Trying to Get at Least 5% Returns...

[WizKid88]

Good morning everyone,

Following the advice in TMF , I'm trying to get a 5% return or higher on the money I invest, while trying to minimize risk. I know everyone's scenario is different, so let me explain my current position:

- I have about 35k in a tax deferred account (can't add money to it because of its type), that I'm only taxed when I withdraw.

- I'm educating myself as much as possible with options, bonds, and mutual funds, etc.

- The goal is to get at least 5-7% returns.

My brokerage advisor suggest I take 25k, and put it in Amerivest Core Mutual Fund Portfolios, keep 5k in cash for withdraws, and 5k to play with options, bonds, etc.

Just wanted to know if that sounds like sound advice, and has anyone had any experience using Amerivest?

 

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[Captain Jack]

Lending Club.

 

[WizKid88]

Lending Club.

Does that mean taking money of my td account and investing it in LC? Cause then that would defeat the purpose since I am taxed on the amount I withdraw?

 

[Captain Jack]

Does that mean taking money of my td account and investing it in LC? Cause then that would defeat the purpose since I am taxed on the amount I withdraw?

I'm pretty sure you could roll it over.

 

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[Ubermensch]

Good morning everyone,

Following the advice in TMF , I'm trying to get a 5% return or higher on the money I invest, while trying to minimize risk. I know everyone's scenario is different, so let me explain my current position:

- I have about 35k in a tax deferred account (can't add money to it because of its type), that I'm only taxed when I withdraw.

- I'm educating myself as much as possible with options, bonds, and mutual funds, etc.

- The goal is to get at least 5-7% returns.

My brokerage advisor suggest I take 25k, and put it in Amerivest Core Mutual Fund Portfolios, keep 5k in cash for withdraws, and 5k to play with options, bonds, etc.

Just wanted to know if that sounds like sound advice, and has anyone had any experience using Amerivest?

Judging from the name of the mutual fund, I presume you are American?

Free your mind.

Bet you didn't even know (until @Ubermensch told you one second ago) that there are foreign accounts that yield 6%.

By far, America is not the most favorable place to conduct business or invest.

 

[OldFaithful]

Hey Whizkid, that was my plan for quite a while too. But guess what I found...MJ was right. After nearly 20 years, my savings had only grown about 6% on average and sadly that's not enough to quit my day job! Consequently I've ceased to rely on that strategy.

At only 27, you don't have enough in that account to really do much as an investment. That 35k will be roughly 280k in 36 years when you turn 62, but that's not inflation adjusted dollars. If you adjust for inflation (which I've tracked at an average of 4% per year over the last 20 years) you are left with a growth rate of only 2%. So your investment will only be worth roughly 70k in today's dollars. If you can't add to it, you might as well convert it to something else. You are in an investment account that is far too restricted to be of much use.

However, don't let this discourage you, because you do have enough to bootstrap a Fastlane business venture!

If you have any other savings, you can just convert this account into something more flexible (like a traditional IRA) and let it sit. Then use your other savings to get out there in the Fastlane. Or you can cash out this account (be sure to save enough aside to pay the taxes on it at the end of the year) and use it to fund a new venture.

The choices, and the their outcome, are all up to you. Good luck & Godspeed.

 

[458]

Don't worry about money you already have, worry about the money your losing right now.

 

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[WizKid88]

Thanks for the chime in everyone, but I'm still wondering about the fact at hand, is the Amerivest moderate growth account a good option to handle this money? If I take it out now (assuming no additional income is made during the year), then we're talking about paying around $8.5k in taxes...yikes!

 

[OldFaithful]

Those mutual funds are probably just as good or bad as any other mutual funds. Sounds like your mind is made up already, so go ahead.

Have you read The Millionaire Fastlane ? Give it a read.

 

[JAJT]

Just wanted to know if that sounds like sound advice

Personally I'm uncomfortable investing in anything I don't understand enough to answer this question myself to.

I like things I understand.

I don't like things where I take other people's word for it.

