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hey, looking to invest 20k safely... i've got a small vanguard star fund roth ira set up, with not much in it, about 10k in series EE bonds from the 80s making about 4.25%, an emergency fund account at hsbc direct which makes 1.10%... I was considering getting some high yield CDs for 12 months at Ally at 1.44% and the raise your rate CD at 1.74% for 2 years but don't really know where things are headed. I was also looking at the vanguard target retirement funds but the star fund seems to be ok. I'm not really good at this stuff, tried to learn but it just doesn't click with me, financial advisors scare me, advice?
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Have you looked for a financial advisor?
If you want DIY advice, you need to start by setting goals and establishing what you are investing for- that will determine many of the issues which follow. -
basically investing for retirement which would be like... 35-40 years out. i've been to a few financial advisors and they just seem like salespeople and i don't trust them.Comment
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If you are not planning on touching this money in 30-40 years my recommendation will be invest it in the stock market. A mutual fund will be good to diversify.Comment
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what are your thoughts on the vanguard prepackaged funds like the star fund and the target retirement funds?Comment
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I would go to vanguard website and take their questionaire for a new investorOriginally posted by swampthing View Post
then do same at 2-3 other competitors (T Rowe Price, Fidelity, Schwabb...)
Those questionaires will ask you how you perceive risk (like if market goes down 40% what would you do...)
and then compare results
Each site should give you a % stocks-% bonds, and possibly a % domestic-% foreign allocation
If you take 2-3 questionaires made by different people (companies) you can get a feel for what is consistent across all of them (like 60-80% stocks and 20-40% foreign) and what is different (20% large caps vs 40% large caps) and narrow down what you need to focus on.
If your income is self employment, then you have a set of IRAs available to you... if your income is from an employer (W-2) you might have a 401k or 403b available plus a different kind of IRA.Comment
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I like them. STAR is ideal when your starting balance is $1000, but once you get to $3000, you may (or may not) want to look at other funds they offer.Originally posted by swampthing View Post
The target retirement fund is a great way to start your retirement investing in a tax advantaged shelter like an IRA.Comment
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what would you guys reccomend doing with money on a short term basis? CD rates stink... I Bonds area intriguing. Series EE bonds seem cool but the end rates after 10 years stink... and that's not short term. Are rates going to ever go back up to where they were years ago?Comment
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If you are investing in cash, you are doing it for diversification and safety, not for the high return.Originally posted by swampthing View Post
Focus on risk first, then investment choice second.Comment
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I may be biased but I think you should do your research into some biotech stocks... there are certainly a few that are ridiculously underpriced at this point that I expect to double within 6-8 months...Originally posted by swampthing View Post
...just like CHTP did, within a month.
or maybe I was lucky... since NOBODY can beat the markets, right?
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You did get lucky on CHTP though...that was what I was trying to imply with my roulette wheel investment example in the other thread.
CHTP has a operating cash flow of -30M and 23M in cash. If something had gone wrong with the study or they were required to perform another identical one because of flawed data, it could have gone very bad. (there still must be something weird going on with this stock, because it is swinging 8% even on a pretty calm market day). But I guess that is where swing traders make their money. Is the escapement mechanism just the uncertainty over when CHTP will issue more common stock to raise cash for the next trials?Comment
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Well, sure, you can say I got lucky... or maybe I did enough research to have the odds greatly in favor of being correct. When it comes down to it, focusing on the cash flow is essentially completely irrelevant here. The question was, when I bought on Aug 10th: "Is CHTP likely to have a positive phase 3 result? Is there going to be a runup into those results?" And in my mind, the answer was overwhelmingly... "Yes" And so I bought CHTP. IMO, the meat of the play is over... why not buy the NEXT CHTP? So, I did my research, and bought what I think is the next CHTP, and we will see.Originally posted by KTP View Post
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Hmm... I don't even know if I want to get into this tangent.
But I am currently working for one of the big pharmas right now. I see these research scientists every day, and even after phase 3, they can't tell if they'll get FDA approval. And if they can't tell....
One of my sister worked for a smaller research pharma, where I think one of their phase 3 fizzled, and they had to dramatically cut staff to maintain cash flow for another pipeline. She worked management in the project, and she couldn't tell if it was going to work out either....
But I admit, there are traders out there who make it their "thing" to speculate on such pipelines. Some are comfortable enough or maybe knowledgeable enough to do it, but I'm not. Not even close for me. In fact, I really don't know how they do it. Maybe they just buy a call contract or two and call it a day. That's not bad.Comment
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So... just to clarify here, I think you are looking at the 'black box' of biopharma investing like most non-traders, and that is that you lump all drug trials/decisions together.Originally posted by Broken Arrow View Post
First of all, there is an absolutely ENORMOUS DIFFERENCE between an FDA drug decision (a PDUFA) and a company presenting the results of a phase 3 trial. Often, newbie investors conflate the two, because while it is true that a company cannot get FDA approval without a positive phase 3 trial, having the latter does not guarantee the former.
