I received an email from an individual asking “where to invest money to get good returns? Current situation: I have $10,000 sitting in my traditional IRA. I sold some stuff 2 months ago when everyone was saying better to be in cash and now with markets at their peak no idea how can I put that money back to work? I am about 7 years away from retirement and since I started investing in 2007 (after moving to USA), my portfolio is very aggressive growth almost 95% equities. I am fully aware of the risk and somehow I feel lucky after last December’s drop, now the portfolio is almost where it was. However considering my age, I am transitioning to less aggressive investments.
Answer: Where to Invest Money To Get Good Returns?
The fatal flaw here, which I think you recognize, is the selling “when everyone was saying.” That’s not investing. I think the consensus of the investors on this forum is that herd mentality will lead one no where, unless it’s over a cliff.
OK, that said, you’re looking for advice. That would start with asking what your timeline and objectives are for these funds and is this a piece of a diversified portfolio or the whole IRA. Recommendations could differ dramatically depending upon the answers here and it’s impossible to recommend specific investments without that. But, unless you need the funds in the short term, getting back into the market either by bolus purchase of an ETF or Mutual fund or by spreading the investment out over smaller purchases in the next six months are both reasonable answers. If you give some additional information, investors on this forum who are more savvy that me will offer specific suggestions.
Yes, some may point to a market at record highs and say be cautious (but that’s akin to the advice you acted on 2 months ago). But does anyone really know if the next move is up or down and how long that direction will be maintained? We can look at historical data, but then we get into the ‘past performance does not predict’ caveat. The key factor for investing will be asset allocation and not predictions of what may happen in the short term. Each time my wife and a received a bolus of funds through inheritance (3 times since 2008), we invested immediately. And our regular retirement contributions went in and we never pulled a dime in a downturn. As a long-term, now retired investor, I’m very happy with the outcomes.
The bottom line is that understanding yourself–goals, needs, time frame, and risk tolerance–may be the most important thing to success in investing.