investment decision

for investing

That's an awfully large emergency fund. I can understand why you want to invest part of it. The "3 Months' Salary" rule says you need $8750 in an emergency fund.

But before going down that avenue, I always like to raise the issue of home ownership. Of course home ownership isn't for everyone, but for many, it's a fantastic financial move. If you don't own your home, this money would make an excellent down payment. In that case, I would be weary of putting this money in to stocks. Keep it in your high-yield savings account or move it to a money market fund.

At your age, I would definitely steer you away from these types of funds. I would much rather see you 100% invested in stocks.

I don't have any experience with lifecycle funds (does that date me from the stone age?). I've heard lots of good things about them, though. If you invested in a fund with a target date of 2045 or 2050, I assume the fund would be nearly 100% invested in stocks, which is a good thing. I see the expense ratio is only 0.79%, which is also nice.

An alternative approach, which I advocate for beginning investors, is to just purchase an S&P 500 index fund. Unfortunately, Fidelity's S&P

500 index fund is pretty expensive (0.59% expense ratio versus 0.18% for Vanguard). But you'd still get the rest of the traditional advantages of an index fund: tax efficiency from low turnover, lower cash reserved, etc..

--Bill

wrote

Read-o at the Fidelity site?

Fidelity's S&P 500 index fund (FSMKX) has an expense ratio of 0.10%. It's been tha low for a few years now. The site says the average for S&P 500 index funds is 0.59%. Vanguard's site confirms the 0.18% expense ratio for VFINX.

For the record, I disagree with the sentiment that home ownership is "for many" a fantastic move. Renting for decades can be more lucrative. The people who should buy homes are the ones willing to give up a little extra money for a higher quality of living now. It's "worth" it to me, but from a financial standpoint, there are strong arguments (property taxes, cost of a new roof, etc.) that I, for one, would be better off renting.

Personally, I'd look at some of the Exchange Traded Funds that track the indexes. I'd take $24K of that $31K and invest it. That leaves $7K in savings as an emergency fund. Of that $24K, split it 3 ways, 1/3 in an S&P index, 1/3 in a broader index like the Russell 2000, and 1/3 in some world-wide fund that has asian exposure (so you catch the growth in China and other foreign markets). It doesn't really matter where you buy ETFs, as long as the commissions are low.

That is my idea. Looking at your idea, I really don't have a problem with it. Your decision making to date has put you in a pretty good financial spot. The only concern that I have is that you are too conservative for your age, so I am happy to see you picking some growth oriented funds.

-john-

Excellent. I am glad you mentioned that. In reading newsgroups like this one, sometimes I get the impression that the sum total of financial decision making revolves around stocks and mutual funds. Real estate should enter into the picture too. Getting into home ownership early is wise. What's more, owning rental property is not a bad idea. Stocks and mutual funds indeed are good investments that should be in the mix, but not the whole story.

thanks for the advice,

some ideas and follow up questions

ideas to consider

1) use the 31k to pay down any debt you have 2) slowly move the 31k from savings to equities. 10k now, 10k in 6 months... remaining amount in 18 months 3) keep an emergency fund =3 months expenses 4) purchase a house to live in 5) increase current 401k percentages until you know what to do with excess cash 6) use 31k to fund an education (or higher degree) to increase 35k of current income with a higher paying job

questions

1) how much of your current income adds to the 31k (is this growing by $50 a month, $150 a month or something more)? 2) how aggressive is the 401k invested (I agree with previous advice to be in 100% equities, or something close at your age)? 3) how aggressive is the Roth IRA invested?

snipped-for-privacy@gmail.com wrote: > If you don't own your home,

These two statements seem antithetical to me. The second statement would indicate a minimum down payment for the home instead of plopping a lump sum in. That's just me, others will (vehemently) disagree. By the way, that's what I did (minimum down, invest the rest in stocks). But Don has pointed out recently here the risk of stocks v. home equity and you should give that serious consideration. Of course, Elle has a great point about buy v. rent as well. For me, buying made financial sense, but I bought at the bottom of the mortgage rates in 2003. It may or may not make sense for you depending on your situation.

Good luck,

-Will