Reddit reviews How a Second Grader Beats Wall Street: Golden Rules Any Investor Can Learn

Read this 16 pages of free and great information from William Bernstein. https://www.dropbox.com/s/5tj8480ji58j00f/If%20You%20Can.pdf?dl=0

Also this book was fantastic!

https://www.amazon.com/gp/product/0470919035/ref=oh_aui_detailpage_o04_s00?ie=UTF8&psc=1

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Learn about Index funds :)

Sorry for unsourced and vague advice. Maybe it will sound familiar to someone and they can expand/correct.

I read about a 10-20% allocation into international/foreign. The thought process was to weight your portfolio in your country (especially if you're in the US). IIRC, it was something about you're investing in the economy and you have much more to worry about than your investments if the US economy tanks. I believe the rationale was also to take advantage of growth opportunities without taking on too much undue risk from unstable and emerging markets.

Edit: IIRC, source was ["How a Second Grader Beats Wall Street: Golden Rules Any Investor Can Learn" by Allan S. Roth] (https://www.amazon.com/Second-Grader-Beats-Wall-Street/dp/0470919035)

You don't need to pay for financial advice. It will just rob you of your wealth. If you have a $50M net worth, maybe you'd be rich enough to pay for financial advice.

• Quit your job now. Quit school now. These are distractions from what you need to focus on. You can find a job and/or go back to school later when you have set up your finances.
  
  
• Buy this book: https://www.amazon.com/Second-Grader-Beats-Wall-Street/dp/0470919035 . This will explain the rationale behind the rest of my instructions.
  
  
• Once the check shows up, deposit it in person at your local bank. Say no to all requests from the bank to "assist" you or "advise" you. Bank fees to invest money are borderline theft.
  
  
• After the check clears, book a hotel room or AirBNB in near where your current bank branch is. With a $5M deposit coming followed by a bunch of withdrawals as per my instructions below, your bank might want you to show your face in person a few times. Book this for at least 14 days. You need to be away from distractions.
  
  
• If the $5M is before income taxes, reserve 50% of it for income taxes. Put that reserve in an interest bearing savings account that pays at least 2%. Goldman Sachs, American Express, Ally, Discover, etc. have accounts and can be opened online
  
  
• Pay off all your debts.
  
  
• Open a brokerage account at fidelity.com
  
  
• Transfer 96% of what is left to your fidelity account
  
  
• After the transfer is completed, each week day, M-F, put 1% your fidelity cash into Fidelity's zero free S&P 500 mutual fund, FNILX. Do this until it is fully invested. It is tedious, it will take 4 months, but this way you don't invest all your money on the day before a massive stock market crash and then feel really shitty for year while it recovers (fear not though ... the S&P 500 always recovers in 7 or less years after a down year).
  
  
• The remaining 4% that is in your local bank branch is what you get to live on next 12 months. Including your hotel bill. Divide it by 12. That is your monthly budget.
  
  
• 12 months from now, you look at your fidelity money in FNILX, and take out no more than 4% of it, and transfer it to your bank account to live for the next 12 months.
  
  
• Any purchases you want to make have to come from your monthly budget. Want a $60,000 sports car? 4% of $5M is $200,000, or $16K a month. If you need $4K a month to live on, then that leaves $12K a month to save up towards the car. So you can buy that in 5 months. And then pay huge registration fees and insurance fees each year, which have to come from your budget. Wanna buy a house? Pay cash for it, and yes it will have to come from the fidelity money. But budget 3% of the purchase price in annual expenses to maintain the house, and pay taxes and insurance. So if you bought a $3M house, that would leave you with $2M. 3% of $3M is $90K, and 4% of $2M is $80K. Thus a $5M net worth cannot sustain a $3M house. Whereas a $1M house has 30K annual costs against 4% of $4M or $160K. 30/180 < 0.25, so you can easily afford a $1M house.
  
  
• You want to share money with your family which is fine. But it absolutely must come out of your monthly budget.
  
  
• 12 months later, rinse/repeat. Some years your 4% withdrawal will be more than last year, and some years it will be less. Because the stock market historically pays 7% compound annual total return (appreciation + dividends) after inflation, the 4% withdrawl rate will tend to produce an annual income that grows each year.

Definitely DO NOT consult a financial advisor or anyone who's going to charge you money to help you invest anything. You're getting ripped off if you do it. I honestly cannot believe people here are recommending that.

Very simple: Put you money throw the flow chart. This chart does a good job of explaining the steps, in order, you should follow. https://i.imgur.com/lSoUQr2.png

After paying down any debt, securing your emergency fund and enrolling in 401K, you have more options to do your own thing. But you should still keep it simple, at least at first. I recommend a quick read of this breezy book: https://www.amazon.com/Second-Grader-Beats-Wall-Street/dp/0470919035

It explains how you can set up a basic 3-fund brokerage portfolio. Only after you do all these things should you look into more "specialized" investment vehicles like real estate (though a solid real estate ETF options are OK to include in your brokerage portfolio) or crypto or stupid shit you're going to lose money on.

If you're interested in investing, I recommend "Index Revolution" and "How a Second Grader Beats Wall Street".

Obviously both advocate index investing :)


https://www.amazon.com/Index-Revolution-Investors-Should-Join/dp/1119313074

https://www.amazon.com/Second-Grader-Beats-Wall-Street/dp/0470919035

Since you said you don't know much about investing, I think what's more important than what you do with this $5k is learning about yourself and finding tools that work for you. I recommend reading "How a Second Grader Beats Wall Street" by Alan Roth. It's a great into to read when you're starting out. (And it's probably available through your local library) https://www.amazon.com/Second-Grader-Beats-Wall-Street/dp/0470919035

There's a concept about CD layering in the that might work for your short/mid-term goals. Plus, it's a pretty quick read 😁

The only investment book you need is: https://www.amazon.com/Second-Grader-Beats-Wall-Street/dp/0470919035

Establish a 6 month emergency cash fund. You might have that already.

If you have a job, open a Roth IRA at a broker, and fund it to the maximum. Your IRA should be in the S&P 500 (index fund) as you have suggested.

After you have exceeded your maximum a year, open a second account at the broker, and put your money again to the same index fund.

I'd recommend looking at the book How a Second Grader Beats Wall Street or A Random Walk Down Wall Street if you're starting to invest.

Short answer: just do it. I wouldn't try too hard to guess the future of the market.

If you are interested in learning more about stocks, bonds, mutual funds, etc., and the pros and cons of these financial instruments I strongly recommend these two books; A Random Walk Down Wall Street and How a Second Grader Beats Wall Street. A Random Walk does a good job at explaining all the different investment options and introducing the language to a person whose had no exposure to Investments before. How a Second Grader sort of treads along the same lines but it is an easier and more entertaining read as the author does a better job with engaging the reader. The book also gives good starting points for a person with no experience, which I followed when I first read it, and it has worked well for me. Essentially both books share the same theme, which most books on investments do, what's the most accurate way of predicting the true value of an investment instrument in theory and can the theory be applied to real world scenarios? Last but not least, I suggest you look into index funds. Good luck!