query: How do I invest in emerging markets

positive: "Morningstar is often considered a trusted industry standard when it comes to rating mutual funds and ETFs.  They offer the same data-centric information for other investments as well, such as individual stocks and bonds.  You can consult Morningstar directly if you like, but any established broker will usually provide you with Morningstar's ratings for the products it is trying to sell to you. Vanguard offers a few Emerging Markets stock and bond funds, some actively managed, some index funds.  Other investment management companies (Fidelity, Schwab, etc.) presumably do as well.  You could start by looking in Morningstar (or on the individual companies' websites) to find what the similarities and differences are among these funds.  That can help answer some important questions: I personally just shove a certain percentage of my portfolio into non-US stocks and bonds, and of that allocation a certain fraction goes into ""established"" economies and a certain fraction into ""emerging"" ones.  I do all this with just a few basic index funds, because the indices make sense (to me) and index funds cost very little."

negative: "An emergency fund is very well defined, both on this site and across the web.  An emergency fund is a cash account where you keep money for emergencies so you don't need to take on debt like a loan or credit cards. Car breaks down? emergency fund can help pay that. Lose your job? The emergency fund is there to pay rent and for groceries until you're back up an running. There are several schools of thought on how much money should be in your emergency fund, but it boils down to how high your risk assessment is. Typically, the average is to have 3 months in cash available at all times (like in a savings account). It'd be better to have more, but that's a typical goal. You're also asking about investments in the comments. An emergency fund should be readily available. If you already have $10K in savings, set aside what you would need to cover a few months of bills into a cash-ready savings account, then invest the rest. Investments sometimes take time, or have penalties, if you withdraw them. Additionally, as @JoeTaxpayer so correctly pointed out, getting into the habit of maintaining a separate emergency fund helps protect your other investments from becoming a crutch and instead used to save up for larger things like a house or, especially, retirement.  See also: What expenses should be covered by an emergency fund What should I reserve ""emergency savings"" for? What expenses do most people not prepare for that turn into ""emergencies"" but are not covered by an Emergency Fund? Less than a year at my first job out of college, what do I save for first?"

negative: Do developing country equities have a higher return and/or lower risk   than emerging market equities?  Generally in finance you get payed more for taking risk.  Riskier stocks over the long run return more than less risky bonds, for instance.  Developing market equity is expected to give less return over the long run as it is generally less risky than emerging market equity.  One way to see that is the amount you pay for one rupee/lira/dollar/euro worth of company earnings is fewer rupees/lira and more dollars/euros. when measured in the emerging market's currency?  This makes this question interesting.  Risky emerging currencies like the rupee tend to devalue over time against less risky currencies euro/dollars/yen like where most international investment ends up, but the results are rather wild.  Think how badly Brazil has done recently and how relatively well the rupee has been doing.   This adds to the returns (roughly based on interest rates) of foreign stocks from the point of view of a emerging market investor on average but has really wild variations. Do you have data for this over a long timeframe (decades), ideally for multiple countries? Not really, unfortunately.  Good data for emerging markets is a fairly new phenomenon and even where it does exist decades ago it would have been very hard to invest like we can now so it likely is not comparable. Does foreign equity pay more or less when measured in rupees (or other   emerging market currency)? Probably less on average (theoretically and empirically) all things included though the evidence is not strong, but there is a massive amount of risk in a portfolio that is 85% in a single emerging market currency.  Think about if you were a Brazilian and needed to retire now and 85% of your portfolio was in the Real.  International goods like gas would be really expensive and your local currency portfolio would seem paltry right now.  If you want to bet on emerging markets in the long run I would suggest that you at least spread the risk over many emerging markets and add a good chunk developed to the mix. As for investing goals, it's just to maximize my return in INR, or maximize my risk-adjusted return. That is up to you, but the goal I generally recommend is making sure you are comfortable in retirement.  This usually involves looking for returns are high in the long run, but not having a ton of risk in a single currency or a single market.  There are reasons to believe a little bias toward your homeland is good as fees tend to be lower on local investments and local investments tend to track closer to your retirement costs, but too much can be very dangerous even for countries with stronger currencies, say Greece.

