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 InvestorPlace.com and the author of "The Frugal Investor's Guide to Finding Great Stocks." Write him at editor@investorplace.com 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

72Comments
Apr 5, 2013 2:47AM
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I had money and didn't know what to invest in until I meet with a friend who referred me to a professional. He’s a little different but I made an investment that changed my fortune. You need a referral code so that he knows you came thru me. When you email him, include this code in your mail. I’m sure you’ll get your answers.
Referral code: M5CMTR8. His emails: cliff.mystic@gmail.com, cliff.mystic@yahoo.com.
Dec 3, 2012 12:42PM
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Buy a house with 20% down and section 8 the house and have income for along time and keep the 80,000
Dec 3, 2012 11:06AM
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Go all in on (mpel) Asia is addicted to Gambling, if your 55 and that is all you have to invest, being deverse is for wimps ,and chicken scratch .What do you have to lose 100000, so what if it only doubles in 3 years,  work until you die, your half way there anyway
Dec 3, 2012 10:23AM
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High quality dividend stocks are your best bet for the long term money growth. Too many people are selling their dividend stocks for the wrong reasons. Today  a $1.00 dividend gets you $.85 with 15% tax. tomorrow a $1.00 dividend gets you possibly a low of $.61 with 39% tax. Do these sellers say the $.61 is not something to bank on? Put these stocks in a Roth. I  laugh all the way to the bank every quarter
Dec 2, 2012 11:52PM
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Damn just happen to check.....About 130 post or comments away from 8000....

That's a lot, think I will just maybe fade away like I did 7-10 years ago...Maybe had a few hundred to  2000 then....Different name maybe even diff ISP.....?

 

How can we get transcripts of all this crap...??

Dec 2, 2012 11:17PM
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Quit trying to sell CHK, Crazy....You will scare off the all the good investors...

And the dumb ones won't get on board anyway.

Dec 2, 2012 9:36PM
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If that is all you have , play, lvs, or ,mgm ,or mpel ,  there you go (mpel ) asia loves to gamble , go all in. screw the gurus   . Just know when 2 sale   when it doubles  . in about three years......... 

Dec 2, 2012 6:22PM
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That does sound interesting...Was looking at a couple Oil patch plays today...

One thing, or bothersome item of what you listed is the CNG part....

They have talked or tried with CNG applications for years...Always plays out after a year or two....??

 

And it always reminds me of a BOMB on wheels...?

If they can get away from that perception or possibility, then maybe something can be accomplished.?

Thanks for the info...On way to Club, Nursing(rehab)place to see friend, then to a Xmas tree lot that my friends have with a bar in the warm up trailer...Cheers too.....

Dec 2, 2012 12:32AM
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Have a nice night to all...And Church as well...

Have been watching "It's a Wonderful Life" w/ Jimmy S..(Kind of forced,again); But  Gen. Stewart is one my favorites anyway...It's a nice show..Always next year.

 

So kind of got my Hope for Humanity tonight, along with my second, good mixed.

 

Have a safe weekend....All

 

Dec 1, 2012 11:34PM
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Tog, I am going to church tomorrow, good night.
Dec 1, 2012 11:13PM
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HEARING AIDeS....OMG...On every corner(there's your answer) too much competition.

 

Think a lot are ma&pa and/or Franchises......Sweet Geezus.

 

We just use a busted off beer bottle, rolled up paper or yell real loud...Mainly at the TV.

 

Or neighbor's kids...GET OFF MY LAWN.....We have a big yard, usually just post it.

Dec 1, 2012 11:06PM
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Obamacare or Romneycare.......Healthcare has done well Flush or recovered well, but has been stagnating and waiting?...Eventually the "boomers" can't.

 

We have around 4-5% in the Sector, used to have more, cut back during stagnation.

We should have around 7-9% like before....Waiting also, BUT I'm thinking Generic Drug maker ??

We used to own one...Stupid, I got rid of it.....We were in/out twice when it was cheap..

Now over $100 a share....Stupid,stupid,stupid.

 

Your other vesting attitudes will serve you well...Good diversification...IMO

Dec 1, 2012 10:57PM
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Mr. Atwood...Thornburg Lmtd. a State Muni is a pretty good fund...I agree...(LTCI)

It has a 5-Star Morningstar rating....The Best..

And has done well on Appreciation and Dividends(?) the last 3 years, about 5% avg..

BUT many Funds and Stock/Equities have done well since early 2009.

 

Being tax exempt on Fed and Calif taxes...It would probably be a better investment for a California resident ??....And it invest in all Cali Companies or Utilities...

Good place to park "safe cash" overall...IMO....in California. 

Dec 1, 2012 10:47PM
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VANHALEN....That was a "windfall" for the "guy" or couple at age 55 (nice windfall) BUT he/they had "not saved anything else" for retirement until that time at age 55..

Need to go back and read the article, Bud.

People with windfalls have a tendancy to blow some of it..Sometimes too much. ie; Lottery winners.

 

PocketPro....That's the best advice I've read or heard...You can retire well on a $1,000K...Lol. 

Dec 1, 2012 10:40PM
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Down here in Fl. they have hearing aids stores on every corner. They cost a lot too. I think about 1800 dollars. I don't know how you would invest in that market. I think they are made in China invest in the Boomers market and you will make money. My simple thinking. LOL
Dec 1, 2012 10:35PM
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CRAZED.....yEAH, I agree with parts, but still you are suggesting "putting all the nutz in one basket."

 

Not good investing advice....PERIOD.

 

I would have a lot more "positive" opinion on Chesapeake(CHK) if we weren't out about $8000 minus dividends...Well not quite that much, because we bought down much below the high of about $35 p/s.

Still we are losing...I DON'T LIKE LOSING...And the div is ONLY around 2%..

I don't dance to the HURDY GURDY very well....And not for long either..

Tell me something POSITIVE. Crazy

Dec 1, 2012 10:31PM
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"You're 55 and have $100k to invest.  What to do.?"  Find another $900k right away and PRAY that you can retire at age 67.
Dec 1, 2012 10:24PM
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I think with Obamacare, healthcare stocks will do good. The boomers are going to need health care.
Dec 1, 2012 10:01PM
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When you think Inflation or worst, a Recession..Invest in things people need not what they might want.

What stores you go to every week, what you buy, what you can do with out? What you have to have?

What comes to your door or your neighbor's door or what they buy..

Restaurants like McDonalds and Yum Brands....Most other restaurants got pounded.

 

Everyone has to eat, everyone usually wipes their butts and has their garbage hauled, everyone buys fuel until they don't have jobs....But still somethings they can't go without very easy..

 

Surprisingly tobacco didn't do too bad...But like several other Companies they also had International exposure...Maybe not so good in a few more years...With laws and regs being instituted.

Dec 1, 2012 9:43PM
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Crazy....Think you are over confident about CHK, but hope it works....Down about 3% Friday.

Carl Icahn and the other guy, wanting to take more control...And more assets to sell, but that can't last forever...Icahn might be the best or worst hope....?? We will see.

 

And if I had 100K it wouldn't "all" be going there, even with their depressed price.

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