Where is the single best place to invest a $50K after-tax windfall now? Assume the following: you don't need the money for at least 10 years, you've already max out 401k and Roth IRAs. Pretend that the windfall came under a couple conditions... 1) You can only invest it in one area. 2) If your investment doesn't make 6% a year you lose it all.
I had a purpose with the stipulations. I was hoping to coerce the bloggers into coming up with a typical investment that might be a bargain right now. In my opinion many investments are currently getting too "expensive" for their prices. I have no interest in many stocks and sectors as they are near the top of the market. Gold has had a huge run-up over the last few years. The dollar seems to be getting weaker every day. Median home prices in my area are 870K. That eliminates any real estate investment for me, because I already do the long distance landlord thing and I'd probably get out of that game if it wouldn't cost me thousands of dollars. Commodity prices seem to be soaring by all accounts.
I had been teasing with the answer that I would give. I'd be tempted to invest with Prosper basically because there seems to be a lot of demand from overextended Americans. I've also done much better when I've reviewed my strategy over the last 6 months. However, I'm not quite that confident to put 50K to work in Prosper. When I originally planned the question, Pharmaceutical HOLDRS (symbol: PPH), was looking like a bargain. It's had a run-up in the last couple of months, and it's now looking expensive like many other companies. I then looked at Vanguard's Healthcare ETF (symbol:VHT) and that looks more promising to me. It's still up around 19.5% this year, so it doesn't fit my bargain hunting criteria. They say the third try is the charm. I found Biotech Holders (Biotech HOLDRS:BBH). It's up only around 2% this year, so there's reason to believe that there's to grow. Over the last three years it's up 23% compared to the S&P500's 42%. The clincher was it's holdings - Amgen, Genzyme, I think these companies, and the sector in general, is well positioned for the next ten years.
8 Responses to “Money Question: What Would you do with a Windfall? Part 4”
Next: Efficient Frugal Shortcuts