Hi, Stupidly I let my 500k sit in bank over last couple years collecting dust. I made a bunch of money from affiliate marketing, never had real money before. But anyways it's time to get it invested in some stocks and bonds. I ALREADY PAID THE TAX on this money when I made it- so what makes sense for me to do? Do I just create a random brokerage account in my name and put the money in there? Or should I make it part of some IRA or 401k or something? I put 50k in a 401k in the year I made the money, since that was the max allowed to contribute in one year(and not be taxed on as income that year). I'm clueless as to where to begin.
First, a couple caveats: ~FDIC only insures up to $250k per person per institution for cash accounts. ~SIPC insures up to $500k (up to $250k equities + $250k cash) per person per institution for brokerage accounts. ~IRA contributions are limited to $5,500 per year (add another $1k if over age 50), but only if you have earned income up to certain limits. (I would fund this out of current earnings--not savings--if possible) ~401k contributions are limited to $18.5k per year (add another $5k if over age 50). (By definition, this would likely be funded out of current earnings) If you want to keep it simple, you could move the entire chunk to ALLY bank and then do the following: (1) For the first $250k, (a) open a $200k to $240k Ally 1-year CD at 2%. (I don't know how much of this cash you need for other purposes) (b) Purchase a US Savings I-bond at 2.58% for $10k (the annual limit for US savings bond purchases is $10k per person. The I-bond has an adjustable rate, so 2.58% could go up or down.) (2) For the second $250k, (a) Open an Ally brokerage account and move $50k to $250k into the new brokerage account. Since you already own an Ally banking account, this will be easy and straightforward. Personally, I would do about $50k until I learned a bit more about stock investing, but your risk profile may be different than mine. (b) With whatever is left from the $250k NOT invested in the brokerage account, open a CapitalOne 360 12-month CD for 2.05% These steps would spread your Federal insurance risk around, and guarantees some interest from money not deployed into a brokerage account. As time goes on and your experience and confidence in stock investing grows, you could ramp up your exposure to the investment account appropriately and annually plow your interest earned on the CDs into new I-bonds. You can close I-bonds after 5 years with no penalty, but the penalty is only 6-months interest if you close earlier.
Why is my intuition telling me that this "Web Guy" (with only one post and smart enough to have made a "bunch of money" but now is "clueless" as to what to do with it) is just out phishing? Maybe I'm too suspicious.
Just for gins though, I'd put as much as possible into a Roth account with a brokerage firm since the taxes are already paid on the principal and the earnings won't ever be taxed. Then I'd set aside 500 century notes to give to homeless people asking for spare change. Then I'd buy farm land and rent it out Then I'd buy silver bullion with whatever is left
Thanks for the replies guys. So if I open a Roth IRA(with this money that has already been taxed), I will never pay taxes on the gains, even when I sell the stock for a gain? I am doing research on a lot of things you mentioned Three Eyes, and Onepoint272, yes this is completely real. My main goal is to just let my money sit somewhere it can make some interest in a relatively safe way, I don't want to focus on making different trades every week or even month really. But I've always thought I would have almost all of it in stock market.
Do you work full time? How much time can you invest into managing your money per day? I would definitely consider buying land as an effort towards diversification. There are many way to lease land, agriculture, forestry, solar, cell tower, radio. If you buy land near a developing area, then you can do some demographic digging to estimate what your roi would be after 10 years and even 20 years. As for stocks, there are so many investing strategies and approaches to the market. You will need a very diverse protfolio and you should spend more time learning about strategies before sticking $ in the market. I would hire a well known financial planner and work to develope a long term strategy and setup some goals for yourself. Your 500k could become 10 million in 30 years if you manage your money wisely.
