You're 55 and have $100K to invest. What to do?

Keep your costs down and don't settle for meager returns if playing catch-up.

By InvestorPlace Nov 30, 2012 2:56PM

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By Jeff Reeves


One of the best parts about my job is interacting with real human beings who have real financial questions. Last week, I got a good one from a 55-year-old who just got a windfall of $100,000, but never had a penny in his retirement account before this sum.


So ... what should you do?


It's impossible to sum up all the ins and outs of retirement planning in 600 words or so, but here's my basic advice to get you started:


Invest in stocks for growth, investment-grade bonds for safety

A "safe" rule of thumb is to use your age as the percentage of fixed income or bonds you should hold (see InvestorPlace video) -- in your case, 55%. But seeing as you are starting from nothing, I might encourage you to be slightly more aggressive to ensure you grow your money fast enough. $100,000 or even $200,000 won't provide for much wiggle room if you want to retire at 65 and live to be 85.


Keep your costs down

Think about it this way: If you have $100,000, but you pay $2,000 in fees and trading costs and "research," you need to make 2% each year just to break even. If your returns don't justify these expenses, then you're throwing money away. If investing is intimidating, there is nothing wrong with going to a bank or a certified investment adviser to get advice or set up a plan -- but be wary of just giving them the keys to the castle. Sometimes it helps just to pay someone a few hundred bucks and sit down for an hour to discuss your specific situation.


Funds (particularly index funds) are your friend

If you have a basic idea of how to invest, don't feel like you need to craft a crazy portfolio with 20 investments or more. Instead, stick with mutual funds or exchange-traded funds -- preferably low-cost ones that are "passively managed" by being benchmarked to a fixed list of investments. The most popular example is the SPDR S&P 500 ETF (SPY) that charges a mere 0.09% in expenses -- or less than a $1 on every $1,000 you invest. Best of all, it's pegged directly to the holdings that make up the S&P 500 Index. So you get the diversification of all the big-name stocks in there like Microsoft (MSFT), Exxon Mobil (XOM) and Walmart (WMT) -- but you don't have to pay a high-priced manager to pick the right mix. It's built-in diversification, done cheaply. (Microsoft owns and publishes Top Stocks, an MSN Money site.)


Don't overdo it

The biggest problem investors have is that they trade too much or change strategies too quickly. They sell too soon because they are afraid a stock will keep declining, then miss the rebound. They buy a stock too late after it is already up 50% or 100%, then are frustrated when it never moves higher. They pay lots of money for fancy software and active trading … all just to spin their wheels. Research continually indicates that the best strategies are long-term ones, not ones that should change every month based on the whims of the market.


Paper trade before you get complicated

Over time, you may learn enough about the markets to want to branch out from index funds and into direct investment in individual companies. That's great -- but make sure you understand the practical matters of the market before you get over your head. I highly recommend "paper trading" (explained here at InvestorPlace) for a while before making any complicated moves. This involves simply writing down the amount you would theoretically invest and the shares you bought, then tracking the pick over time just like you really owned it. It's often the most instructive way to learn about your investing skills … and best of all, you can make beginner mistakes without losing your shirt in the process!


Related reading

Jeff Reeves is the editor of and the author of "The Frugal Investor's Guide to Finding Great Stocks." Write him at or follow him on Twitter via @JeffReevesIP. As of this writing he did not own a position in any of the stocks named here.


More from InvestorPlace

Nov 30, 2012 11:14PM
Yeah this is more easily discussed with a couple cocktails or a glass of wine in hand...TGIF.
Nov 30, 2012 11:10PM
This has served me well:  when you think the rules have changed and the market will go up forever SELL. The day you think the rules have changed and the market will go down forever BUY.  Don’t be afraid of bonds. They are there to keep you ahead of inflation and will serve you well the next time the market drops 700 points, which it will.  Nothing wrong with the advice of 55% - 45% but do know your investments. Spend some time on Vanguard’s website which has very low cost mutual funds and compare risks to rewards and remember that markets are driven by two things: Fear and Greed.
Nov 30, 2012 10:17PM

Put 55% into fixed income? Are you smoking crack? How do YOU get to write articles for this site? Wow that's brilliant, with yields at all time lows and no where to go but up once inflation starts to hit "officially" hit (it is already happening "unofficially") a bond portfolio is destined to lose value. You might suggest TIPS but there yields are ultra low and might be ok for a small part of a portfolio but not 55%. Also with this person not having saved anything to this point you also think he'll be able to trade and research investments? Wow again, I htink he would have tried that by now!


This person would probably benefit most from a Variable Annuity with a guaranteed lifetime withdrawal benefit for most of this money, and putting aside some cash for rainy day fund, like enough for 6 months to a year's expenses. He just needs to learn how to "operate" the VA and let the product carrier worry about the underlying investments as they are the ones who will be guaranteeing the withdrawal benefit. Yes VA's have higher internal fees than say a mutual fund but you can think of those fees as sort-of "investment insurance". You can get a nice VA from a well known insurance company through Charles Schwab and Company that has lower fees than you'd be subject to by buying virtually the same VA from a commissioned stock broker, so check out their website. You may need to invest in one yourself if you keep giving such sage advice!

