Safe stocks to invest $12k?

Canned goods and ammunition have a long shelf life, and if the shit hits the fan you’ll be glad to have a little tucked away, that’s for sure.

That being said, six months worth of expenses isn’t like saving six months salary. We’re talking net, not gross. Probably for most people two months gross salary in cash equivalents would be sufficient to get them through six months without a paycheck and give them a buffer against unexpected events.

You’d hate to have to go out and sell stocks into a 20% downturn just because the transmission went out in your vehicle.

Remember, ‘liquid’ in the sense of ‘how fast and reliably can I turn it back into cash?’ is different from ‘safe’, in the sense of ‘how likely is it to still be worth what I paid?’

A house is not very liquid – it takes months to turn it into cash. But, outside of areas with a real-estate bubble, it’s pretty safe: a house will not generally suddenly be worthless overnight.

A high-tech stock is probably pretty liquid – you can turn it into cash in an hour probably – but not safe at all – it might declare bankruptcy this afternoon.

A checking account is super-liquid, and super-safe, but has a horrible return. An expensive Work of Art is horribly illiquid and not very safe.

Index funds usually are about as liquid as an individual stock, but more safe. So they’re a better choice for medium-term investments than individual stocks, typically.

Obviously, you want your emergency funds both safe and liquid, and then you can start looking at more risky and higher-paying investments.

As others have already said, just put it in and index fund. I like both Vanguard or Schwab. If you want better growth, you generally have to pay for it to be managed by an expert, but sometimes experts are wrong. The way I look at it, the market is “right” 95-98% of the time. When someone beats the market, they usually only do so for a short period of time and then start losing again.

Look for low fees ( .10 or .05 for each $10,000 in stock you have).

It’s either 10 per $10,000 or .1%. No one has ten cents per $10k…that’s an implausible .001%.

Some questions to the OP … I hope they return to answer …

27] Some excellent advice above concerning stock investments … but my question is why does the OP want to confine themselves to just one investment option … for example, T-Bills are safer, just not as much return … are you willing to give a little ground to inflation with a near guaranty of getting your original capital back?

39] Have you already contributed your maximum to your retirement account?

71] What do you want the money to do? … That’s an important consideration because some investments are best for the long term, others are best for the short term … how long do you plan on keeping this money in an investment?

97] Feeling lucky … spend two weeks in Vegas … [evil grin] …

Define “safe”.

That is, what is your risk tolerance? What are you willing and able to lose?

There’s no stock or index fund in the world that can’t just lose 20+% of its value overnight on a really bad day. Will that be an unfortunate situation for you, or a catastrophe?

More importantly, how will you react? It’s hard to really know this for sure. But think about it. If you wake up a few months after you’ve made this investment and see that it’s gone down, say, 15%, are you going to think “Shit, this is a terrible decision. Better sell before it goes down further”? If so, you should not invest in stocks. You should invest in something safer like a bond fund or US Treasuries.

People are giving good investment advice here, but they’re mostly telling you what they’d do with the money. The important thing that’s missing is information about you and your finances and your risk tolerance.

I agree and invest similarly to you (I am a 3-fund Boglehead).

However, my wife and mother are much more risk-averse so I put them in a mix of Vanguard Wellington and Wellesley. This chart shows that investor shares of Wellington (blue) suffered smaller losses in 2008 than Total Market index (yellow). Fees are a bit higher (.25 vs .16) but .25% is still quite low for a managed fund.

So, Wellington induces much less anxiety in my wife and mother. Each fund has a $3000 minimum investment.

Should have include Wellesley (VWINX) in the chart. It is the red line. Much smaller losses in 2008.

Equal investments in Wellington and Wellesley give a nice, conservative 50-50 stock-bond portfolio.

FWIW, I put a portion of my emergency fund in a fairly conservative bond index fund (BSV). In a nutshell, it fluctuates in value a bit, but it also pays 1%-1.5% dividends currently. It’s worst drop was during the 2008 financial crisis, where it briefly dropped in value by 4%.

I’m comfortable with that sort of risk: if I need the money immediately after another financial crisis, when I include the emergency funds in my checking and savings accounts, I’ll have ~5.9 months of expenses instead of 6 months of expenses. If that fund drops by enough to put a serious dent in my savings, we’ll be in the “invest in beans and ammunition” economy.

If nothing serious goes wrong, a couple years of dividends will offset the more typical swings in value, and over several years there’s a pretty high probability that I’ll be better off than if I’d just kept all the money in a checking account.

It’s not just a Trump-induced crash you need to be worried about. It’s also a Fed-induced bubble.

Fact is that the fed keeping interest rates so low for so long has inflated the price of both stocks and bonds. With rates expected to rise somewhat going forward, companies will have to improve their profitability just to keep the same value (all else being equal) and fixed-rate bonds are likely to fall in any event.

Of course, that’s just what’s “expected”. There’s always risk of things going down and also risk of things going up, which is why you don’t just keep your money under your mattress.