negative: "IMO, you can do whatever you want with an emergency fund, as long as it is in a deposit-type account. The purpose of the fund is for emergencies, not to make money, so you want it to be liquid so that you can access it in an emergency. Personally, I'm willing to take accept a potential penalty for withdrawing. Here's some examples of what I mean: You don't want ""emergency"" funds in a marketable security, because your emergency could be directly or indirectly related to some sort of market crisis. If you absolutely needed to liquidate an investment in the days after the collapse of Lehman brothers, you probably would have taken a bath -- even secure, US State bonds fell in value. If you feel that this is taking too much cash off the table, that's ok, just don't consider the part that you invest part of your ""emergency"" fund. The 3-8 months of expenses thing depends on your situation. If you're a salesman, err towards 8. If you're a unionized civil service worker with seniority, 3 months is probably appropriate."

negative: I know this is heresy but if you have funds for significantly more   than 6 months of expenses (let's say 12 months), how risky would it be   to put it all into stock index funds? Quite risky as if you do need to dip into it, how fast could you get the cash? Also, do you realize the tax implications when you do sell the shares should you have an emergency? In the worst-case scenario, let's say you have a financial emergency   at the same time the stock market crashes and loses half its value.   You could still liquidate the rest and have sufficient funds for 6   months. Am I underestimating the risks of this strategy? That's not worst case scenario though. Worst case scenario would be another 9/11 where the markets are closed for nearly a week and you need the money but can't get the funds converted to cash in the bank that you can use. This is in addition to the potential wait for a settlement in the case of using ETFs if you choose to go that way. In the case of money market funds, CDs and other near cash equivalents these can be accessed relatively easily which is part of the point. A staggered approach where some cash is kept in house, some in accounts that can easily accessed and some in other investments may make sense though the breakdown would differ depending on how much risk people are willing to take. If it truly is an emergency fund then the odds of needing it should be   very slim, so why live with near zero return on that money? Something to consider is what is called an emergency here? For some people a sudden $1,000 bill to fix their car that just broke down is an emergency. For others, there could be emergency trips to visit family that may have gotten into accidents or gotten a diagnosis that they may pass away soon. Consider what do you want to call an emergency here as chances are you may not be considering all that people would think is an emergency. There is the question of what other sources of money do you have to cover should issues arise.

negative: Let me first start by defining an emergency fund. This is money which is: Because emergency's usually need to be deal with ASAP, boiler breaks, gears box in a car. Generally you need these to be solved as soon as possible, because ou depend on these things working and you can't budget for this type of expenditure using just your monthly salary. This is a personal opinion but I prefer investment types that don't have another fee on access. I really don't like having another fee on top on money that I need right now. Investment Options: Market based investments should be seen as long term investments, therefore they do not really satisfy requirement one, they can also have broker fees, therefore you might pay a small extra charge for taking money out, and so do not satisfy requirement two. Investment Options for Emergency Funds You want to get the best return on your money even if it's your emergency fund. So use regular saving accounts, but from you emergency fund or use tax effective savings accounts, like a cash ISA if based in the UK. Don't think of an emergency money as just sitting there, you have options just makes sure the options fit the requirements. UPDATE Given feedback I appreciate there are levels of emergency fund, the above details things which might be about 1-2 month salary in cost, car repairs, leaks, boiler repairs. Now I have another fund which is in P2P funds which is higher risk than a deposit account but then gives me a better return and is less subject to market fluctuations and it would be the place I go to for loss of job level emergencies say 6 months of salary, this takes a bit longer to access but given I have the above emergency fund I have given myself time to get the money from the P2P account.