When it comes to PDUFA decisions, there are far more variables... does the FDA want additional data? do they want a REMS? Do they think that such-and-such drug causes cancer in rats at 500 times the normal human dose?
For any of these reasons, it is a very very risky bet to gamble on the FDA outcome.
Just to further clarify, all of these PDUFA decisions this past month (ARNA getting rejected, AMLN getting rejected, etc) were FDA DECISIONS. However, if you look at CHTP and the phase 3 results presented around mid september, that was a Phase 3 trial, NOT a PDUFA. Huge difference.
When it comes to phase 3 trial results, all you have to worry about is "Did the drug meet the primary endpoint?" In the case of CHTP and Droxidopa, it was abundantly clear that it would, based on the partial data they were releasing beforehand. Anyone that did deep DD would know that it was going to hit that endpoint. It is also abundantly clear that it will succeed in the 306 trial, which is in early 2011... if you look at the data in the Parkinson's subset of the 301 and 302 trials, and extrapolate to the 306 trial, you will see that it is almost certainly going to succeed. But that is months away, and an eternity between now and then, and there are better plays in the meantime. But I digress
So essentially, what it comes down to is to understand the probability of a positive or negative outcome, and your reward (or punishment
) if you are right or wrong, respectively.
I stand by my assertion that there are certain binary decisions where it makes absolute sense to hold through. Just as a tip (but not to give away all of my secrets), do you think it is safer to hold through a phase 3 result in small cell lung cancer? or one where you give a drug that is literally a precursor of a known pressor (for those medical folks) and check if it will increase blood pressure?
Which one do you think has less variables and things to go wrong? Which would you bet on?
Just asking
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Okay, I'm going to try to get this back on topic.
First of all, you are sitting on some cash - it's fine to put your money in a Target Fund, if it's long term. You could do worse. My only suggestion is just based on your choices (Series EE bonds, etc.), you seem a little more risk adverse than most people and that's okay. . .I would perhaps steer you towards Vanguard's Wellsely fund - it got about the same return as the S&P 500 but without the risk because it owns more %age of bonds (about 60%).
NOw. . .as to a financial advisor.
Here at Saving Advice, we are kind of do-it yourselvers but I have never been opposed to getting a financial advisor if it's really not your cup of tea.
I would search out 2 potential arrangements.
Probably the best is a fee for service arrangement. You go in, you consult, he/she makes recs, you follow (or not) and you pay for unbiased advice, like an attorney or an accountant.
If you can't afford that or don't like this arrangement, I always thought the next best arrangement was a %age arrangement.
It would work like this - you hand over $20,000 to me to invest at my "house". I get a 1% commission per year on assets, so I get $200 per year to start. I then make co-decisions with you after getting to know you and maintain that relationship. I get you to automatically deduct from your checking into my "house" and together we build wealth.
THis is more like a "real estate agent" relationship.
I like this one because let's say we have built $1,000,000 together and I am getting $10,000/year managing your wealth.
Think I want to take too much risk with it? No. In fact, maybe just the opposite - I don't want to overly risk my 10K per year paycheck on you.
THink I want to make you trade around just for the fun of it (raise trade fees)? No. Not making any money on trades like Merrill Lynch people used to (not sure if they still do)
Hell, I would just perhaps keep in a mix of bonds and stocks and let it stick. And it let's you not worry about your money. You have some other guy who you have lunch with 1-2X/year and gets to personally know you and your goals in life (it can be actually kind of nice). Part of this relationship should almost be like the Genius Suze Orman does:
"CAn I afford it?" and she answers it.
In other words, you plan to spend that money someday. . .a financial advisor, along with an accountant, should help you with that. I know I am going to need to spend my college funds, every last penny of them, for instance.
That's what investing is for, not to just build wealth and wealth to give to a brat grandchild someday who goes out and blows it on a sports car.
Finally, the worst kind of financial advisor relationship to me is the Loaded Mutual Fund relationship, which unfortunately is the most common.
This is where you hand me $20,000 but then I turn around and invest $18,500 by you paying front end loads on mutual funds and mutual funds that may even be "average" at best in performance. To boot, these people will often tell you that loaded mutual funds outperform no-loads, which is a flat-out lie. The only advantage loaded funds may have over no-loads is they are less volatile, but they return nearly identical, actually , no-loads return more because there aren't a lot of fees with them.
Unfortunately, the financial advisor industry has a very sales culture about it as someone noted. There have been calls for reform but it really hasn't evolved yet.
I hope my post gives you some direction.
Disclosure: I am not a financial advisor nor have ever been screwed by one so I don't think I have a dog in this fight.Last edited by Scanner; 11-02-2010, 08:46 AM.Comment
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