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Originally Posted by Shag
Thanks! I'm mid/late 40s, so kind of in a weird spot for risk. I've got a fairly large investment portfolio after years of 401k, ESPP, and RSUs, so I've got a nice nest egg going. Ideally, looking to retire as soon as reasonable, but realistically, that's likely at least 10yrs away.
CDs feel a little too conservative on that timeline, but maybe I'm not thinking about it properly. The market tear also makes me worried about a pullback, but I'd think a 10yr horizon should negate that long term. I was thinking maybe an index fund for the native diversification, but so many options on that front.
Then there's the AAPL, AMZN, MSFT, and NVDAs of the world - those always feel like good long term holds, but who knows, I'm not a great stock mind.
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I'm about the same age, different mechanics but a lot of the same risk tolerance.
I'm looking to move some underperforming assets and cash to equities. What I'm looking at is about a 75/25 mix of VOO (S&P Index Fund) and VUG (Vanguard Growth Index Fund ETF). ETFs have a much lower load (costs, fees, etc.) and better diversification than I can achieve picking stocks. I keep a little brokerage account to periodically trade some stocks, but that's for entertainment only. I figure it's cheaper than a trip to the casino and maybe less downside, but I'd have to knock out some really low probability home runs to beat the ETFS on a small scale, and on a larger scale, I'd have to manage it MUCH more intensively than I'm good for and I'd have to some real work on risk that I may or may not be smart enough to do.
Presuming you're not going to need the money any time soon, and are looking to use it to fund your retirement.
1. Keep an emergency fund in a taxable brokerage account or high interest savings account (Mine is in Vanguard Settlement Account which is automatically VMFXX @ 5.43% currently). A lot of the personal finance stuff says save 6 months expenses in an emergency fund. I think that's sound and you won't be in real trouble if you follow that. From my perspective, I'm starting to save money for the next car trade. My objective is to not finance the next trade on the wifes car because it's unlikely the rate will be lower than 8% (That's the long terms S&P return), so I need to be a cash operator. Not sure I can get it done, but that's the goal.
tl;dr: Emergency fund in brokerage or high interest savings.
2. Contribute to your 401K up to the match maximum (do this always - match = 100% return).
3. Start a ROTH IRA and contribute up to the maximum (6,500 for you. If you're married start one for the wife too). In the retirement I have it in a target dated fund (VLXVX - rebalances automatically as I age and becomes more conservative). I haven't done any math to determine it's return vs VOO/VUG, but I'd feel good about either option here.
4. Do some looking and see if you're comfortable with the investments. What you need to look for is long term performance and load (fees, cost, commission).
If you're comfortable with them, max out your 401K. If you aren't start a Traditional 401K and one for the wife if applicable and max them out. Traditional IRAs carry the same tax benefits as a traditional 401K, it's just self directed. If you max out your 401K, it's usually easiest to increase your contributions and use your cash savings for the shortfall from your wages.
The cost efficiency of tax sheltered (retirement) accounts for retirement savings is difficult to match. Take as much advantage of tax shelters as you can. If you don't know the tax implications of Tradtional/ROTH IRA/401K, it's posted a million times in here. Even then, just ask, I don't mind rolling through it again.
5. After that, stick it in a taxed brokerage account and do what you're comfortable with. I'm looking at the VOO/VUG split above.
That's things from my perspective, I'm certainly not qualified to answer, and there are a lot of different viable strategies, but that's what makes the most sense to me.