negative: You're absolutely correct. If you have maxed out your retirement investment vehicles and have some additional investments in a regular taxable account, you can certainly use that as an emergency source of funds without much downside. (You can borrow from many retirement account but there are downsides.) Sure, you risk selling at a loss when/if you need the money, but I'd rather take the risk and take advantage of the investment growth that I would miss if I kept my emergency fund in cash or money market. And you can choose how much risk you're willing to take on when you invest the money.

negative: "I'd suggest you start by looking at the mutual fund and/or ETF options available via your bank, and see if they have any low-cost funds that invest in high-risk sectors.  You can increase your risk (and potential returns) by allocating your assets to riskier sectors rather than by picking individual stocks, and you'll be less likely to make an avoidable mistake. It is possible to do as you suggest and pick individual stocks, but by doing so you may be taking on more risk than you suspect, even unnecessary risk.  For instance, if you decide to buy stock in Company A, you know you're taking a risk by investing in just one company.  However, without a lot of work and financial expertise, you may not be able to assess how much risk you're taking by investing in Company A specifically, as opposed to Company B.  Even if you know that investing in individual stocks is risky, it can be very hard to know how risky those particular individual stocks are, compared to other alternatives. This is doubly true if the investment involves actions more exotic than simply buying and holding an asset like a stock.  For instance, you could definitely get plenty of risk by investing in commercial real estate development or complicated options contracts; but a certain amount of work and expertise is required to even understand how to do that, and there is a greater likelihood that you will slip up and make a costly mistake that negates any extra gain, even if the investment itself might have been sound for someone with experience in that area.  In other words, you want your risk to really be the risk of the investment, not the ""personal"" risk that you'll make a mistake in a complicated scheme and lose money because you didn't know what you were doing.  (If you do have some expertise in more exotic investments, then maybe you could go this route, but I think most people -- including me -- don't.) On the other hand, you can find mutual funds or ETFs that invest in large economic sectors that are high-risk, but because the investment is diversified within that sector, you need only compare the risk of the sectors.  For instance, emerging markets are usually considered one of the highest-risk sectors.  But if you restrict your choice to low-cost emerging-market index funds, they are unlikely to differ drastically in risk (at any rate, far less than individual companies).  This eliminates the problem mentioned above: when you choose to invest in Emerging Markets Index Fund A, you don't need to worry as much about whether Emerging Markets Index Fund B might have been less risky; most of the risk is in the choice to invest in the emerging markets sector in the first place, and differences between comparable funds in that sector are small by comparison.  You could do the same with other targeted sectors that can produce high returns; for instance, there are mutual funds and ETFs that invest specifically in technology stocks. So you could begin by exploring the mutual funds and ETFs available via your existing investment bank, or poke around on Morningstar.  Fees will still matter no matter what sector you're in, so pay attention to those.  But you can probably find a way to take an aggressive risk position without getting bogged down in the details of individual companies.  Also, this will be less work than trying something more exotic, so you're less likely to make a costly mistake due to not understanding the complexities of what you're investing in."

negative: "Wow. It's clear I'm outnumbered.  When I'm approached with the question (and keep in mind, it's usually a couple data points and little else) ""I am getting started, with no other money do I fund a retirement or emergency account?"" I often suggest they put the funds into a Roth, in a money market fund, and treat it like an emergency account. If there's in fact an emergency, there's no penalty to withdraw the deposit and we're talking peanuts for interest today.  With no emergency, two things could happen: A) As the account grows beyond what's needed for emergencies, the excess can be invested long term. B) As the investor earns more money and saves up enough to have a true emergency account separate from the IRA, the Roth can be fully invested long term. The 'Bad idea' stems from the view that one is using their Roth as an emergency account, which of course is bad. The subtle difference is one has no retirement savings and puts their Emergency account into the otherwise unused Roth. As time passes, they've protected more funds to grow tax free.  In the end, the most important thing is whether the person is saving and not tapping for simple non-emergency things. I'd rather see a guy with $25K in his Roth and no other funds than to have $5000 in his bank account because every time it gets larger he feels compelled to spend it.  My answer to Matt is to treat it for now as you intended, low risk, CD or cash (money market)."