Nov 30, 2012 8:36PM

Invest $99K in an extremely risky triple-leveraged market fund, either long or short.

It is the only way you will have enough (assuming it hits big) to retire in 10 years.

Spend the last $1000 on a gun and bullets in case it doesn't work out for you.

Nov 30, 2012 8:17PM
You were living without a plan, so the 100K is a gift.  Since you were OK not having it (retirement money), you can afford the risk.  Buy 170 shares of AAPL.  Let it ride to 1000.  Should take about a year, maybe two?   That will give you a 70K profit.  Meanwhile, educate yourself about the market and investing in general.  Look for value, pay attention to trends, become a investor. Reinvest the profits, grow your portfolio.   Keep working, save money,  find things you enjoy doing, turn them into a career.  Your greatest asset is your talent, often hidden from view.

Create your own opinions about money.  Don't let people convince you, you are behind.  Fear is a fatal emotion when it comes to investing.  "To thine own self be true."

Life is too short to not live fully.
Nov 30, 2012 8:17PM

Being that the person has not saved a dime towards retirement before now...Is perplexing? At 55.

Maybe they had planned on working until they are Eighty.....??

Because of that it would take me several pages to give them ideas...WHICH,,,,,,,

They probably shouldn't follow but, a small portion of anyway...They need to start reading today, and then read some more; Get a little advice from some friends....Learn to understand terms that a Financial Advisor or Money person might discuss with them....FIRST TIME Free Advice is always best....

Do not settle on the first FA/Broker you talk to, not even if it's the one your Grandpa used..Unless maybe he is a very close caring friend of the Family...Consider not using relatives, unless maybe a close loving brother or sister..? 

You have your work cut out for you at this age; But I took over all our investments at about the same age....Difference maybe, was I had been interested for over a decade before I did. Early 40s.

Nov 30, 2012 7:43PM

Gold has been a horrible long term investment.That`s Archie Bunker thinking.If you

put 60% in the S&p and 40% in the total bond marker over a 20 year span you`ll

beat 95% of the so called experts.

Nov 30, 2012 5:06PM
hmm a 55 year old man, with a 100k present. First of all he needs to pull his head out, as he should have already have a chunk in for retirement. Second of all, learn how investments work. There all kinds of investments out there, and all kinds of leeches waiting to take your money. NOBODY WILL LOOK OUT AFTER YOUR MONEY, BETTER THAN YOURSELF. Remember that!

  Sure a stash in the fund that mirrors the S & P 500 would help, but, also don't put all your eggs in one basket. Like the poster above stated, some gold would be good, preferably the real stuff, the stuff you can hold in your hand.  If you have the knack at fixing up houses, dealing with renters, then being a landlord can help. Watch your investments daily, and continue to learn how the stock market works.  I for one, would branch out into high quality dividend paying stocks, that pay out at least 5% in dividends. Under 5% stocks that have growth potential is ok, as long as they are sound companies. MLP's are an example, but, you need to know they come with tax issues. BDC's are a great way to get great dividends, and are lower priced stocks, but, do your due diligence..meaning know when to buy, and what price to pay. Some BDC's pay out dividends every month. Mortgage REIT's pay great dividends, but, know which ones are sound. Lots of smaller industrial stocks pay higher dividends, as well as the shipping companies, but, no more than 10% of your portfolio.

  Spread your risks out, study your investments, and know what the companies you invest in do, to make money. Don'tt take others advice, unless you know what the heck your investing in, and more importantly with WHOM your investing your money. Remember Bernie, Madoff??  Lots of rich, and elites invested in him, and they lost big time.  Just because they are rich and maybe celebrities, doesn't make them actually smart when it comes to investing.

  Either take your dividends as cash, to invest in other stocks or investments, or reinvest the dividends back into the stock for future gains and accumulate more shares.  Over the long haul, retirement could be nicer because you did your own due diligence. Also, NEVER FALL IN LOVE WITH A STOCK.  I keep trying to tell my father that, as his original investment of $4,400 has turned into $220,000. He has never rung the cash register on that stock. At least take back your original investment. Like playing blackjack, when your up, and beyond your original investment, stash the original, and play on the houses money.

Nov 30, 2012 3:55PM
The u.s. will be greece under 8 years. there are to many leeches in this country called liberal idiots. To maximize your money and to keep the liberals out of your wallet, first, do not invest in real estate, bonds or stocks. There is only one stock to invest in, utilities esp. in a roth account. The best place to make money is to buy and sell (flip) collectibles like coins, stamps, art, old u.s. currency, world coins, baseball cards etc. then dump your profits into dividend utilitiy stocks in a roth ira.
Nov 30, 2012 3:25PM
Buy Gold/Silver...  Avoid bonds, CD's cash.  Invest  in stocks and overseas stocks.  

The US is going to be the next Greece.  Profit from that!
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