$15k: invest or buy a car?

[gfh77665]

The domestic market IS overvalued right now. We are poised for a pullback very soon. Put fundamentals to work for you in forming a decision. Invest in undervalued, growing economies. Many professionals will say look around the globe for value.

The Emerging markets are the best play now. Its super easy to invest internationally. Buy an index fund with very low expenses and watch the money grow. Here are two great ideas:


VXUS: http://www.morningstar.com/etfs/xnas/vxus/quote.html

EEM: http://www.morningstar.com/etfs/arcx/eem/quote.html

 

[cjcride]

Invest in US bank stocks. You won't regret it.

 

[ecotourist]

If you don't need a new car, don't buy a new car.

If you're interested in investing, here's what I'd suggest:

1) keep 3 months of expenses as near cash (high interest savings account, a cashable GIC, etc) as an emergency fund.

Assuming you won't need the rest for at least 5 years:

2) the stock market is long overdue for a downturn so I wouldn't plow a lot of money into the market right now. If you really want to get started, I'd suggest dollar cost averaging, maybe investing 25% of the intended amount every 3 months. That way you may be ahead by the time a downturn occurs, and if it occurs right after you invest some money you won't feel too beaten up, or panic and sell out confirming your loss.

3) buy a low cost US broad market ETF or a low cost US broad market index mutual fund. Vanguard has excellent products. You should be able to buy shares in an ETF (which trades like a stock) for $10 or less. If this is all the money you have and are likely to have for a while, a mutual fund might be better as dividends and capital gains can be automatically reinvested. The rule of thumb is you should pay less than 1% in costs to make any investment so (if $10 is the cost), the minimum size investment for a stock or ETF is about $1000. ETFs throw off small amounts of cash regularly which would be hard to re-invest efficiently using the 1% rule of thumb making a mutual fund better for smaller investments.

 

[SevenBizzos]

If I had $15k in hand, I wouldn't buy a car with it.

Invest $15k and make 10% or more on it and then borrow the $15k for the car at 1%.

 

[Mr Nice]

Pandus13,

How old are you ?
This info helps us in giving quality advice.

You can buy Vanguard ETFs for free through a Vanguard account, just reinvest your dividends automatically.

I have a few Vanguard ETFs that have done well this year. I believe that we have 2 more years of bull run...

 

[OneEyeJack]

Originally Posted By: pandus13
OneEyeJack, I like it.. xBox....

The current Yaris is sedan, Pacific Blue, has some scratches from 2 crazy doves, and 61,870 miles as of this morning.
And it handled driving to ATL and back with 2 adults+kids+some luggage pretty well. Actually, it surprised me since I tought I had a penalty box. It just swallows the road, in the right lane, mile after mile, including climbing the Smokeys.

I have a Fram ToughGuard filter laying around... Are you up for an xBox oil challenge?


Yes, I'm always "up" for an oil change but I got a closeout buy on Mobil 1 M1-103 oil filters at the local Walmart. The manager wanted to clean up the oil filter shelf that was a terrible mess. I got a bunch of 103's and some 209's that I use for my V8 4Runner (longer than stock).

Sounds like you had a great trip through some beautiful country. You have proven that one can go from one place to another with less than 200 horsepower. This can actually be done without a touchscreen, too. And that little 2NZ-FE is about as close to "bulletproof" as an engine can be, 1.5L, a chain and it can spin all day long. It's possible that there are more of these engines out and about than any other engine in production. If Toyota makes a car under 3K pounds it probably has this engine under the hood attached to everything from an automatic to a manual to an electric motor.

What's your next trip.........?

 

[VK56VD]

If you have a mortgage, put that $15k into it.

 

[GMFan]

Assuming you have no debt, $5,500 in Roth IRA for this year and January 1 another $5,500. With the $4k leftover, save $2k for rainy day fund, donate $500 to a good charity, set aside $1k for all Christmas expenses and with the last $500 blow it on something you typically wouldn’t buy yourself. This is what I would do.