negative: I would say that, for the most part, money should not be invested in the stock market or real estate.  Mostly this money should be kept in savings: I feel like your emergency fund is light.  You do not indicate what your expenses are per month, but unless you can live off of 1K/month, that is pretty low.  I would bump that to about 15K, but that really depends upon your expenses. You may want to go higher when you consider your real estate investments.  What happens if a water heater needs replacement?  (41K left) EDIT:  As stated you could reduce your expenses, in an emergency, to 2K.  At the bare minimum your emergency fund should be 12K.  I'd still be likely to have more as you don't have any money in sinking funds or designated savings and the real estate leaves you a bit exposed.  In your shoes, I'd have 12K as a general emergency fund.  Another 5K in a car fund (I don't mind driving a 5,000 car), 5k in a real estate/home repair fund, and save about 400 per month for yearly insurance and tax costs.  Your first point is incorrect, you do have debt in the form of a car lease.  That car needs to be replaced, and you might want to upgrade the other car.  How much?  Perhaps spend 12K on each and sell the existing car for 2K?  (19K left). Congratulations on attempting to bootstrap a software company.  What kind of cash do you anticipate needing?  How about keeping 10K designated for that?  (9K left) Assuming that medical school will run you about 50K per year for 4 years how do you propose to pay for it?  Assuming that you put away 4K per month for 24 months and have 9K, you will come up about 95K short assuming some interests in your favor.  The time frame is too short to invest it, so you are stuck with crappy bank rates.

negative: "The Roth vs not debate is irrelevant to the question. It doesn't matter where your emergency fund is kept, as long as it is liquid and safe. I said it before in an answer to another question: your emergency fund is not an investment -- it's your safety net This answer also says it well: an ""emergency fund"" is just that... for emergencies... NOT investment. While it ""hurts"" not to have your emergency money making more money... its MORE IMPORTANT to have quick access to it. So at TD Ameritrade, just park it in their FDIC deposit account. It will not earn any meaningful interest (at least until rates rise), but you'll be able to have access to it when you need it. Note that I would caution against putting it in a money market mutual fund. They're safer than many other investments, but they're not FDIC insured against loss and there is a potential for temporary loss of liquidity. In late 2008 when the credit markets collapsed, a lot of people suddenly became unemployed -- and needed access to their emergency funds. When Lehman Brothers went bust in September, the Reserve Primary Fund (with billions of dollars in their fund) ""broke the buck"" -- they lowered the price of shares below $1, meaning investors lost principal. The worst part is that investors were not as liquid as they wanted to be: the fund froze and it was hard to get money out. The lesson to take away from this is that one of the times you're likely to need access to your emergency fund is during a macroeconomic crisis. This is also the time when any investment that isn't guaranteed safe may potentially be (at least temporarily) unavailable or decline in value. Emergency funds should be 100% government insured. When you have your Roth funded to the point where there's extra money beyond the emergency fund, you can start investing in higher-yielding vehicles: stock or bond index ETFs would be a good start. But then that part of your Roth starts to look like a retirement account and not an emergency fund. If it were me, I'd open a Roth at a stable local bank and just keep it in their FDIC insured money market deposit account. Then if I wanted a slight boost, I might put the ""upper half"" of my emergency fund into short term CDs, but even CDs aren't worth much at the moment."

negative: "Emergency funds have a very specific and obvious benefit; you'll have money sitting around in case you need it.  A lot of people think a big car repair or some unexpected home repair is an emergency, and that's fine.  Emergency also expands up to ""I lost my job four months ago and we're a year in to a recession, the stock market is down 30% and I need to pay my rent or mortgage.""  Sure, you could just sell some of your stocks that have lost 30% and pay your rent. I know nobody likes to think about it, but the stock market can go down.  I know nobody likes to think about it, but the economy can slink in to a recession.  In fact, here's a small list of recent U.S. recessions: No competent investment adviser would advise that your emergency funds should be subject to market volatility because that completely defeats the purpose of an emergency fund. It's possible that this manager wants you to indicate a separate emergency fund to allocate a portion of your account to a low volatility US Treasury fund or something of the like, this would be materially different than investing in a broad market/large cap fund like VOO or VTI.  The effects of inflation are not so bad that you should put your emergency money in the market.  Who cares what inflation was if you have to sell an asset at a loss to pay rent?  One last point.  Index fund ETFs are not ""safe.""  Investing in diversified funds is safER than buying individual company stocks."

