Where Should I Invest $50,000?


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By this point, we all know that inflation is likely going to soon rear it's ugly head. Fed Chairman Jerome Powell said as much in his recent talk in Jackson Hole, Wyoming. It's my guess that any investments made by average folk like myself will have an eye on dealing with this and hedging against it. My question is, if you had $50,000 today, where would you invest it? I happen to have this money and I'm at somewhat of a loss as what to do with it. It's in cash right now and I do have approximately $200,000 more in equities, so I understand I'm not balanced at all. Would you buy bonds with this extra $50,000? More equities? What would you do?


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I would say the answer to this question depends on a few things. How old you are, whether you're attempting to hedge against inflation, or whether you're trying to actually make money off inflation. Or, are you simply trying to maintain a balanced portfolio while inflation is occurring.

Warren Buffett says that the best hedge against inflation is to improve your own self worth. If you become worth more professionally during an inflationary period, you'll command more pay. Also, if you own a strong business that offers something that people need, you'll also be in good position to ride out the inflationary wave. While inflation does exist, it's not an end-all to earning power. Many people make a lot of money during times of inflation.

There's a really great article about investing and inflation you can read. It talks about how investing in equities can either help or harm you. If I read it correctly, I deduced that investing in value stocks during an inflationary period is better than investing in growth stocks, but you need to really analyze what's happening in the supply chain of these value companies to make a good decision. Personally, I would opt to go for a balanced approach. I'd try to maintain a balanced portfolio of stocks, bonds, real estate, and commodities. And within the stocks, I'd diversify between domestic equities, foreign developed nations, and emerging markets. And within the bond world, I'd diversify between regular bonds and inflation protected bonds.

To answer your question more clearly, I'd probably put the $50,000 in ETFs: inflation protected bonds, gold, commodities, and real estate. There's only so much we can do, so that would be my advice. Now, if you wanted to become a hard core real estate investor, you could buy a house now with a big mortgage and hope inflation hits. You'd have a low rate fixed mortgage and then in a few years, that loan would seem like peanuts, depending on how much inflation we're facing. You could sell the house for a handsome profit after the inflation thing has calmed down. But if you don't know what you're doing as far as real estate investing, stay far away from that. Far too many people have lost their shirts doing that type of risky investing.


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I like real estate. Personally, I feel that if you buy a REIT through an ETF like VNQ, it's a safe investment. VNQ is returning 4.5% dividend right now and it's actually one of Vanguard's. It's the largest REIT ETF in the world. And with Trump's tax law from 2018, you can buy RIETs in your taxable accounts too. They're now tax advantaged because of the QBI deduction. This is way over my head, but I've been doing a lot of reading on it lately. I like the returns that real estate gives much more than the supposed safety of bonds. And with inflation around the corner, I think real estate will fare a lot better than bonds.


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If you had invested $50,000 in NLY (Annaly Capital Management) on August 28 at $7.46 per share, you would have been able to buy 6,702 shares. Today, the value of the stock is $8.23, so the value of your investment would be $55,157. So that's an increase of $5,157 in just a few months. Not bad. During those months, you would have earned a healthy dividend as well. Let's just say the going dividend was 10% per year at the time, so you would have earned 2.5% on your investment so far, just in dividends. That would be around $1,250. So if you sold today, you'd have made around $6,300. I'm giving very general numbers here to make it quick. That's an awesome investment though. Of course, it could have gone the other way just as easily. That's the problem with risky investments. And I wouldn't say that Annaly is particular risky, but it's not not risky either.