What to do when you have a bit but not a whole lot

The Something Awful Forums > Discussion > Ask/Tell > Business, Finance, and Careers > What to do when you have a bit but not a whole lot

lllllllllllllllllll: Feb 28, 2010; Now the scene's lighting is perfect!

My situation: I inherited some money (around 40K Euros). Being an anxiety-ridden sadbrain without a job it was the slowly draining fund-that-will-keep-me-from-experiencing-the-horrors-of-the-world. Now that my situation improved and I happen to have a job and a family, I wonder if there is something more productive I could do with it. My options as I see it:

Savings bond ("Sparbrief"): Gets like 1% interest rate, can't access money for a while. Doesn't sound so attractice.
Stocks: I have no idea where and how to invest but I'm willing to learn. With this "little" money I can't compensate when stocks take a dive though.
Buy property: I won't get far with 40k, but I could ask my father to help me out and we could possibly buy a small house or apartment (not for ourselves). Thing is: I am not much of a craftsman and we'd pay for every repair. Plus there is the problem of choosing the right renters and we can't move too far away if we want to. Seems like a lot of trouble for something that will pay off in several decades.
Something else: buy wood or something unusual like that. No idea.
Precious metal: At the very least turning money into metal is good against the effect of inflation, isn't it? While the money's value will lessen, silver/gold/platinum will not (in the same way at least). I think this is my favourite option right now. I am uncomfortable with the idea to stash silver somewhere in the apartment for an indefinite amount of time though, which could eventually be stolen (unlikely but possible).

Also, I am in Germany. I appreciate all thoughts and additions. I am very sorry all this will sound terribly naive to most of you. Thanks for reading anyway.

# ? Aug 18, 2016 10:16

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# ? Apr 25, 2024 09:47

KYOON GRIFFEY JR: Apr 12, 2010; Runner-up, TRP Sack Race 2021/22

Do you need this money in the near future, or is this now serving as long term investment through to retirement?
General rules of thumb with windfalls:

1. Pay off debt if you have a lot or have relatively high interest debt
2. Build a liquid savings cushion that can cover for you in case of the loss of employment, family emergencies, etc. A good rule of thumb is to keep at least a couple month's expenses on hand accessible in a savings account.
3. Apply the money to your goals

What are your goals? Do you want to buy a house at some point? Do you want to retire early? Do you want to work less and live off money (probably not possible since it's not a lot of money)

I will now respond to your concepts in order:
1. Savings bond - not the worst idea but the return is terrible
2. Stocks - index funds for major European indices exist. An index tracks the performance of a group of stocks - the DAX is large German companies. An index fund means you own a little bit of every company in the DAX - if the DAX does well, collectively, you do well. This is better than trying to pick individual stocks because it requires less active management. Best for a "buy and hold" strategy where you don't need the money for at least 5 years.
3. Property - even if this weren't a horrible idea (it is), you don't know anything about it, making it a horrible idea
4. Other commodities - even if this weren't a horrible idea (it is), you don't know anything about it, making it a horrible idea
5. precious metals - easily the worst idea you've put to paper

Unless you have some specific goals that the money would help you attain, I would park the money in an index fund of some kind if you think you might want use of it before you retire. I'm not in Germany, so I don't know German tax laws regarding tax-advantaged retirement accounts. From what I can tell, German pension/retirement programs are quite complex and you should probably speak to a specialist if you plan to invest the money for retirement.

# ? Aug 18, 2016 13:39

moana: Jun 18, 2005; one of the more intellectual satire communities on the web

Agree with everything Kyoon said, for the love of god don't go buying precious metals to avoid inflation. There are plenty of ways to avoid inflation that aren't ridiculously bad ideas for a newbie investor.

While your specific recommendations might not be the same as far as what exactly to invest in, the concepts will be the same. Have you read the Long Term Investing post stickied at the top of the forum? You need to decide on your goals and the timeline horizon you have, because that will be the main thing that informs what you want to invest in.