negative: (To be clear, IRA accounts are just wrappers, and can contain a large variety of investments. I'm restricting myself to the usual setup of investment in the stock market.) So, let's say you have $5000 in savings, as an emergency fund. Of the top of my head, putting some of it into a Roth IRA could backfire in the following ways: The basic principle here is that the stock market is not a good place for storing your emergency cash, which needs to be secured against loss and immediately accessible. Once you're happy with your level of emergency cash, however, tax-advantaged investment accounts are a reasonable next step.

negative: "Some of the other answers recommended peer-to-peer lending and property markets. I would not invest in either of these. Firstly, peer-to-peer lending is not a traditional investment and we may not have enough historical data for the risk-to-return ratio. Secondly, property investments have a great risk unless you diversify, which requires a huge portfolio. Crowd-funding for one property is not a traditional investment, and may have drawbacks. For example, what if you disagree with other crowd-funders about the required repairs for the property? If you invest in the property market, I recommend a well-diversified fund that owns many properties. Beware of high debt leverage used to enhance returns (and, at the same time, risk) and high fees when selecting a fund. However, traditionally it has been a better choice to invest in stocks than to invest in property market. Beware of anyone who says that the property market is ""too good to not get into"" without specifying which part of the world is meant. Note also that many companies invest in properties, so if you invest only in a well-diversified stock index fund, you may already have property investments in your portfolio! However, in your case I would keep the money in risk-free assets, i.e. bank savings or a genuine low-cost money market fund (i.e. one that doesn't invest in corporate debt or in variable-rate loans which have short duration but long maturity). The reason is that you're going to be unemployed soon, and thus, you may need the money soon. If you have an investment horizon of, say, 10 years, then I would throw stocks into the mix, and if you're saving for retirement, then I would go all in to stocks. In the part of the world where I live in, money market funds generally have better return than bank savings, and better diversification too. However, your 2.8% interest sounds rather high (the money market fund I have in the past invested in currently yields at 0.02%, but then again I live in the eurozone), so be sure to get estimates for the yields of different risk-free assets. So, my advice for investing is simple: risk-free assets for short time horizon, a mixture of stocks and risk-free assets for medium time horizon, and only stocks for long time horizon. In any case, you need a small emergency fund, too, which you should consider a thing separate from your investments. My emergency fund is 20 000 EUR. Your 50 000 AUD is bit more than 30 000 EUR, so you don't really have that much money to invest, only a bit more than a reasonably sized emergency fund. But then again, I live in rental property, so my expenses are probably higher than yours. If you can foresee a very long time horizon for part of your investment, you could perhaps invest 50% of your money to stocks (preference being a geographically diversified index fund or a number of index funds), but I wouldn't invest more because of the need for an emergency fund."

negative: It depends on how immediately you think you'll need your emergency fund cash: If you anticipate running into problems where you need cash right away (e.g. you live paycheck to paycheck, and your car breaks down a lot), put it into a checking or money market account. If you don't think your emergencies will require immediate access to cash (e.g. unemployment), then put it in a savings account or CD. If there is a lot of money in your accounts that goes unused, and you want a bigger safety net, then consider investing it. Though it's generally a better idea to pay off debts at this point. I think the best idea is to split your emergency fund between your checking and savings. Maybe 20% checking and 80% savings. That way, you have some extra cash on hand when you need it, while most of your money is growing in savings.