Bottom line is that nothing is “safe”, when opportunity cost is factored in.

The posts saying index fund are a better investment for individual stock investors than undiverisified purchases of individual company’s stocks are correct.

However as others have mentioned, one has to step back and examine the concept of ‘safe stocks’, since there’s no such thing. Some types of stocks are relatively more or less risky than the whole US market (what you’d get with an ‘index’ fund, whole market or a big chunk of it, or beyond the US market, depending which index) but not greatly so. Utilities and ‘dividend payers’ are not enough less risky than the whole market to justify the title ‘safe stock’. That’s basically an obsolete term. It might have had validity back when there weren’t mutual funds and the choice for a small investor was relatively few different stocks of either big solid companies or little fly by night companies. It’s a much less valid concept with investment choices now.

The general recommendation is to have 6-12 months of living expenses in the bank, stodgy as that may sound to some. I think it’s generally good advice. But maybe OP has that much or more money in the bank and this is an extra $12k.

Anyway, risk tolerance is an individual decision without a ‘right’ answer. As long as one realizes that stocks can fall 10’s of % pretty quickly, if they do the relatively less volatile ones won’t fall that much less than the whole market, and that you aren’t likely going to correctly predict when that will happen (based on Trump or anything else).

I believe VWELX holds a mix of stocks and bonds, so it’ll underperform a stock index fund over periods where stocks have outperformed bonds. However the bond holdings should reduce volatility relative to an index fund.

Wealthfront manages the first $10k for free:

(robo-advising investment management).

Yes. In the chart I linked to above, it shows the 10 year results of a $10,000 investment - fairly close returns but the differences in volatility are large.

The value today would be:

VWELX $19,510 (Wellington - 65/35)
VWINX $18,965 (Wellesley - 35/65)
VTSMX $19,918 (Total Stock Index - 100% stocks)

Howver, on 3/6/2008 the low points were:

VWELX $7,033 - 30% loss
VWINX $8,324 - 27% loss
VTSMX $4,928 - 51% loss

So is the OP investing in the markets for long-term accumulation of wealth or wanting to keep their cash readily available but safer than under the mattress?
[ul]
[li]If you want liquidity, your “investment” will not garner you wealth. The interest rates are crap. Just get a credit union savings account and the money is safe. It will be there when you need it.[/li][li]If you want to grow wealth, you have to give away some liquidity and safety for long-term (two-five years and more) growth.[/li][/ul]
Since the OP doesn’t seem to understand the basics, best the OP read up on savings vs investments. Any of the big mutual funds have plenty of free learning: Fidelity, T. Row Price, Vanguard.
Since the OP has a Trump uncertainty:
[ol]
[li]A credit union account with a minimum of nine months to one year of net income cash. If you don’t have the amount already, start creating a regular expense out of your paycheck and build up the account. This only works if you are disciplined to do it with every paycheck until the goal is reached. It also means giving up frivolous expenses until the goal is reached. If you cannot do this first, what follows is beyond your reach.[/li][li] Once your emergency fund is reached, keeping taking money out of your paycheck and put it into a mutual fund index fund.[/li][li]If you think you are keen on individual investing, good luck with that. Unless you are really savvy (doesn’t sound like it) you need a financial advisor. However, their fees will eat up any wealth accumulation and principal for several years. So unless you have a few hundred thousand to invest, forget individual stocks. and stick with mutual funds.[/li][/ol]

Since you have no experience, I do NOT recommend just jumping in on a stock or index you think has growth. More than likely as SOON as you invest, the price will go down, and you will panic.

The real safest way: get a money market. They yield around 1%, so $10,000 in the bank is around $8+ a month ($100+ a year). Very liquid for emergencies or money transfers to your checking account. You could do this while you research how to invest your money.

I don’t think OP’s question has been properly answered . Buying an index fund is a way to achieve one type of safety — diversification — but that is not the only safety criterion.

OP might be interested in buying a stock with high financial strength and/or strong dividend and earnings record and/or non-cyclicity (e.g. low “beta”) — these are other criteria of safety. For example, Johnson & Johnson does well on all those criteria. It has tracked the S&P 500 index more-or-less but hasn’t fallen as much as the Index in down markets (nor risen as much in up markets).

But JNJ is just an example. This post is not an offer nor a solicitation and is worth no more than the price paid for it!

This is an important point. If you are uncomfortable or unfamiliar with an investment, there is a risk you will react emotionally. The psychology of fear and greed lead to the average investor underperforming the general market.

The efficient market hypothesis suggests that buy and sell opinions will balance out!

:smack: Posting this prompted me to Google JNJ just now and I see a Motley Fool opinion that “Johnson & Johnson Is Becoming a Far Riskier Investment.” The concern is over-reliance on high drug prices. (I suppose Trump is the key variable — did Big Pharma piss him off? My own JNJ is almost all unrealized gains so I’ll just ride it out …)

Buy a couple of decent e30’s and watch the price skyrocket in the next few years. :smiley:

Or send that cash to me. I’ll keep it “safe”.