# ? Aug 18, 2016 18:58

Elephanthead: Sep 11, 2008; Toilet Rascal

Can you leverage the money to get some skills to get a better job? Education has a really high rate of return.

# ? Aug 18, 2016 21:46

lllllllllllllllllll: Feb 28, 2010; Now the scene's lighting is perfect!

Wow. Never thought I'd get such specific and helpful answers. You guys are the best.

KYOON GRIFFEY JR posted:

Do you need this money in the near future, or is this now serving as long term investment through to retirement?

Let's see. My car's 16 years old and surely needs replacement within the next three years. This year if I'm unlucky. So that'll be 15.000 EUR (rough estimate). Other than that I'm fine I think.

quote:

1. Pay off debt if you have a lot or have relatively high interest debt
2. Build a liquid savings cushion that can cover for you in case of the loss of employment, family emergencies, etc. A good rule of thumb is to keep at least a couple month's expenses on hand accessible in a savings account.
3. Apply the money to your goals

Good advice. Let's see...

1. Does not apply.
2. 2-3K should be enough.
3. Okay!

quote:

What are your goals? Do you want to buy a house at some point? Do you want to retire early? Do you want to work less and live off money (probably not possible since it's not a lot of money)

Getting the most out of what I have is my goal currently. Also saving something for the kids' future I guess. Also simply relying on my retirement pension for old age seems like a bad idea. This should be avoided. There are two old-age pension insurances initiated by my mother years ago. I pay 50 EUR and my father 150 EUR monthly. Seems steep. Not sure if I should keep them.

quote:

I will now respond to your concepts in order:
1. Savings bond - not the worst idea but the return is terrible

Agreed.

quote:

2. Stocks - index funds for major European indices exist. An index tracks the performance of a group of stocks - the DAX is large German companies. An index fund means you own a little bit of every company in the DAX - if the DAX does well, collectively, you do well. This is better than trying to pick individual stocks because it requires less active management. Best for a "buy and hold" strategy where you don't need the money for at least 5 years.

Excellent idea! Thank you. I'll talk to my bank.

quote:

3. Property - even if this weren't a horrible idea (it is), you don't know anything about it, making it a horrible idea
4. Other commodities - even if this weren't a horrible idea (it is), you don't know anything about it, making it a horrible idea
5. precious metals - easily the worst idea you've put to paper

Ah, okay. People in my family are concerned about how "the money will be worth nothing" and urge me to buy gold, but I'll ignore them.

quote:

Unless you have some specific goals that the money would help you attain, I would park the money in an index fund of some kind if you think you might want use of it before you retire. I'm not in Germany, so I don't know German tax laws regarding tax-advantaged retirement accounts. From what I can tell, German pension/retirement programs are quite complex and you should probably speak to a specialist if you plan to invest the money for retirement.

I'll probably do that. Thank you KYOON GRIFFEY JR!

moana posted:

Have you read the Long Term Investing post stickied at the top of the forum? You need to decide on your goals and the timeline horizon you have, because that will be the main thing that informs what you want to invest in.

Well, okay. I think I understand the concept better now. Thanks!

Elephanthead posted:

Can you leverage the money to get some skills to get a better job? Education has a really high rate of return.

I was planning to work at least a year to see if I want to stay in this field (like I have any other chances) and then perhaps go back to school. I will keep this question in mind though.

So far my goals are:

1. Discover the documents for those old-age pension insurances (hidden somewhere at my parents' house) and learn exactly how much I can expect and when. Decide if I should keep them.
2. Probably invest 20 of my 40k EUR in index fonds as advised. Keep 20K EUR for possible new car and other expenses (safety cushion).
3. Roughly set a date where I decide if I want to keep this job, move on, or move up (go back to school) - probably next summer or spring.
4. Forget about those other investment ideas.

Oh, and rereading the sticky I guess. That about covers it. Thanks again for the helpful advice!

# ? Aug 27, 2016 11:40

The Something Awful Forums > Discussion > Ask/Tell > Business, Finance, and Careers > What to do when you have a bit but not a whole lot