Investment Strategy for a 30 year old

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raul777
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Joined: Wed May 15, 2019 9:26 pm

Investment Strategy for a 30 year old

Post by raul777 » Wed May 15, 2019 9:44 pm

Situation (May 2019):

1. Non-401K Assets:
- $350,000 in cash (assume cash for this discussion)
- $50,000 in Company Stock that I do not intent to move (Google)

2. 401K Assets:
- $110,000 (in Vanguard)

3. $100K saved every year for the next 5 years (at least, additionally on the investments above)

Finance Goals:
1. Need to pay ~$225,000 down payment on a house in the next 12 months.
2. Get Mortgage of ~$500,000 in the next 12 months to pay for the house (interest rate between 1-2% APR, Germany)
3. Ideally, want 6-7% Returns on non-401K money through investments.
4. Ideally, want 3-4% Growth on 401-K money for the next 30 years through investments.

Questions / Help:
1. What is a good investment strategy to invest my $350,000 today?
2. How should I factor in the $100,000 savings coming in every year (at least for the next 5 years)?
3. What should be my investment strategy for 401K to achieve 3-4% annual growth till retirement?

@ Experts / Enthusiasts - Please let me know. Thank you!

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Watty
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Re: Investment Strategy for a 30 year old

Post by Watty » Wed May 15, 2019 10:51 pm

There are a lot of unknowns in your post like what your tax situation is, what country you live in, and where you are likely to retire.

A few things;
raul777 wrote:
Wed May 15, 2019 9:44 pm
1. What is a good investment strategy to invest my $350,000 today?
You need $225K for the home down payment so that should be in something like a CD or a money market fund.

You also need an emergency fund if you don't have one so you would have something like $100K to invest. A sort of general recommendation would be to use a three fund portfolio.

https://www.bogleheads.org/wiki/Three-fund_portfolio
raul777 wrote:
Wed May 15, 2019 9:44 pm
2. How should I factor in the $100,000 savings coming in every year (at least for the next 5 years)?
It would not change anything now, when you actually get the money just invest it according to your desired asset allocation.
raul777 wrote:
Wed May 15, 2019 9:44 pm
3. What should be my investment strategy for 401K to achieve 3-4% annual growth till retirement?
In your planning you would consider all of your retirement funds together as one big portfolio and the three fund portfolio would be a good way to manage the money.

megabad
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Re: Investment Strategy for a 30 year old

Post by megabad » Thu May 16, 2019 1:46 pm

Since I assume you are a German resident, maybe more/better responses would be obtained in the non-US investors forum topic? Unfortunately I have very little knowledge in that arena.

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DanMahowny
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Re: Investment Strategy for a 30 year old

Post by DanMahowny » Thu May 16, 2019 2:39 pm

Short Tesla.

There is no better opportunity to make money.
Funding secured

lazylarry
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Re: Investment Strategy for a 30 year old

Post by lazylarry » Thu May 16, 2019 11:02 pm

Yeah I can't tell if you just have a German house and are a US citizen. However, if you live in Germany, there may be different indices to follow - often it's not best to follow US indices.

Otherwise +1 to what Watty said. I'd only add to pay the mortgage as slowly as possible given the low interest rate, if it's fixed.
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lakpr
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Re: Investment Strategy for a 30 year old

Post by lakpr » Thu May 16, 2019 11:24 pm

I believe the mortgage interest rates in Europe are not fixed as they are here in the US for the duration of the loan. I believe the interest rates do reset periodically based on some benchmark rate. That said, 1 to 2% mortgage rate (as the OP indicated) is awful cheap money, so I would not prepay a dime more than necessary. If the interest rates rise substantially then perhaps revisit this question.

I would advise to do a liability matching investment on the non 401k money. Invest that money in Vanguard Treasury Money Market fund which is super liquid / super safe and is yielding 2.34% now; granted the 0.34% arbitrage is not much but provides enough liquidity to repay the loan in one fell swoop. (Assuming here that there are no penalties to pay off the mortgage in advance). The 401k money should be invested fully or mostly in stocks, to balance out the bond-like investment in taxable account. Once the taxable account has enough to pay off the mortgage, then subsequent investments should reverse the direction; stocks in taxable, bonds in 401k.

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