Opinion: Where should this technology invest $40,000? She must first answer this question

I saved $100,000 in cash by thinking of some changes. I don’t know yet what those changes should be.

I gave $60,000 to my financial advisor who is handling my 401(k). Of course, he just wants to increase his total assets in order to increase his income through a 1.5% management fee.

I would like to have three ideas on where to invest the remaining $40,000 that will be available if I find a one-year master’s program, a new home, or a job that pays less than my high-tech job. Something liquid, but bearing interest and earning more than a bank savings account. I’m thinking about the Vanguard index fund. I am single, owner of an apartment and no children.

I thought of you as an alternative to my current financial advisor because I want to diversify my activities.

Cash Cathy

Send your questions to Ms. MoneyPeace: [email protected]

Dear Kathy Cash:

Congratulations on your good savings. You mentioned several options for where to invest money, and expressed your attitude towards your adviser.

Few advisors manage 401(k) unless they are part of a brokerage firm that owns the assets. Companies’ 401(k) plans hire an investment manager to oversee the money and work with plan members. Your business may have considered a brokerage or consultant, but that doesn’t mean they’re right for you. Do you trust them? Did you interview consultants before hiring them to manage your extra money? Is the consultant a fiduciary, which means your interests are taken care of?

The 1.5% commission is very high. Typical is the one percent, which, in addition to investment management, gives you advice on taxes, financial planning, estate planning, and money management. These fees are worth paying if you are profiting from the relationship. Otherwise, you may overpay.

You show an understanding of pay motivation. Nowhere do you mention your trust in their guidance and advice. I sense a question mark about their abilities. The fact that you are looking to me for advice shows that it may be time to add another professional, someone you trust, to your team.

What stands out is the wording of your comment: “I gave my financial advisor $60,000.” Many people talk about this, sometimes demonstrating a lack of ownership of their money and a lack of understanding of their capabilities. Consultants follow instructions you. Knowing where your money is now is the key to taking the next step in your savings balance. Remember that you asked this investment manager to look after your money; you didn’t give. Ask more questions, learn more, and make informed investment decisions. It’s your money – and your life. You must take responsibility for this.

For paying a current consultant annually, you can hire an objective, paid Certified Financial Planner (CFP) for a few hours to review your investment. They can advise you on the best way to invest or save your current funds.

As for your next investment move, it depends on how your remaining $60,000 is invested. The tried and true rule with silver is that the earlier you use it, the less you want to keep it in risky places. When your plans are in the air, cash, certificates of deposit (CD), credit unions and banks are the safest, despite low but rising interest rates. You can go beyond your local bank as national discount brokerage firms will help you open an account and then purchase CDs by finding the best rates around the country.

The Vanguard Index Fund is inexpensive, and yet many of them are equity funds. Until you decide what changes you are making, placing that money in the stock market is a bad choice because the market is long-term. There are some Vanguard funds like Vanguard Limited-Term Tax-Free Fund VMLTX,
who only invest in bonds.

If you need money in three to eight years, bonds may be a good choice. Series I savings bonds, known as I bonds, which are sold by the federal government, yield over 9%, but purchases are limited to $10,000.

The most important thing is to clarify your life choices when considering financial options. I don’t know, you didn’t name them because you didn’t decide or you want the money to make more than one. Consider working with a financial therapist to ensure your life goals align with your financial goals.

Lily: Ignore these sources of “free” financial advice – they will cost you dearly.

In terms of investment, being satisfied with your money and your life will help you make smarter decisions. Here I would refer to a wise man who told me many years ago: “When in doubt, do nothing.”

CD Moriarty is a Certified Financial Planner, CNET Columnist, and Personal Finance Speaker. She blogs on MoneyPeace.