Where to invest extra 50K

36 Replies

Hi,

I have 50K extra to invest, and I have already diversified my other investments to many different areas using: Vanguard 3-fund index fund portfolio ( vtsax, vtiax, vwitx (60/30/10) ), M1Finance 3-fund ETF portfolio ( vti, vxus, vteb (60/30/10), individual company stocks and ESPP (around 80K), Treasury notes (6-month and 1-year, total of 40K), I-bonds (10K limit for this year), some CDs (1-year 2% at ally and synchrony), and some in savings account in synchrony.

How can i invest the extra 50K? I can put it into savings account, but return is low. Treasury notes return slightly higher, but not so much. Tax-exempt muni bonds could be, but returns are dropping due to interest rate hikes. Stock market is risky right now, thanks to current politics. Any suggestions here about what i can do with extra 50K? How about real estate funding via Fundrise or Peerstreet? Real estate investment in another state via house flipping or renting? (I'm in bay area, age 33 if it matters.). Haven't put anything in Roth IRA, maybe that? Any other options / suggestions?

Originally posted by @Cagri Ozcaglar :

Hi,

I have 50K extra to invest, and I have already diversified my other investments to many different areas using: Vanguard 3-fund index fund portfolio ( vtsax, vtiax, vwitx (60/30/10) ), M1Finance 3-fund ETF portfolio ( vti, vxus, vteb (60/30/10), individual company stocks and ESPP (around 80K), Treasury notes (6-month and 1-year, total of 40K), I-bonds (10K limit for this year), some CDs (1-year 2% at ally and synchrony), and some in savings account in synchrony.

How can i invest the extra 50K? I can put it into savings account, but return is low. Treasury notes return slightly higher, but not so much. Tax-exempt muni bonds could be, but returns are dropping due to interest rate hikes. Stock market is risky right now, thanks to current politics. Any suggestions here about what i can do with extra 50K? How about real estate funding via Fundrise or Peerstreet? Real estate investment in another state via house flipping or renting? (I'm in bay area, age 33 if it matters.). Haven't put anything in Roth IRA, maybe that? Any other options / suggestions?

 That's enough to buy a property Subject To, sell it to a tenant buyer getting $25k down from him and cash flowing the property, at least in the Phoenix market. ;-)

Could you define:
- ballpark expectations on return
- time horizon, how liquid you need it to be
- how passive? Personally if you use online platform, it’s the most passive but you learn the least

Originally posted by @Mike M. :
Originally posted by @Cagri Ozcaglar:

Hi,

I have 50K extra to invest, and I have already diversified my other investments to many different areas using: Vanguard 3-fund index fund portfolio ( vtsax, vtiax, vwitx (60/30/10) ), M1Finance 3-fund ETF portfolio ( vti, vxus, vteb (60/30/10), individual company stocks and ESPP (around 80K), Treasury notes (6-month and 1-year, total of 40K), I-bonds (10K limit for this year), some CDs (1-year 2% at ally and synchrony), and some in savings account in synchrony.

How can i invest the extra 50K? I can put it into savings account, but return is low. Treasury notes return slightly higher, but not so much. Tax-exempt muni bonds could be, but returns are dropping due to interest rate hikes. Stock market is risky right now, thanks to current politics. Any suggestions here about what i can do with extra 50K? How about real estate funding via Fundrise or Peerstreet? Real estate investment in another state via house flipping or renting? (I'm in bay area, age 33 if it matters.). Haven't put anything in Roth IRA, maybe that? Any other options / suggestions?

 That's enough to buy a property Subject To, sell it to a tenant buyer getting $25k down from him and cash flowing the property, at least in the Phoenix market. ;-)

 I know, and I agree, and I though about it for other locations, but the difficulty and time requirement of distant real estate ownership is not something I can take on right now.

Originally posted by @Chatree C. :

Could you define:
- ballpark expectations on return
- time horizon, how liquid you need it to be
- how passive? Personally if you use online platform, it’s the most passive but you learn the least

- I'm looking for the highest return obviously, but particularly anything better than returns of CDs, savings accounts, treasury bills.