negative: What explains the most of the future returns of a portfolio is the allocation between asset classes. In the long term, stock investments are almost certain to return more than any other kinds of investments. For 40+ years, I would choose a portfolio of 100% stocks. How to construct the portfolio, then? Diversification is the key. You should diversify in time (don't put a large sum of money into your stock portfolio immediately; if you have a large sum to invest, spread it around several years). You should diversify based on company size (invest in both large and small companies). You should also diversify internationally (don't invest in just US companies). If you prefer to pick individual stocks, 20 very carefully selected stocks may provide enough diversification if you keep diversification in mind during stock picking. However, careful stock picking cannot be expected to yield excess returns, and if you pick stocks manually, you need to rebalance your portfolio occasionally. Thus, if you're lazy, I would recommend a mutual fund, or many mutual funds if you have difficulty finding a low-cost one that is internationally diversified. The most important consideration is the cost. You cannot expect careful fund selection to yield excess returns before expenses. However, the expenses are certain costs, so prefer low-cost funds. Almost always this means picking index funds. Avoid funds that have a small number of stocks, because they typically invest only in the largest companies, which means you fail to get diversification in company size. So, instead of Euro STOXX 50, select STOXX 600 when investing to the European market. ETFs may have lower costs than traditional mutual funds, so keep ETFs in mind when selecting the mutual funds in which to invest. For international diversification, do not forget emerging markets. It is not excessive to invest e.g. 20% to emerging markets. Emerging markets have a higher risk but they also have a higher return. A portfolio that does not include emerging markets is not in my opinion well diversified. When getting close to retirement age, I would consider increasing the percentage of bonds in the portfolio. This should be done primarily by putting additional money to bonds instead of selling existing investments to avoid additional taxes (not sure if this applies to other taxation systems than the Finnish one). Bond investments are best made though low-cost mutual funds as well. Keep bond investments in your local currency and risk-free assets (i.e. select US government bonds). Whatever you do, remember that historical return is no guarantee of future return. Actually, the opposite may be true: there is a mean reversion law. If a particular investment has returned well in the past, it often means its price has gone up, making it more likely that the price goes down in the future. So don't select a fund based on its historical return; instead, select a fund based on low costs. However, I'm 99% certain that over a period of 40 years, stocks will return better than other investments. In addition to fund costs, taxes are the other certain thing that will be deducted from your returns. Research what options you have to reduce the taxes you need to pay. 401-K was explained in another answer; this may be a good option. Some things recommended in other answers that I would avoid:

negative: I like this option, rather than exposing all 600k to market risk, I'd think of paying off the mortgage as a way to diversify my portfolio. Expose 400k to market risk, and get a guaranteed 3.75% return on that 200k (in essence). Then you can invest the money you were putting towards your mortgage each month.  The potential disadvantage, is that the extra 200k investment could earn significantly more than 3.75%, and you'd lose out on some money. Historically, the market beats 3.75%, and you'd come out ahead investing everything. There's no guarantee. You also don't have to keep your money invested, you can change your position down the road and pay off the house. I feel best about a paid off house, but I know that my sense of security carries opportunity cost. Up to you to decide how much risk you're willing to accept. Also, if you don't have an emergency fund, I'd set up that first and then go from there with investing/paying off house.

negative: Great question and great of you to be paying attention to this.  Right now having the ability to save $2K per year might seem very out of reach.  However with the right career path and by paying attention to personal finance saving 2K per month will become possible sooner than you may think. As a student you are already investing in your future, by building your greatest wealth building tool:  your income.  Right now concentrate on that.  If you have extra money throw it in a boring old savings account and don't touch it other than emergencies.  An emergency is defined as something that will preclude you from completing your education.  It is not paying for the latest xbox game/skateboard/once in a lifetime trip. An important precursor to investing is having an emergency fund that sits in a boring old savings account earning almost nothing.  Think of it as an insurance policy that prevents you from liquidating your investments in case of and emergency.   Emergencies often come during economic downturns.  If you have to liquidate your investment to cover these times then you will lock in negative returns.    Once you are done with school, moved into a place of your own, and have your first job you will have a nice start on your emergency fund.  Then you can start investing.  Doing it in the right order you will be amazed how quickly your savings can accumulate.   I'd be shooting for that 2 million by the time you are 40, not 65.

