in Canada) and International
Equity that I feel is comfortable for me. I chose this mainly because of the
low-cost/low-MER (Vanguard ETFs have even lower MER in the US) and went
passive because I don't like to have constantly make adjustments to my
portfolio.

Most of my assets are invested for long-term capital growth, but I have
separate accounts for an emergency fund and saving for a real estate purchase
where preservation of principal is my concern. (high interest savings account)

~~~
refurb
The Boglehead wiki has some great references on these topics:
[http://www.bogleheads.org/wiki/Main_Page](http://www.bogleheads.org/wiki/Main_Page)