- Time horizon: Not short term really, I would say 5-10 years at least. I don't need it liquid, unless of course there is a market crash coming, in which case I could use some of this money to buy discounted stocks.

- If I go that way and use passive real estate investing via online platforms, which I never tried, I'm wondering if the returns are really at least 7-8% on average, as I read about it. I'm ok with not learning too much for now, I'm a real novice in real estate investing and I'm still trying to learn from Brendan's webinars. So, I'm ok with being passive investor of real estate for now.

You could meet all of those requirements by just buying a performing note. 

Originally posted by @Dan Deppen :

You could meet all of those requirements by just buying a performing note. 

Thank you. Apparently, I'm new to this term, as well as real estate investing? Where can I buy a performing note? Or were you referring to the notes purchased in online platforms such as PeerStreet or FundRise.

Just curious - how does this money qualify as 'extra'? Why didn't it just go into the mutual funds with the other money? 

I'm not suggesting it should be in the mutual funds, just trying to understand the thought process that went on when you were investing, stopped with $50K left and said "that money that's left is extra". Understanding that might help determine what to do with the money.

@Cagri Ozcaglar

I am a big fan of the Roth IRA. I would recommend you talk about it with your CPA about a Roth to see if you are eligible. If you have not already made your 2017 IRA contribution, you would be able to make a 2017 and a 2018 contribution which would be a total of $11,000.

Have you heard of a self-directed IRA (or Roth IRA) these accounts follow all the rules of normal IRA's and Roth IRA's, but they allow you to invest in alternative assets such as real estate, notes, mortgages, private placements and even precious metals.

I see you may interested in notes, let me recommend you speak with  @Dave Van Horn or PPR Note Co.

You can buy a performing note and get an 8-10% yield with minimal hassle.

@Cagri Ozcaglar have you considered cash value insurance? I would not consider this an "investment" however in comparison to some other "safer" accounts this could be a strong alternative. Insurance contracts offer additional asset protection, higher yields than most savings accounts/CDs, and there's usually liquidity (tax free).    

is it just me or is every conventional investment "yield starved". Stocks very close to overvalued if not already, bonds stink in a rising interest rate environment, real estate is risky now(home prices bounced well above the trend line)and way below normal on yield.R.e. notes may be the only thing to consider unless you are brave enough for bitcoin 

Originally posted by @Dan Deppen :

You could meet all of those requirements by just buying a performing note. 

@Dan Deppen : Curious to know, how much return should I expect from performing notes? It looks like it is hard to find information about them online.

Originally posted by @Paul Allen :

Just curious - how does this money qualify as 'extra'? Why didn't it just go into the mutual funds with the other money? 

I'm not suggesting it should be in the mutual funds, just trying to understand the thought process that went on when you were investing, stopped with $50K left and said "that money that's left is extra". Understanding that might help determine what to do with the money.

@Paul Allen: This is the sum of some bonus payment, plus my money in Wealthfront account which I exited, and some Vanguard muni-bonds I cashed out due to fed rate hikes resulting in negative returns in bonds. Some of this money was in mutual funds, but now some part of it is in safer investments such as Treasury bills. I still continue to DCA into my index funds, but this 50K stays as extra money that I can invest somewhere else.

Originally posted by @Carl Fischer :

@Cagri Ozcaglar

I am a big fan of the Roth IRA. I would recommend you talk about it with your CPA about a Roth to see if you are eligible. If you have not already made your 2017 IRA contribution, you would be able to make a 2017 and a 2018 contribution which would be a total of $11,000.

Have you heard of a self-directed IRA (or Roth IRA) these accounts follow all the rules of normal IRA's and Roth IRA's, but they allow you to invest in alternative assets such as real estate, notes, mortgages, private placements and even precious metals.

I see you may interested in notes, let me recommend you speak with  @Dave Van Horn or PPR Note Co.

