A large sum coming in, need advice: High interest savings, CDs, advice

[iced]

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@SouthJamaica wrote:

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@iced wrote:

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@Anonymous wrote:

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Agree.

Some equity indexes are at or near all time highs.

Others are off all time highs but not so far off.

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Those same equity indexes reach new all time highs every few years. The secret to investing is time. Nobody should invest money they need in 6 months, but if they don't need that money for 6 years investing becomes a no-brainer.

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In 6 years it might be at half the value it has today.

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WIth interest rates lagging inflation for the last 15 years, in 6 years money in savings is guaranteed to be worth less than it is today. I’d take the small risk of big loss over the guaranteed small loss, especially in the long-term where that risk has proven time and again throughout the last two centuries to be approaching 0.

[ChazzieT]

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@SouthJamaica wrote:

In 6 years it might be at half the value it has today.

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It well might, but I guarantee you that it will have been worth far more than that same money in a savings acount, several times between now and then AND will be worth more than the original investment again, after that. The market may go down temporarily, but over the long term, it trends upward.

Any losses on paper, only count if you stupidly sell the stock at that time. If you wait out the down turn, and take profits when returns on your investments are high, then move those profits into something less risky as you near retirement, the stock market is as safe or safer than any where else you can put your money.

Take the covid "crash" for example. All my dollar amounts went down, but I still own the same number of shares because I haven't sold anything since February 10th. Almost every stock I own is now more valuable than it was on February 12th (the day before the first covid sell-off). The couple of REITs that haven't caught up yet, are close (85-90%) and have now paid me dividends twice, which were re-invested at a lower price than I paid for the original shares.

The only people who actually lose money in the market are the people who panic and sell when prices are low.

[Anonymous]

It sounds like I'll get my money next week or the week after. (It always takes longer than expected, I swear!)

I've already set up a savings account (Nationwide Axos) which was 1.5% interest when I signed up, but now is 1% and they've changed the terms. I guess that's how these things go. Up and down, up and down.

I've also got a high interest checking account with a local credit union.

I'll wait until I actually have the money and decide then what to do. Investing a small sum, I think I could do. I just don't have the guts to do anything substantial right now. I would "sit on" the invested amount, like I've read here, instead of panicking and cashing out when things look bad. 

I read some articles on "What to do when you get a large sum of money" and most of them say wait a few months before making any big decisions. I've got my Nationwide Axos account waiting, so I will be patient with myself and wait. I might open a Citibank high interest savings account too (1.2%) but I might hold off on that too. I opened a TAB bank account about 6 month ago (because it had both a high yield savings and checking account) but they were kind of flaky and now I'm scared to use them. I'm tired of opening bank accounts, especially when things change so quickly. (Though I still want to get in with PenFed someday! )

Thanks everyone for your advice! I love this place.

[Anonymous]

I agree for the most part. Investing in an s&p fund or something along those lines is great for LONG term investing as regardless of recessions...etc the s&p stays up over the long term. The key is not pulling out when times get tough (as a lot of people learned from 08) and eating that loss instead of letting it regain. 

based on your post I would actually go against this advice for multiple reasons. It seems you have a lot of short term issues that are currently coming up. I would not bet my housing fund/emergency fund in the s&p especially since no one can predict where the market is going now. Since you are looking at short term uses for the money I would not invest right now given the looming economic issues and the possibility of a second and or third wave of covid coming and crippling the economy. If you goals were stretched out over 10 years that is a different story and the s&p would be a great choice. However, when times are tough like they are not I prefer cash on hand vs investment because you don't know when you can lose a job and need access to funds and I would not want to take a 15-20% haircut if the market drops again like it did at the beginning especially since you will have to pull out your funds at an indefinite interval of time. 

also, with a house purchase and skepticism over a job/further pay cuts I would certainly prefer the peace if mind of knowing my future is safe instead of being bet during a recession but that is my .02. I am big into investing and made good money doing it but I completely liquidated and in savings accounts at the beginning prior to the drop and plan to remain that way until I have some more certainty regarding the economy. 

[Anonymous]

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@Anonymous wrote:

also, with a house purchase and skepticism over a job/further pay cuts I would certainly prefer the peace if mind of knowing my future is safe instead of being bet during a recession but that is my .02. I am big into investing and made good money doing it but I completely liquidated and in savings accounts at the beginning prior to the drop and plan to remain that way until I have some more certainty regarding the economy. 

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Thank you!

Others have suggested investing with a small sum ($1K) and I can do that. There's a certain amount of this money needed for debts, for living expenses during the Plague, and also the house. With that all spoken for, there will still be a substantial amount left over that I want to keep in savings long term, but it needs to be more liquid. $1K-$5K I could risk to investing. Much more than that makes me nervous right now.

I feel so ignorant, for one thing. As some here have suggested, I can learn about how things work with my small investment and work from there. But I don't think I'd ever feel comfortable investing the majority of the amount I intend to hold onto long term. 

What I want to do now is use high interest savings, high interest checking, maybe get some bank sign-up bonuses, and the like. 

Thank you again, everybody!

[Anonymous]

@Anonymous  I would say that is good to get your feet wet! At that price point you'd most likely be looking at a self directed brokerage account so making stock picks yourself. My advice would be a mix of s and p stocks. I won't say investing now is completely out of the question as I believe there is still some profit to be had the uncertainty makes me a little hesitant to invest. 

just for a point of reference I personally invested $10k at the onset and I made a very very "risky" move. Granted I didn't see much risk in the move though I DEFINETLY do not recommend this kind of asset allocation as you should definitely diversify across many different stocks. I bought overstock stock and purchased spirit airlines stock at the onset of the covid and I will say that I split it an even $5k at lows of around $5-7 dollars respectively and just sold off a few weeks ago and made a very good return. Investing in a depressed economy due to a recession is tricky but just think of where you would place value in a time like this and where there is less uncertainty revolving around a specific business type as that takes out quite a bit of the investment risk.