Am I selling myself short not investing?

[Triforceofcourage]

I basically keep all of my savings in a high yield online savings account earning 5.3% and I am wondering if I am selling myself short not investing in an S&P 500 index fund. I am 24 years old if that helps

Tri

 

[Gunslinger08]

I've made a 6% return in the past 5 months doing absolutely nothing but putting 5% of my income into a 401k. This is also pre-tax, so I'm making probably closer to 8 or 9%, compared to post-tax.

 

[chrisms]

Diversify, put a little bit everywhere.

 

[alien42]

i would say you are selling yourself short if you are not investing in high risk stocks, especially at a young age. no funds are going to net you 30% - hundreds of % returns.

 

[zebano]

It all depends on if you can accept the risk that you will probably make about 10% APR over time, there is a chance of doing worse or better (including losing it all). Just be sure to diversify.


Edit: if you can't take the risk, I suppose you still have the option of stocks and bonds...

 

[Queasy]

Does your company offer a 401K with matching? If so and you aren't using it, you are definitely robbing yourself of some extra money.

 

[Triforceofcourage]

Originally posted by: Queasy
Does your company offer a 401K with matching? If so and you aren't using it, you are definitely robbing yourself of some extra money.

To clarify, I am putting 10% of my income into a 401k plan using exclusively a S&P 500 Index fund.

I am just wondering about all of my savings just sitting there in high yield savings account. I am 24 years old if that helps

 

[crownjules]

Yes. For one thing, savings account interest yields will eventually go down at some point in the future. When the economy slows down again, the Fed will pull back the interest rates and with that your savings account rate will also shrink. It was only less that two years ago that ING offered something like 2.30% (as opposed to 4.50% now).

If you just give your money to a company like Vanguard or Fidelity, they can usually make you 8-10% in the long run. You might suffer worse years or better years, but in a 10+ year timeframe, that's what you could expect. And you don't really have to do anything.

Now if you are really risk averse, and especially so if you are younger, then you can afford to dabble in stocks and/or other equity investment vehicles. The risk is a lot higher, but so is the potential reward.

 

[kranky]

Let's clarify here. What you are calling "savings" doesn't include your retirement savings, which is in your 401k, right?

If so, then there's nothing wrong with keeping an emergency fund in a high-yield savings account. Once that fund is large enough to cover six months of your expenses (in case of job loss, health problems, etc.), then anything beyond that should probably be invested for the longer term.

 

[AnthroAndStargate]

Originally posted by: Triforceofcourage
I basically keep all of my savings in a high yield online savings account earning 5.3% and I am wondering if I am selling myself short not investing in an S&P 500 index fund. I am 24 years old if that helps

Tri

Can you tell me how/where to get one of these high yield accounts. I never have found a straight answer on that. How much should be put into said account?

 

[Triforceofcourage]

Originally posted by: AnthroAndStargate

Originally posted by: Triforceofcourage
I basically keep all of my savings in a high yield online savings account earning 5.3% and I am wondering if I am selling myself short not investing in an S&P 500 index fund. I am 24 years old if that helps

Tri

Can you tell me how/where to get one of these high yield accounts. I never have found a straight answer on that. How much should be put into said account?

www.amtrustdirect.com

 

[DaveSimmons]

Originally posted by: kranky
Let's clarify here. What you are calling "savings" doesn't include your retirement savings, which is in your 401k, right?

If so, then there's nothing wrong with keeping an emergency fund in a high-yield savings account. Once that fund is large enough to cover six months of your expenses (in case of job loss, health problems, etc.), then anything beyond that should probably be invested for the longer term.

Exactly.

Also, if you are saving up for a house down payment, savings is a good place to park the money.

An S&P500 fund like VFINX will (historically) grow twice as fast as the savings account (10% vs. 5%), so after 10 years compounded you are +159% vs. +62%, but you can only count on this over 10+ years not over 1-3. If you might need the money soonish savings is usually best.