Where should I put my money?

Submitted by spaceflamingo3 t3_yifwx3 in personalfinance

Hi everyone. I'm 22 and I recently started my first grown up job. I make around 80k a year pre tax. I had a goal of saving up 50k in the bank for an emergency fund, and to eventually buy a better car when my current one breaks down. This goal is projected to be completed by the end of the year, and is placed in a HYSA. (PS I don't think my car will break down anytime soon). After writing out the budget, I have ton of money extra each month after this goal is met, even after maxing out my Roth IRA and counting month expenses. I have about $2000 remaining each month. One of my next long term goals is to buy a house, but I don't think I want to buy until about 4-5 years in the future. Just want to see where my career takes me for the time being. In my head it doesn't make sense for me to place this house fund in the same HYSA account. I want to invest it but how should I do this and what should I invest in? From initial research I wanted to open a brokerage account and put 50% in VOO and 50% in QQQ. Is this a good plan? Are there better options? What are the tax implications? Thanks in advance for the advice.

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BringItBoy t1_iuiff4i wrote

5 years for stocks is risky in my opinion. You have no idea what could happen in that time. Bond rates have gone up on the other hand so maybe instead of an HYSA for those by short term bonds.

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spaceflamingo3 OP t1_iuifizz wrote

Not a fan of Bonds.

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BringItBoy t1_iuig6ld wrote

You can choose to put into broad index funds but no guarantee that it moves up. While the SP500 has averaged over 10% for the last decade does not mean it will do it again for this coming decade. If you want to be safe with your house fund then choose a more conservative option.

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spaceflamingo3 OP t1_iuigbt5 wrote

More conservative then the S&P 500? Might as well keep it in the bank lol

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BringItBoy t1_iuih1bh wrote

Are you saving or investing? It sounds like you just want to invest and whatever you have in your investment account you will put towards a house.

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spaceflamingo3 OP t1_iuihp5k wrote

I guess I want to invest that money, as I'm afraid that inflation will eat up the buying power of my money, by the time I'm ready to buy a house. I know that I don't want to buy a house in the next 1-3 years, but I know that I do want to further down the road. Also I think having 50k in savings is good in terms of liquid cash available.

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BringItBoy t1_iuiieyd wrote

If inflation is your worry than buy Series I bonds as they are inflation protected. Stocks are not hedges against inflation. Inflation is also slowing down and interest rates are going up which means rates on the bonds are going up which will likely hurt stock yields for the future. People tend to realize from 2012-2020 was the biggest bull run in history and one of the drivers was 0% interest rates. The new target for interest rates is going to 5% which is the highest its been in 20 years.

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Varathien t1_iuifvgt wrote

>From initial research I wanted to open a brokerage account and put 50% in VOO and 50% in QQQ.

That doesn't make sense. You're doubling up on a lot of stocks, while completely ignoring others.

Replace both VOO and QQQ with VTI. VTI contains basically every US stock. Add VXUS for international diversification.

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OcelotWolf t1_iuigyr1 wrote

I would look into Series I Bonds from the Treasury. In exchange for some limitations on buying ($10k/yr maximum) and cashing them out (not possible until 1 year minimum), they’ll handily beat the return of a HYSA and will inflation-protect your money to ensure you don’t lose any buying power over that timespan.

Investing in the market over just a span of 4-5 years is risky and you’d have to contend with the fact that not only could your lump sum have less buying power - it could potentially be wholly less than you started with, depending on how the market performs

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[deleted] t1_iujj9pi wrote

[removed]

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spaceflamingo3 OP t1_iujjhj2 wrote

Aren’t VOO and QQQ index funds? Tracking S&P500 and Nasdaq respectively? I actually picked them because I wanted to get into Large Cap and Tech stocks passively.

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LOGICpremium t1_iujkq2t wrote

Correct, I don’t think i articulated it correctly lol. The first part of what I meant was suggesting to learn how the markets work and build your portfolio based on assets that you specifically would like to invest in and believe will be profitable. Otherwise you can do as you mentioned and put your money into funds. You can also invest into bonds, CD’s, etc.

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