I'm a young developer in mid 20's and make decent money. I am no economic or market wiz and don't have any outstanding loans or credit owed. I have a nice liquid backup that I'm comfortable with. Now where should I be putting my money?!<p>More info: I contribute max to my company's 401k to maximize my matching, the startup I was a part of was bought by aforementioned company so I get payouts quarterly, and my investment strategies so far have been centralized around the stock market, mostly in index funds.<p>Advice appreciated!<p>Edit: My main goal is to have generalized advice, so it doesn't just pertain to me, but to a wider audience, especially young developers who have excess income each month and want to be smart about preserving and growing their net worth intelligently.
I'd stick with index funds. Personally, I'm a big fan of Vanguard funds -- they're really low expense ratio.<p>I'd do 90% stocks, 10% bonds, assuming you don't need the money until retirement. You could go down to 80% or up to 100% (I actually do 100%, but I also do individual stocks plus index funds).<p>S&P 500, a broader-market fund (3000-5000 companies in the US market, to get smaller businesses too not covered in the S&P), and some kind of global fund. Depending on how your 401k is held, you want to take that into account when allocating the rest of your money, and be careful because a lot of 401k plans have horrible funds (high expense ratios).<p>You might want to look at Roth IRAs too --it's a post-tax contribution, but never taxed on the gain or withdrawal. There are income limits to contribute, but there's a backdoor by contributing to an IRA (not income limited) and then converting it to a Roth.
Index funds are great when you want to do direct deposits every month.. the don't have front-load costs so you can just set up an automatic transfer.<p>If you invest in ETF's which are traded like stocks then you have to contend with trading fees. The rule of thumb (I've garnered from reading blogs/ literature) is that if your portfolio is < $50,000, then set up automatic payments for all index funds.. however if you have a larger portfolio then it would be worth getting a discount brokerage account and using that to invest in ETFs. This is because having a larger portfolio means that your brokerage house will offer you a discounted trading fee. The advantage of ETFs is generally a lower management-expense ratio than index funds and more importantly you get access to things like REITs and other non-standard financial vehicles.
I put mine into new opportunities.<p>Mostly equipment for the day I might venture out on my own.<p>I have an entire music studio (hardware and software), creative studio (cintiq, nice cameras [video and still], adobe creative suite), and the start of an electrical engineering lab in my apartment. I have built a pretty good home theater in my living room (projection system), and lots of DVDs for inspiration. Lots and lots of boooooks.<p>It's pretty expensive, but makes me feel more secure. I'm not worried about money; I am worried about boredom. Make sure to get good insurance.<p>I would spend some of it curating a taste in something as well.<p>The most important thing you have to spend is time. Whatever you can buy to save time (without losing control over things you need control over) is a good investment.
I've started putting more and more money into lendingclub. The returns have been great and you can scale how much you put in slowly. Would definitely suggest checking it out.<p>Ping me offline if you have any questions.
Real Estate has proven profitable for me. Look for cheap multi-family units. You could live in one-side rent the other for tax benefits, or rent both sides.<p>Stocks, bonds. 80% stocks, 20% bonds given your age and the fact you are already saving for retirement.<p>If you own a home, pay extra on your mortgage. Depending on how much extra, you could pay off your home in 5-10 years versus a standard 30.<p>Or you could use it for advancing freelance/etc. For instance, I pick up freelance web-dev jobs and do some advertising consulting with my background in the printing industry.<p>One last thing, still have fun with it. It gets easy to become so focused on investing that you are living for 10 years from now, and missing living-in-the-moment.
Coming from someone who has intensively studied stocks and done very well in the market over a few years:<p>Invest in index funds. First max out your 401k match, then your Roth IRA, then the rest of your 401k, then open a taxable account.<p>I highly recommend Vanguard's LifeCycle funds. Asset allocation is one of the most important factors in determining your returns, and Vanguard will automatically adjust your asset allocation while charging very small fees.
How do you decide what index funds to put money into?<p>edit: Furthermore, how did you come to the decision to put money into index funds instead of something else?