@Carl Fischer: Thank you for your suggestions. IRA is something in my radar, which I never invested before, and I'm still debating investing in this time. I don't have a CPA, but I know what to do, I can simply add money to my Roth IRA. Thank you very much for your note on 2017 contribution to IRA still being possible, this is a golden suggestion. My company allows Mega Backdoor Roth IRA, so I can actually invest up to 27K per year in IRA Roth. I will of course use only some of this 50K for IRA, if I end up doing so.

Yes, I heard about Roth IRA, I heard about them being used for mortgage payments.

Thank you for your pointers on performing notes, I will contact @Dave Van Horn and PPR Note Co. I'm still trying to understand the performances of performing notes in terms of return rate, and their risk scores. Once I learn more, I will contact them.

Originally posted by @Bob E. :

You can buy a performing note and get an 8-10% yield with minimal hassle.

@Bob E. : I'm new to performing notes, but if this is the case, depending on the risk factors of performing notes, this may be a very good investment. My searches about performing notes have very limited results, I guess this is not a common investment. I'm still trying to figure out this investment's risk score, and how I can buy performing notes.

Originally posted by @Warren Garceau :

@Cagri Ozcaglar have you considered cash value insurance? I would not consider this an "investment" however in comparison to some other "safer" accounts this could be a strong alternative. Insurance contracts offer additional asset protection, higher yields than most savings accounts/CDs, and there's usually liquidity (tax free).    

 @Warren Garceau : I didn't know about cash value insurance. I already have a life insurance. But this sounds more likely insuring the value of my money. Does this insurance keep the cash value the same, or protect against inflation rate, or have even better returns?

Originally posted by @Will G. :

is it just me or is every conventional investment "yield starved". Stocks very close to overvalued if not already, bonds stink in a rising interest rate environment, real estate is risky now(home prices bounced well above the trend line)and way below normal on yield.R.e. notes may be the only thing to consider unless you are brave enough for bitcoin 

@Will Grabert : This looks like to be the case. I'm still doing more search on real estate notes, how risky their returns are, how much their returns are, and how I can buy them. 

Originally posted by @Sam Josh :

What about dividend paying stocks like [email protected] or Verizon yielding north of 5%?

 I thought about this, more particularly with high-dividend REIT stocks, such as NLY, BXMT, WPC. Some hesitations:

1) Stock market itself is volatile. It always is, but in the current political climate, it is more-than-average volatile. I already have my index funds which is keeping me excited / nervous right now.

2) AT&T and Verizon: Their values seem to be constant in recent years, if not dropping. A crash may knock them down, and I wouldn't want that for 5% income.

3) For REITs: REIT dividends are not qualifying dividends, so I will have to pay full tax (federal tax: 35%, state tax: 9.3%), which I want to avoid.

Cagri
If your up for a cup of coffee, I’m happy to discuss what I’ve been doing. I’m not a financial advisor and won’t try to sell you anything. I am an active investor. LMK

@Cagri Ozcaglar I would say as a beginning note investor that your question on returns is not an easy one to answer and the note industry is not like more popular real estate arenas like buy and hold or flipping where there's more literature and information to find out about it. Learning notes is more like learning a foreign language where the best way to do it is go and live in the country and immerse yourself in the culture. You likely won't have much luck googling the answers you want in notes. 

Roughly most active note investors I would guess target returns in the 30% and up neighborhood on non-performing notes. If you're looking at performing the easiest way to think of it as imagine you're the bank on you're on mortgage note (if you have one). At par you're making the state interest rate on the note. At a discount you're higher depending on the discount.

@Cagri Ozcaglar

@Dave Van Horn just released a new book on notes. I recommend it highly. It should answer questions and provide new strategies for the experienced as well as the newcomers. 

@Will G. I agree, most investments look yield starved.  

Our primary focus right now is paying down debt, both personal and business.  Once that is done we will be very selective about what we buy.  If you have cash a decent strategy is to buy or write shorter term (5 years or less) notes.  There are several brokers on BP and anyone in the business will have occasional deals they cant do or notes they want to resale or notes they will hypothecate.

@Cagri Ozcaglar insuring the value of money is a very interesting way to view itT these types of insurance contracts can help protect against inflation and historically have had better returns. I would be happy to connect sometime and talk more about how it works. 

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