 

[skyactiv]

What would happen if you lost your job? You have an emergency fund?
If 15K is all you have for available money, I'd buy a CD. Some banks have CD's that allow one penalty free withdrawal.

 

[fdcg27]

If you don't need a car, don't buy a car.
You have two good rides, especially the Yaris, which along with its parent Echo is probably one of the most durable Toyotas of the past couple of decades.
Keep the 15K as cash for emergencies, or spend a few K of it on a nice winter vacation somewhere warm with your wife and keep the rest readily available.
15K isn't a whole lot of money for either a new car or for cash savings.

 

[eljefino]

Agree on the 4k IRA and the rest in CDs. If the stocks bubble bursts you'll get your money back by retirement.

 

[daves87rs]

Well, if you don't buy gold...

Don't invest-that would be dumb. Why? What if someone totals your car tomorrow? Then the money would be all tied up-then you're screwed on the intended purpose...

I would have it available-just in case. If one really wants to make something on it, one of those checking accounts with interest could be an idea. And you could even keep adding to it....

Though a boat could be fun....

 

[Mr Nice]

Of course pay down debt.
Max out both IRAs

For me CD's are terrible, better would be REITs that pay 7-12% dividends.

Pandus never said how old he was, but the older you get you can't be too aggressive with your investments.

 

[PimTac]

Your age is an important part of the question here. There are many ways to make this money work. If you have no debts and have lots of time to invest the money then I would invest all or most of it. If you don’t have a emergency fund then take $5000 and use that and invest the remaining $10k.

Single? Married? Children? It’s not an easy answer to your question, especially on a Internet forum.

 

[fdcg27]

Originally Posted By: eljefino
Agree on the 4k IRA and the rest in CDs. If the stocks bubble bursts you'll get your money back by retirement.


It depends.
If you have a house, a wife and a couple of kids and 15K represents your total savings it would probably be wise to keep that money readily accessible without penalties.
A little emergency fund is always nice to have and it does take the sting out of unexpected events.
The home heating plant might take a dump tomorrow and having cash to cover the 3-4K replacement cost gives you options in contractor as well as equipment which you might not have if you have to finance the cost.
Things happen and most of them can be covered easily if you have a little ready cash.

 

[barkingspider]

I have a feeling we are going into a recession in the near future so having liquid cash would be my priority. Put the cash between your mattress and box spring and leave it there, lol. Put it in a savings account for now

 

[khittner]

With 62K on a Yaris that holds all that you need it to, you don't need a new car.

 

[Wolf359]

Too many variables, not enough information.

It's an interesting mix of opinions and I'd endorse half of them depending on the OP's situation. As he didn't really mention what that was, can't really give any good advice.

I think a lot of the answers depends on the current financial status of the OP.

For no savings, then savings is the answer. Either S&P 500, Vanguard Admiral shares or ETF, Total stock market would also be a good one. Paying off the mortgage just locks you into a fixed returned on whatever the mortgage rate is, maybe about 4% now, but the stock market is up over 20% year to date. Dollar cost average if you're worried about a downturn.

On the other hand, if you have 100-200k+ in the savings, then depending on how you feel about the market, drop the 15k on the car and don't worry about it. If you want to maximize your return, you'd just put 20% down and get a 2% car loan. I paid cash for the last car because I made a very good chunk in the market and wanted to take some out to spend and it made for a very simple deal, just got a bank check and that was the end of it.

 

[pandus13]

Sorry for the late response:

42 years old.

Max Roth IRA money has been already earmarked.
Rainy day fund has been already earmarked.
Vacation fund has been already earmarked.
Car rainy fund has been already earmarked.

So the $15k are investing money.

 

[PimTac]

Sounds like you have your finances under control. If this $15k represents a small percentage (single digits) then I would invest it. With the current market as it is, maybe hold it in money market and wait for the inevitable drop? At age 42 you still have some time before considering asset allocation unless you are unable to handle market fluctuations. What would you do if the market dropped by 20% next year? That answer may steer you in the direction you want.

So in short, I would invest it. Where to invest it is up to you.