Opinion: Where should this technical worker invest $ 40,000? She must first answer this question

Dear Ms. MoneyPeace:

I saved $ 100,000 in cash with the idea of ​​making some changes. I still don’t know what these changes should be.

I gave $ 60,000 to my financial advisor, who manages my 401 (k). Of course, he just wants to increase the total amount of the asset to increase his income by 1.5% management fee.

I would like three ideas on where to put the remaining $ 40,000 that is available if I find a one-year master’s program, a new home, or a lower-paid job for my high-tech job. Something liquid, but complicated interest and earning more than a bank savings account. I’m thinking of the Vanguard Index Fund. I am single, have an apartment and have no children.

I thought of you as an alternative to my current financial advisor, as I want to diversify.

Money on hand Cathy

Send your questions to Ms. MoneyPeace: [email protected]

Dear Cash Cathy:

Congratulations on being a good savior. You mentioned several options for where to invest your money and expressed your feelings to your advisor.

Few advisors manage 401 (k) s unless they are part of the brokerage firm that holds the assets. Plans 401 (k) hire an investment manager to oversee the money and work with plan participants. Your company may have checked out the brokerage firm or advisor, but that doesn’t mean they’re right for you. Do you trust them? Did you interview counselors before hiring them to manage your extra money? Is the trustee a trustee, which means they take care of your best interests?

The 1.5% fee is very high. A typical percentage is that in addition to investment management, it gives you advice on taxes, financial planning, property planning and money management. These fees are worth paying if you receive value from the connection. Otherwise you may pay too much.

You show an understanding of the motivation of the fee. Nowhere do you mention that you are confident in their advice and guidance. I feel a question mark about their ability. The fact that you’re looking for my opinion shows that maybe it’s time to add another professional to your team, someone you trust.

What stands out to me is the wording of your comment: “I gave $ 60,000 to my financial advisor.” Many people say this, sometimes demonstrating a lack of ownership of their money and a lack of understanding of their capabilities. The advisers accept instructions from you. Knowing where your money is invested is now the key to taking the next step with the balance of your savings. Remember that you have asked this investment manager to monitor the money for you; you didn’t give it. Ask more questions, get details and make informed investment decisions. This is your money – and your life. You have to take responsibility for that.

For what you pay this current advisor annually, you can hire an objective, self-paying certified financial planner (CFP) for a few hours to review your investments. They can guide you in the best way to invest or save your current funds.

As for your next step in investing, it depends on how your other $ 60,000 is invested. The tried and tested rule of thumb is that the sooner you use it, the less risky places you want to keep. When your plans are pending, cash, certificates of deposit (CDs), credit unions and banks are safest, despite low but rising interest rates. You can look beyond the local bank, as national discount brokers will help you create an account and then buy CDs, finding the best prices across the country.

The Vanguard index fund has a low price and yet many of them are equity funds. Until you decide what changes you are making, putting that money on the stock market is a bad choice because the market is long term. There are some Vanguard funds, such as the Vanguard Limited-Term Tax-Exempt Fund VMLTX,
+ 0.19%,,
who invest only in bonds.

If you may need the money in three to eight years, then bonds may be a good choice. Series I savings bonds, known as I bonds sold by the federal government, return more than 9%, but purchases are limited to $ 10,000.

The most important thing is to gain clarity about your life choices as you consider your financial capabilities. It is not clear whether you did not specify them because you did not decide or you may want money to make more than one. Consider working with a financial therapist so that your life goals match your financial goals.

Read: Skip these “free” sources of financial advice – they will cost you dearly

When it comes to investing, being happy with your money and your life first will help you make better decisions. At this point, I would refer to the wise man who told me years ago, “When in doubt, do nothing.

CD Moriarty is a certified financial planner, MarketWatch columnist and personal finance spokesperson. She blogs at MoneyPeace.

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