Best way to put cash to use?

Anonymous · ‎03-19-2018

I am sitting on a hefty sum of cash between my annual bonus and some company issued stock I sold. I don’t know how to invest in the stock market, and I don’t want to waste the opportunity to have this cash earn me a return. Any advice?

Anonymous · ‎03-19-2018

1) Build up a $1000 emergency fund

2) If your extra cash exceeds the $1000, list your non-mortgage debts out from smallest to largest. This includes car loans, credit cards, etc). Using the snowball approach use any cash in excess of the $1000 on the smallest debt while paying minimums on the rest. Once you clear one, move on to the next until they are all gone.

3) Up your emergency fund to a full 6 months of expenses

4) If you have any bonus money left after the above, increase your 401K contributions to 15% and use the extra cash to purchase Roth IRAs.

Anonymous · ‎03-19-2018

Thanks for the reply, none of those suggestions apply, for various reasons:
1. Already have emergency fund in a separate account
2. My cc debt is all at 0% for 12 mo, will pay off prior to expiration. Car note at 1.95, but really prefer to keep these funds as liquid as possible in case we can qualify for mortgage as this would be down payment.
3. Above liquid state covers this point unless we use for mortgage down payment.
4. I’m HCE and contribute max of 8% to 401K so won’t qualify for Roth. Also contribute 7% to Exec deferred program.

Any other suggestions with the thought of keeping funds liquid? I thinking of picking up the Chase savings/checking SUB of $500 with $15K, but think I may need to wait until CR’s are clear of BK by June? Will still have plenty leftover to do something else with even if I do Chase SUB.

Thanks!

Anonymous · ‎03-19-2018

Sure, if you want to keep it relatively liquid, I would do an S&P 500 index fund. Low turnover, low fees, will mirror the broader market.

DaveInAZ · ‎03-19-2018

@Anonymouswrote:

Any other suggestions with the thought of keeping funds liquid? I thinking of picking up the Chase savings/checking SUB of $500 with $15K, but think I may need to wait until CR’s are clear of BK by June? Will still have plenty leftover to do something else with even if I do Chase SUB.

Thanks!

You can do the Chase savings/checking SUB of $500 with $15K with the BK still on your CR, just be sure to decline overdraft protection on checking as that's a credit product and authorizes theme to pull your credit report. Without OD protection all they pull is EWS to check for any banking problems.

I included a couple Chase cards in my 2010 BK7 and opened a Chase checking account in January, my first direct deposit hit in Feb., and I got the $300 SUB a few days later.

There's also a SUB for Discover Bank Savings, if you've never had a Disco savings account before - $150 SUB for $15k, $200 SUB for $25k. Code: HMB318

Open the account by 4/2/18 and fund the needed balance by 4/16/18.

Anonymous · ‎03-19-2018

Thanks! Just opened the Chase $500 SUB. Need to check into the Disco SUB.

DaveInAZ · ‎03-19-2018

@Anonymouswrote:
Thanks! Just opened the Chase $500 SUB. Need to check into the Disco SUB.

It's a site similar to Doctor of Credit, google hustlermoneyblog

That's what the HMB stands for in the code.

When you have some extra cash those bank SUBs pay alot better than interest rates.

iced · ‎03-19-2018

@Anonymouswrote:
I am sitting on a hefty sum of cash between my annual bonus and some company issued stock I sold. I don’t know how to invest in the stock market, and I don’t want to waste the opportunity to have this cash earn me a return. Any advice?

When in doubt, invest it the same way you do your retirement accounts. If you have a portfolio you are happy with in your 401k, do the same with your extra cash. If your retirement/ESPP is handled by a company like Fidelity or Merrill, you can likely open (or already have) an individual brokerage where you can buy stock from with the cash. Just be mindful of diversification - don't have 90% of your total nest egg in the same ETF (or even sector of the market, such as tech stocks).

This gives you time to research some individual companies you may like to invest in.

Nobody should be telling you specifically which stocks to buy except for you.

iced · ‎03-19-2018

@DaveInAZwrote:
@Anonymouswrote:
Thanks! Just opened the Chase $500 SUB. Need to check into the Disco SUB.
It's a site similar to Doctor of Credit, google hustlermoneyblog
That's what the HMB stands for in the code.

When you have some extra cash those bank SUBs pay alot better than interest rates.

Better than interest rates, yes. Better than dividends and growth in equities, no. Nobody ever got rich off of chasing SUBs. Aside from those bonuses, the accounts the cash sit in earn basically nothing.

Someone with a hefty sum of cash available to invest (which I take to mean over $50,000) will get more return in the long run by dropping it in equities or similar investments over moving it around from account to account chasing SUBs. The only time when someone shouldn't do this is if they are very averse to risk or need the cash in a short period of time, though in the both cases it wasn't really available for investing to begin with.

If someone wants to keep a small amount ($10,000 or thereabouts) of cash sitting around to play the SUB game, that's fine.

Anonymous · ‎03-19-2018

Hello Jlgab345. If I am understanding you right, it is important to keep the cash liquid since you may want it for a mortgage downpayment if the next 6-12 months. If that is the case, you may also be risk averse (with respect to this cash) -- you don't want to invest it and have it lose a quarter of its value in the next few months.

Can you confirm?

If so, chasing bank bonuses seems like a reasonable thing to do with it (while keeping unused portions in savings accounts that get you 5%). I would certainly not buy stocks with it (if I understood your constraints properly).

While you do that I would spend time learning about how investments work (you mention having little knowledge of this). There are some basic books any number of us could suggest.