# Q: Which is the best way to invest $250K? And why?

It all depends on your time-frame. If you don’t have much time before you need the money, you’ll want to invest conservatively. Unfortunately, that likely means that you won’t earn much on your money; the 5-year U.S. Treasury is paying just 2.02%.

If you have time to let your money grow before you need it, you could invest in the S&P 500. Historically, over the past 50 years, it has returned 9.7%, including dividends. If history repeats, your money could be worth over $630,000 in ten years and over $1.6 million after 20 years.

Of course that would mean putting all of your money into the stock market; that could be too risky a proposition. You could simply carve off a portion and invest it in bonds.

The percentage allocation is based on your comfort level. Many advisors suggest a “110 minus your age” approach. If you are 30 years old, you would put 80% (110 – 30 = 80) of you money in stocks and the remaining 20% in bonds. If you were 40 years old, yo would put 70% in stocks and 30% in bonds, etc.

If you are somewhat risk averse, you could tweak the “110 minus your age” approach and ratchet it down a bit, perhaps change it to “100 minus your age.” So at 30 you would have 70% in stocks.

If you have a reasonable appetite for risk, you could ten tweak the “110 minus your age” approach and ratchet it up somewhat, perhaps change it to “120 minus your age.” So at 30 you would have 90% in stocks.

Regardless, every year, or five, or ten — whatever time-frame you choose — you would adjust your portfolio as appropriate. For instance, if as a 30-year old you started with 80% in stocks, you might decrease that to 70% when you turn 40. You could do that by either selling some of the stock portion of your portfolio or buying more of the bonds by adding new money to your investments.

The amount that you are investing is immaterial; the approach is the same. But just to whet your appetite a bit… if you assume a 7% combined, compounded annual growth rate, if you are 40 years old, your $250,000 would be worth $1.4 million when reach your 65th birthday.

Best of luck

*originally published on: Quora*

# Q: What is the secret of the ability to make money?

If you are looking at the ability to make money investing in the stock market, the answer is: time.

The more time you have, the longer your money has to compound. A $10,000 investment growing at 7% a year would be worth: $20,000 after 10 years, $39,000 after 20 years, $76,000 after 30 years, and $150,000 after 40 years.

Compare that to a $3,000 invest every year for 20 years. After 20 years, that annual investment of $3,000 would be worth $131,000.

By starting early, the person would invested $10,000 would have $150,000 — that’s $19,000 more than the person who started 20 years later and invested $60,000.

The earlier you start investing, the better off you’ll likely be.

*originally published on Quora*

# Q: How risky is it to invest all 401(k)/IRAs into S&P 500 index funds?

Putting all your eggs in one basket — even if that basket is comprised of 500 of the largest publicly traded companies in the USA — is risky. Recently, the S&P has been performing well, but less than a decade ago, it lost 37% in one year. Could you stomach that kind of decline?

Most people are better off spreading their risk around somewhat. Most financial advisors will suggest a 60/40 or 70/30 portfolio. That is, 60% of you money in the S&P 500 and 40% in U.S. Treasuries or in a corporate bond fund.

That said, Warren Buffett — arguably the greatest investor ever — has indicated that upon his demise, his wife’s money will be in a 90/10 portfolio: 90% in an S&P 500 index fund and 10% in short-term treasuries.

*originally published on Quora*

*image credit: Flickr/PRO 401(K) 2012*