negative: "What could a small guy with $100 do to make himself not poor? The first priority is an emergency fund. One of the largest expenses of poor people are short-term loans for emergencies. Being able to avoid those will likely be more lucrative than an S&P investment. Remember, just like a loan, if you use your emergency fund, you'll need to refill it. Be smart, and pay yourself 10% interest when you do. It's still less than you'd pay for a payday loan, and yet it means that after every emergency you're better prepared for the next event. To get an idea for how much you'd need: you probably own a car. How much would you spend, if you suddenly had to replace it? That should be money you have available. If you think ""must"" buy a new car, better have that much available. If you can live with a clunker, you're still going to need a few K.  Having said that, the next goal after the emergency fund should be savings for the infrequent large purchases. The emergency fund if for the case where your car unexpectedly gets totaled; the saving is for the regular replacement. Again, the point here is to avoid an expensive loan.  Paying down a mortgage is not that important. Mortgage loans are cheaper than  car loans, and much cheaper than payday loans. Still, it would be nice if your house is paid when you retire. But here chances are that stocks are a better investment than real estate, even if it's the real estate you live in."

negative: How's your savings and emergency fund? Everyone should have an emergency fund that will last them 6 months, and the goal should be two years' worth.  This should be in an easily accessible account, such as a savings or money market account at your bank (you could consider CDs, but unless you're laddering them there will be penalties to get at the money). Once you've got 6 months' worth saved, the next thing to focus on is a tax advantaged retirement account.  Only when you've maxed out your contributions (and the tax benefits) should you consider other investments.  After all, those tax benefits are free money from Uncle Sam :)

negative: $23,000 Student Loans at 4% This represents guaranteed loss. Paying this off quickly is a conservative move, while your other investments may easily surpass 4% return, they are not guaranteed.  Should I just keep my money in my savings account since I want to keep   my money available? Or are there other options I have that are not   necessarily long term may provide better returns? This all depends on your plans, if you're just trying to keep cash in anticipation of the next big dip, you might strike gold, but you could just as easily miss out on significant market gains while waiting. People have a poor track record of predicting market down-turns. If you are concerned about how exposed to market risk you are in your current positions, then you may be more comfortable with a larger cash position. Savings/CDs are low-interest, but much lower risk. If you currently have no savings (you titled the section savings, but they all look like retirement/investment accounts), then I would recommend focusing on that first, getting a healthy emergency fund saved up, and budgeting for your car/house purchases.  There's no way to know if you'd be better off investing everything or piling up cash in the short-term. You have to decide how much risk you are comfortable with and act accordingly.

