[shortercollege]

I have $10,000 and wanted to put $8000 in to a money market and put $2000 into a mutual fund. Have never invested before other than 403B and I wanted to do it directly with a company. Do you think this is a good way to handle this money and if so how should I go about doing this? Would you suggest doing something else with this $10,000. When putting money into a money market account what is a good rate to look for?

Thanks

[wingrun]

It's a very difficult question to answer because every investor is different.

First and foremost, talk to a financial adviser to help you plan out your investment strategy. And by saying financial adviser I mean someone who really knows what they're talking about and not just showing you tables and graphs saying 'see the past 3 year performance?' cause being in the investment business myself I notice many of them are in it just for the money and are just salespeople.

Aside from seeking financial adviser's opinion, here's a few things that you need to go over:
How old you are and what are you planning to do with the money (if you have made any plans already). I don't want to get too technical cause the writing will go too long.
Are you planning to add additional funds in the future? Are you in need of the $10,000 or have no plans of spending in the short term?
If you're young then you might want to take wise additional risk.

As for your question about mutual funds, each mutual fund has different purpose meaning some are made for the elderly which consist of a portfolio made mostly of fixed income (bonds) and others are highly risky mostly recommended for young investors. So each category has a different average. But the fact is more than 50% of mutual funds underperform the S&P500. And in times like now I would say underperforming mutual funds are way more than that 50% range.

The money market account offers you a low rate of return but it's not as risky as mutual fund. I would suggest you invest your money in a CD rather than a money market if you don't need the cash in the short term. Finding rates of CDs online is simple, just search Google or bankrate.com

[morgaine300]

As for the financial advisor, I would not depend too much on anyone who has a stake in what you do. That means, no one at the brokerage where you want to invest. They are good for some general information, but I certainly wouldn't take their advice. If they could possibly have any interest whatsoever in anything but you, I wouldn't use them. This is difficult to figure out, cause you never really know when they may have some ulterior motive.

For that matter, can you afford a financial advisor and is it worth it to you?

I don't use one, can't afford one, and it's most definitely not worth it to me. I make my own decisions. I do occasionally call the customer service reps at my brokers to just get general info -- i.e. like a good spread of mutual fund *types* (not specific funds) at my age and risk level. Then I take it from there on making the actual decisions.

But it is true that no one can give you too much advice without knowing your age, your plans for the money... can you tie all this money up longer term or might you need some of it? Is this all the savings you have? Etc. The younger you are, the more you can put in the risky stuff, and as you get older, or if you need the money sooner, then you get more conservative. But with only 10K, how much can you diversify? Not much. And as for the question about a mutual fund -- there's a billion different ones out there, including money market mutual funds. You also have to consider minimums and fees. More difficult to get a mutual fund for only $2000, though it can be done, especially if you put it inside an IRA. (Do you have an IRA? If this is long-term money and you have other emergency or what-if-I-lose-my job money, do this through the IRA. You can even get money markets inside an IRA.)

Just for example (this is only an example! ), my retirement is over 10 years away, so I consider this my long-term money. Meaning I can be more risky with it. Since I'm a bit higher risk, I have 100% of this in stocks. (Through mutual funds, but it's in stocks.) A less risk tolerant person might want more like 70% stock and 30% bond. My <10 year money is partly in a half bond/half high dividend paying fund. I've also been looking into bond funds. Any money I need even closer-term is in CD's and anything w/in like the next 6 months is just in my money market, which right now is paying a big whopping 1.3%. (You can get a better money market online.) I also always have some "ready" money -- either for when the furnace breaks or something like that. Again, that's just an example of what I mean for illustrative purposes.

So your age, whether this is all your savings, what you need to money for, your risk tolerance, etc. will all play in to what you want to do with this money. And really, just your own personal preferences. Since you only have $10, that's going to limit being able to split it into pieces cause you can only spread that much so far.