The market is one of those things I don't understand enough to be able to trust the advice of other people. Especially when I hear 9 horror stories for every 1 success story. Where every statistic I read is about how experts turn out to be "experts". How highly regarded funds turn into mountains of shit. How those selling it take advantage of those buying it. Maybe I just get my news from a poisoned well. That's possible.

That being said - I'm not trying to say you should or should not do whatever it is you like with your own money. I'm just saying that if I didn't understand enough about an investment (of any kind) to know whether or not the advice I was getting was good or not - I wouldn't do it.

Maybe I'll hit old age as a poor old man with this kind of attitude but at least I won't be confused about what happened to all my money along the way

 

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[Captain Jack]

Personally I'm uncomfortable investing in anything I don't understand enough to answer this question myself to.

I like things I understand.

I don't like things where I take other people's word for it.

The market is one of those things I don't understand enough to be able to trust the advice of other people. Especially when I hear 9 horror stories for every 1 success story. Where every statistic I read is about how experts turn out to be "experts". How highly regarded funds turn into mountains of shit. How those selling it take advantage of those buying it. Maybe I just get my news from a poisoned well. That's possible.

That being said - I'm not trying to say you should or should not do whatever it is you like with your own money. I'm just saying that if I didn't understand enough about an investment (of any kind) to know whether or not the advice I was getting was good or not - I wouldn't do it.

Maybe I'll hit old age as a poor old man with this kind of attitude but at least I won't be confused about what happened to all my money along the way

I think it might be generational. My parents have no problem giving a good portion of money to their financial advisor to do what he pleases with it without asking questions. So far, this strategy seems to be going fairly well for them.

Personally, I could never do that. But then again, I reached maturity after the Bernie Madoff-esque ponzi schemes were unveiled. They grew up in a different time. I think our generation is far more skeptical of these kinds of things.

 

[WizKid88]

Those mutual funds are probably just as good or bad as any other mutual funds. Sounds like your mind is made up already, so go ahead.

Have you read The Millionaire Fastlane ? Give it a read.

I read it, but it focuses mainly on the money systems whereas investment strategy (which I understand since that would be another book, and could be outdated information based on the market)

My question is though, has anyone used Amerivest, and has it been good or a nightmare.

I'm trying to make a good decision. If that means just letting the money sit there and educate myself more, then fine. If that means understanding options and starting out with a small amount in the account, then ok.

My point is I just was wondering if anyone has been through similar circumstances, and if there's any good advice or tips you have along the way. My advisor is saying $25K in Amerivest would hit my target, and the fees are only $250 annually.

Definitely appreciate everyone who has chimmed in.

 

[biophase]

Nobody can answer that questions for you because none of us know whether a certain mutual fund is good or bad. If I were you I would just put it into an S&P500 index fund. Most funds perform worse than the S&P500. Since you have it in an retirement account you are limited to basically stocks and funds. It sounds like you don't want to really manage it or I would suggest moving it to a self directed IRA which would open up some more options for you.

 

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[OzzieRob]

This is what i did the past 2 years to achieve 6%-7% cashflow tax free. Open a money market account and research companies with a 20 yr history of paying consistent dividends and with a fairly low P/E. You can easily filter companies for P/E, share price, capitilalisation etc in your money market account. Forced myself to read books by Ben Graham, Security Analysis, Warren Buffet and dividend growth investing as well as index tracking fund investing. I chose 12 companies in the ASX 300. If you want passive cash flow then try dividend growth investing. As far as i know an index tracking fund will beat most active fund managers but won't give you as much regular cash flow in the form of dividends as they are diversified amongst non-dividend paying companies and partly franked companies. I like both growth and dividends. No guarantee what will happen though at retirement with the sharemaket so it's also good to use business income to buy rental properties if possible.

 

[WizKid88]

Nobody can answer that questions for you because none of us know whether a certain mutual fund is good or bad. If I were you I would just put it into an S&P500 index fund. Most funds perform worse than the S&P500. Since you have it in an retirement account you are limited to basically stocks and funds. It sounds like you don't want to really manage it or I would suggest moving it to a self directed IRA which would open up some more options for you.

