Need Investing Help - $200k

[Chris T]

I'm a 40 year old freelancer in the film business. My gross annual income averages $150,000 (though since I'm self-employed, work can be sometimes volatile and inconsistent). My wife and I own a house (purchased for $800,000, 5 years ago. Now estimated worth over $1.3M). We have $590,000 left on the mortgage = 30yr fixed at 4.0%

I have $220,000 in cash savings and $34,000 in 401k. My wife has $19,000 in her 401k. She works for me (i.e. also self-employed).

Currently my cash is in an online savings account(!!), and is gaining a terrible 0.6% interest or thereabouts. Obviously I need to invest it more aggressively.

I was advised by my accountant that if I'm going to invest on the stock market, that I should consider paying off a chunk (say $50k) of our mortgage at the same time (as a way of 'diversifying' our investing by reducing our mortgage burden).

If I were to do that, and also keep about $50,000 in savings (rainy day), that leaves me with $120,000 to invest in the stock market.

I'm considering Robo-investors (Wealthfront, Betterment, Vanguard etc) vs a human financial manager. Can you advise on the pros/cons of robo-investors vs humans, and also the mortgage payoff etc. Also, I prefer having a wealth management firm help me since a) I'm very new to investing, and b) have no time to spend researching / learning about best invetments etc. Would rather pay a little to have an expert (human or robot) do this for me.

Thanks!

[canbonbon]

You should read some of the wiki posts and also read about the 3 fund portfolio on this board.

https://www.bogleheads.org/wiki/Main_Page

I don't think paying off mortgage with almost quarter of your savings is a good idea. Because it gets converted to home equity and is kinda useless if you actually live in that home. In the time of need, you won't be able to sell your home to access that money. OTH, if it was invested in somewhat more liquid asset, then could potentially sell it and have it available for you. So you should think about that as well.
Most here on this board suggest a 3-4 fund portfolio for your cash. You should be able to manage it yourself. I did the same thing by getting rid of many mutual funds and focussing only on 4.

Most robo advisors also charge money (are not free) except perhaps wisebanyan and Schwab SIP. Both of these do not charge any fee that is %age of your assets but have different pros and cons as well (you should be able do a search on the forum here). For me, I did the 4 fund conversion for my entire asset balance and then lately I have been toying with the idea of making my monthly investments in wisebanyan. This is my 4th month with them and I am OK with it. So that might be something you could do as well for your regular (monthly or otherwise) deposits.

And lastly, not sure how you plan to invest those $50K for the emergency funds? I ended up getting a tax free Munincipal Bond fund (ETF-VETB) for my emergency instead of buying CDs. Let us know what you have in mind for that as well. Good luck. There is a lot of very good advice on this board.

[itengineer]

If your home has appreciated that much and you only owe 600K you could consider selling your home for the 1.3M
You'll pocket 700K
Obviously you'll need to buy a home but you could dump 400K into your new home and add 300K to savings

[MittensMoney]

Wealthfront and Betterment won't offer a human advisor to guide you financially. Consider either Personal Capital or Vanguard, they will invest your savings in a smart way and also offer financial planning advice in other areas. Both have fee's but will offer smart investment strategies, 'free' advice on other components of your finances, and a worry-free way to increase your nest egg.

[Toons]

Put as much towards the mortgage that you are comfortable with.
The remaining.
Vanguard Balanced Index Fund

https://advisors.vanguard.com/VGApp/iip ... undId=0502

[tampaite]

Deleting my messages on this forum

[t3chiman]

...Would rather pay a little to have an expert (human or robot) do this for me....

Well, this forum is great for free advice. Worth what you pay, etc..

But, first: a millionaire at 40! Congrats. Quite the accomplishment. You are ahead of 99% of people in the world. You are entitled to relish the associated privileges, at least for a bit.

You could, for instance, investigate filming locations in southern New Zealand for a month or so. And then compare them with geologically similar sites in the Canadian Rockies. You may have to hire guides to get you to absolutely spectacular locales. A legitimate business expense, it seems to me (consult your tax advisor of course). Even if you end up making no money from the activity, at the very least you will have happy memories for a lifetime. And get to tell your grandchildren about glaciers.

You are young yet. Lots of time to let the market work its dynamics on your nest egg. Computing, communications, energy, biotech--fields in which the entrepreneurs among us will realize immense fortunes. Let Vanguard pick the winners, e.g. Health Care, Energy, Consumer Staples.

I would keep the mortgage. It is a government-subsidized 4% loan; why not hang on to it? Unless you can borrow money at 2% to pay it down, or you are spooked by the recurring obligation, just pay the monthly fee.

HTH

[Chris T]

Hi all

I'm finally setup with my Vanguard account and have decided to do the following:

1. Paying an additional $700 towards the mortgage each month, which means we're set to pay it off by 2036 (in 20 ys-when I'm aged 60). I decided not to pay-off more for now since that liquidity is important due to my volatile earning (i.e. the possible need for more cash, which if I pay off house would just be invested in the house).

2. Invest $50,000 with Vanguard (probably using their advisor service...for a year at least so I can learn).

3. Invest $50,000 with a Robo-advisor (probably Wealthfront)..for a year at least. After that year or more I'll see which is performing better. Since I have exactly the same amount invested they should be pretty easy to compare. Also, after that year (or more) I may opt to not do the 'Advisor' services at Vanguard and just self-invest in various Index Funds / ETFS (or just the Vanguard S&P like you suggested).

4. Keep $50,000+ in Emergency Fund. While it might be foolish to keep this much in a Savings account, since i'm a freelancer and my income is highly volatile, I do need the liquidity on occasion (so as not to have to dip into the investment accounts). That said, can anyone recommend a more lucrative way of keeping 'SAFE' money. E,g, half in savings, and half say in Treasury bonds? (with a 1-yr maturity or something). That way the whole $50k is not going to waste...

5. $70,000 is now in my 401k. Due to tax deadline issues I had to rollover my single- 401k to a new Financial Advisor. He happens to be with Merrill Lynch (and I believe is charging 1.1--1.3% in fees/commissions. I thought about moving this soon to a 401k at Vanguard, but I discovered that Vanguard cannot offer account management / rebalancing services for 401k's (which ML does), so I'm undecided about what to do with this money.

Any advice on any of the above points would be most appreciated!

[Chris T]

Also - I am currently halfway through the Bogleheads' Guide to Investing. Good read!

[Five Scoop]

You could do a solo 401k at Vanguard and use a target date fund or a life strategy fund. They would be auto rebalanced so you wouldn't have to worry about that.

[vangocambo]

Why not sell the house and pocket the profit and buy a smaller house. Put all the profit into SP500, Emerging Market and Small cap index fund. I think you are set.