Posts Tagged ‘dollars’

One of the starting points to investing comes with the savings of ten thousand dollars. This seems to be a magical number for some reason, at which point people look for the best and most effective ways to invest 10000. Contrary to what most people would like to hear, when you invest 10000 you are not able to live a decent lifestyle off of the returns. In fact, even with an index fund that saw the S&P 500 climb more than 40% in 2009, that phenomenal return translates to just $4,000 in returns, clearly less than $350 per month.

When people want to invest 10000, the best advice a professional planner can give them is to invest for the long-term and “forget about it.” This makes the most sense for most investors as it will allow them to focus on saving their next 10000. More importantly, if the investor trusts the advisor and the advisor is even half-ways competent, he or she will recommend better ways to save that next 10000. Ultimately, people who want to invest 10000 will not receive advice on how to invest the original 10000 but they will receive advice on how to create even greater wealth through an appropriate savings and investment program that looks at building a proper asset allocation model as well as a rudimentary financial plan that takes taxation and some estate planning issues into account as well.

A common question facing many advisors today is how to invest 10000 given the market conditions. Some people will ask this question and revel in the entertainment value of the advisor’s response because, unfortunately, there is no generic response to this question (there should not be anyway). The reason for the many different responses is that financial advice cannot be given on a generic level… ever.

Without fully understanding the investor’s goals and objectives, the advisor really should not be giving any advice at all. For instance, investors with low to medium risk tolerance but a small appetite for growth may be inclined to invest in high yield investments. An investor with greater risk tolerance and a better appetite for risk would probably be best served in an equity fund with great long-term performance, low expenses, and greater opportunity for sustained long-term growth.

As evidenced below, the question about how to invest 10000 cannot be generically answered, so the responses out of different advisors can certainly be comical as they seemingly skirt the question and provide something of a well-rehearsed, industry compliant regurgitation of questions to the person asking what is seemingly an easy, straight-forward question.

However, for those who are serious about where to invest this magic number, websites such as www.MutualFundSite.org is a great starting point because it will point you to the right spots. First is your financial advisor/planner, and if you do not have one then at least this site will provide you with the basics. Second is what mutual funds (and other investments) are all about, particularly as long-term investment (wealth building) vehicles. Third is that after you spend a bit of time on our site, you will understand the basics of investment management so that you can not only stay on top of your own financial advisor or planner, but on top of your own investment portfolio as well. (A well-respected financial planner in my area has a slogan: “Financial planning is not a spectator sport.” This catchy slogan has not only helped him attract a great deal of local business, but it is also so very true. His clients know, up-front, that they will need to invest some time and effort in understanding their investments, which allows him to sleep better at night because he knows that these folks are not investing in “him,” they are investing in the plan he helped them develop).