I would like to manage it, I just don't know probably the first step to go? I've been learning about bonds, forex, and options, and yes I'm kind of limited, but I can invest in a variety of options at TD, but I can't add more to the account. I was thinking of self managing it, but every time I make a withdrawal, its counted as taxable income.

 

[illmasterj]

This is what i did the past 2 years to achieve 6%-7% cashflow tax free. Open a money market account and research companies with a 20 yr history of paying consistent dividends and with a fairly low P/E. You can easily filter companies for P/E, share price, capitilalisation etc in your money market account. Forced myself to read books by Ben Graham, Security Analysis, Warren Buffet and dividend growth investing as well as index tracking fund investing. I chose 12 companies in the ASX 300. If you want passive cash flow then try dividend growth investing. As far as i know an index tracking fund will beat most active fund managers but won't give you as much regular cash flow in the form of dividends as they are diversified amongst non-dividend paying companies and partly franked companies. I like both growth and dividends. No guarantee what will happen though at retirement with the sharemaket so it's also good to use business income to buy rental properties if possible.

What about this is tax free? Australia has a 30% dividend withholding tax for non-residents, while residents are taxed on dividend income, correct?

 

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[WizKid88]

Wow didn't know that about Australia. I'm actually in the US.

It's a Bene IRA, which means you can't add money to it, however, I believe I'm free to do any investing that is allowed by my brokerage TD.

Simply withdrawing the money now and dumping it in another account would mean I would incur a $8K tax penalty, and added risk.

The account is completely tax deferred UNTIL I withdraw (I also have minimum distributions I must take annually, but we are talking less than $700).

So it would make more sense to try to make this account grow as long as I can, or until I decide to move in to other ventures.

Hope that explains things a bit better.

 

[OzzieRob]

Wow didn't know that about Australia. I'm actually in the US.

It's a Bene IRA, which means you can't add money to it, however, I believe I'm free to do any investing that is allowed by my brokerage TD.

Simply withdrawing the money now and dumping it in another account would mean I would incur a $8K tax penalty, and added risk.

The account is completely tax deferred UNTIL I withdraw (I also have minimum distributions I must take annually, but we are talking less than $700).

So it would make more sense to try to make this account grow as long as I can, or until I decide to move in to other ventures.

Hope that explains things a bit better.

There isn't much money to made passively investing in the sharemarket unfortunately. I much prefer to pay down a mortgage first, reduce investment properties to 50% LVR and have enough leftover to enjoy lifes little luxuries and then use the remainder to invest in the sharemarket.
I quite often hear about investors who buy shares or a rental property and then find they were no better off when they retired as they can no longer get the pension. You've got the right idea about moving into other ventures. Good wishes.

 

[OzzieRob]

What about this is tax free? Australia has a 30% dividend withholding tax for non-residents, while residents are taxed on dividend income, correct?

Technically speaking it works out that i am tax free based on deductions as i am not in the highest tax bracket although the dividends is still regarded as taxable income for residents. They are 100% franked. Yes, non-residents will need to pay tax.

 

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[458]

5% of nothing is still nothing.. You want big money? Go and get it. 99% of people lose money because they think and talk like you do..

 

[WizKid88]

5% of nothing is still nothing.. You want big money? Go and get it. 99% of people lose money because they think and talk like you do..

Excuse me? I never said I wanted "big money", and it's not "nothing". I simply asked about one of td programs, and how to achieve a 5% goal.

 

[WizKid88]

I'm thinking as of now to just hold off on amerivest core program. $25k to me is a lot just to start off investing on something I'm not familiar, so I'm thinking to further educate myself on investments, and take about 3-4K of that amount to actually use for options/bonds/mutual funds/etc.

 

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[jfny]

Download the iBillionaire app and look at their selection. They have one portfolio you can invest in which has been making a steady 30% return for a while now.