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What is the best route to invest $50,000?

I'm a recent college graduate with no outstanding loans or debts. I live at home where food is provided and my car is fully paid off, so my monthly expenses are minimal. I have $50,000 in a checking/savings account earning just $1 a month. What's the best way to invest this money in order to get the most bang for my buck?

Investing, Lifestage Based Planning
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February 2017

Great question. The key factors when deciding how to construct an investment portfolio are time horizon, investment experience, and risk tolerance. You have a time horizon that's probably at least five decades. You may not have much investment experience, but that's not a problem.  And it's too early to learn your tolerance for risk. For example, what if you invested the $50,000 and the market dropped the value by more than a third? I can't imagine that you'd be pleased with that, but it does happen. Look back at 2008-2009. Yet, since then the market averages have fully recovered . . . and then some. Given your time horizon, risk should not be a concern. Your investments should be equities only since equities are always the top performing asset class over 20 years or more. That's well within your time horizon.

Even if we don't have a big drop, it's more common than not to have a 10% pullback sometime during most years. That's quite normal, but it passes.

So as exciting as the world of investing may be, there's exciting and there's smart. Exciting is investing in a few hot stocks and hoping for the best. The problem with hot stocks is that you'll often end up getting burned.

The smart way is simple enough. Make equal commitments in two no-load mutual funds: total U.S. equity index and total international equity index. Once a year, rebalance so that the funds are equally divided. Then watch it grow over time.

Good luck!

January 2017
January 2017