What would you recommend for an aggressive investment strategy?
I'm 50 years old and I have $10,000 to invest. As I understand it, I can't retire until I'm 67 so that's another 17 to 20 years for investing purposes. I'm looking at putting the $10,000 into an aggressive high gross investment strategy. What kind of advice do you have for me so I can execute this investment? I'm also trying to learn and understand investing. Would you recommend I can invest and control it myself, as opposed to having to go to other entities to make it happen?
You are 50 and essentially have no savings. You have recognized that you can't afford not to take risk; I maintain that you can't afford to take a lot of risk, either. I have one suggestion for you.
Change your lifestyle. You don't say how much you make but clearly you have not been saving enough. Downsize, now. Cut your spending, cut your monthly housing costs, sell any valuables that you don't use. Then, pledge to yourself that you will put away $3-4,000 PER YEAR into your investment account. (Or more!) Then, invest in something moderately risky, like large cap stocks. Don't be tempted to swing for the fences. If the market cooperates over the next 17-20 years, you will have enough put away so you won't need to worry about being old, feeble and broke. Better to live like you're broke today.
As an example, if you start with $10,000 and add $3,500 per year for 18 years, and average a 7% return over that period, you will end with $153,000. That's not bad, but not great either if you think about needing to live on your savings for 20 more years after that. If you don't start right now, it's only going to get harder. If you don't want to be living on dog food when you're 80, get going.
If you have the knowledge, time, and energy to invest on your own, by all means, do it yourself. You may find the joy and thrill from this experience. On the other hand, I am a little concerned from your statement that you needed the advice to execute a buying order.
So, here are some questions you need to ask yourself before commit to that buying strategy: 1)If I can’t get my $10k back in one month, 6-month, or a year from now, what would I do? 2) Do I need that $10k for any contingency plan? 3)Why do I pick this particular fund? Is there another fund with similar goals/income but less expensive or having a more experienced management team? 4) What about the tax? If this $10k is in a taxable account, you have to pay capital gain/dividend tax every year? Should you pick up a fund that may be more tax-efficient?
All of those questions are simple enough, but your answers will give an advisor a glimpse of your risk profile and your current finance. For example, your answer to the first question will tell a professional how much risk you can take, which immediately translates to if the “aggressive high gross income” strategy is suitable for you. The second question asked about your emergency fund. If you don’t have a safety net for six months living expenses, a professional may suggest using the $10k for that purpose. The third question tests your investment knowledge of how much you know about this particular fund and your research to do the comparison to better your future return. The last question reminds you to be mindful about the tax consequence as the tax man may take a big chunk of your return at the end of the year.
So, you see it’s not easy to just invest $10k. If you become uncomfortable of investing on your own or need a guiding hand, ask a professional’s advice. You don’t have to let someone manage for you, but you could seek a periodical review to make sure you’re on the right track. You got the best of both worlds. Best!
This is a very complicated question, so I will answer it in generalities. At 50 years old, you are approaching a critical point where you have to start worrying about your retirement. Whether or not you want something aggressive needs to be put in context to what you have, how much you can save, and what you need to retire comfortably. To be candid, $10,000 is just not enough. That being said, you may have a retirement plan at work or a pension at retirement, so I don't want to presume anything.
Many people look at returns to justify decisions, but it is more important to understand risk. For individuals that have never invested before, selecting investments is very difficult. You hear people on television or at a cocktail party and figure this investing thing is pretty easy. However, most people want to invest when things feel good which is usually when the markets are up. They also panic and sell when things are bad. This can really have a negative impact on the individual and their investments. The best thing to do is find a professional to help guide you through this process. Investing shouldn't be about maximizing returns. It should be about maximizing risk adjusted returns within the context of an individual's risk tolerance.
Consider leveraged [Ultra Short] ETF's. If you are 'bullish' on a specific sector or indice, leveraged [that means earning up to four times the return on the index] is an option. No loads [front or back], low cost and highly versatile in that you can attache Stop/Trail Stop Orders on these investments as they trade like stocks. I definitely recommend utilizing Stop Orders when utilizing leveraged funds. The Beta's on these funds, of course, will be higher as Market Beta is always set at 1.0 so a leveraged position,say two times earnings, its Beta may be as high as 1.45 meaning you are carrying 45% more risk than the index.
While you may want to pursue additional income streams, you can still put the $10,000 to good use over 17-20 years in a properly balanced ETF portfolio. Based on your total financial picture, you can still tolerate some risk/higher growth potential over that time period.
Be sure you get an honest recommendation so that you are comfortable with your decision. An advisor should be able to give you a more specific direction after a free consultation.