negative: "The answer to your question depends very much on your definition of ""long-term"". Because let's make something clear: an investment horizon of three to six months is not long term. And you need to consider the length of time from when an ""emergency"" develops until you will need to tap into the money. Emergencies almost by definition are unplanned. When talking about investment risk, the real word that should be used is volatility. Stocks aren't inherently riskier than bonds issued by the same company. They are likely to be a more volatile instrument, however. This means that while stocks can easily gain 15-20 percent or more in a year if you are lucky (as a holder), they can also easily lose just as much (which is good if you are looking to buy, unless the loss is precipitated by significantly weaker fundamentals such as earning lookout). Most of the time stocks rebound and regain lost valuation, but this can take some time. If you have to sell during that period, then you lose money. The purpose of an emergency fund is generally to be liquid, easily accessible without penalties, stable in value, and provide a cushion against potentially large, unplanned expenses. If you live on your own, have good insurance, rent your home, don't have any major household (or other) items that might break and require immediate replacement or repair, then just looking at your emergency fund in terms of months of normal outlay makes sense. If you own your home, have dependents, lack insurance and have major possessions which you need, then you need to factor those risks into deciding how large an emergency fund you might need, and perhaps consider not just normal outlays but also some exceptional situations. What if the refrigerator and water heater breaks down at the same time that something breaks a few windows, for example? What if you also need to make an emergency trip near the same time because a relative becomes seriously ill? Notice that the purpose of the emergency fund is specifically not to generate significant interest or dividend income. Since it needs to be stable in value (not depreciate) and liquid, an emergency fund will tend towards lower-risk and thus lower-yield investments, the extreme being cash or the for many more practical option of a savings account. Account forms geared toward retirement savings tend to not be particularly liquid. Sure, you can usually swap out one investment vehicle for another, but you can't easily withdraw your money without significant penalties if at all. Bonds are generally more stable in value than stocks, which is a good thing for a longer-term portion of an emergency fund. Just make sure that you are able to withdraw the money with short notice without significant penalties, and pick bonds issued by stable companies (or a fund of investment-grade bonds). However, in the present investment climate, this means that you are looking at returns not significantly better than those of a high-yield savings account while taking on a certain amount of additional risk. Bonds today can easily have a place if you have to pick some form of investment vehicle, but if you have the option of keeping the cash in a high-yield savings account, that might actually be a better option. Any stock market investments should be seen as investments rather than a safety net. Hopefully they will grow over time, but it is perfectly possible that they will lose value. If what triggers your financial emergency is anything more than local, it is certainly possible to have that same trigger cause a decline in the stock market. Money that you need for regular expenses, even unplanned ones, should not be in investments. Thus, you first decide how large an emergency fund you need based on your particular situation. Then, you build up that amount of money in a savings vehicle rather than an investment vehicle. Once you have the emergency fund in savings, then by all means continue to put the same amount of money into investments instead. Just make sure to, if you tap into the emergency fund, replenish it as quickly as possible."

negative: "For an RRSP, you do not have to pay taxes on money or investments until you withdraw the money. If you do not reinvest the dividends but instead, take them out as cash, that would be withdrawing the money. For mutual funds, you would normally reinvest the dividends if holding the investment inside an RRSP. For stocks, I believe the dividends would end up sitting in the cash part of your RRSP account (and you'd probably use the money to buy more stocks, though would not be required to do so). Either way, you do not pay tax on this investment income unless you withdraw it from your RRSP. For example, you invest $10,000 inside your RRSP. You get the tax benefit from doing so. You get dividends of $1,000 (hey, it was a good year), and use these to buy more stock. As the money never left your RRSP account, you are considered to have invested only your initial $10,000. If instead, you withdraw the $1,000 in dividends, you are taxed on $1000 income. TFSA are slightly more complicated. You don't get a tax benefit from your initial contribution, but then do not pay tax when you withdraw from the TFSA. Your investment income is still tax-free, and you are (generally) much more limited in how much you can contribute. For example, you invest $10,000 inside your TFSA. You get dividends of $1,000, and use these to buy more stock. Your total contributions to your TFSA remains at $10,000 as the money never left your account. You could instead withdraw the $1000 from your TFSA and would not pay tax on it. In the next calendar year (or later) after the withdrawal, you could ""repay"" the $1000 you took out without suffering an overcontribution penalty. This makes TFSA an excellent place to park emergency funds, as you can withdraw and subsequently replace the investment while continuing to get the tax benefits on your investment income. RRSPs are better for retirement or for the home buyers plan. In general, you should not be withdrawing money from either your TFSA or RRSP, except in emergencies, when retiring, or when purchasing a home. I prefer indexed mutual funds or money market accounts for both my RRSP and TFSA rather than individual stocks, but that's up to you."

negative: "A well diversified retirement portfolio is going to have some component in cash or near-liquid investments. So I tend to put it all in one place knowing that I can draw on it (at least from the ROTH account) in the event of an emergency.  Obviously, you don't want to do this very often, but hopefully emergencies don't happen often either. You also have to attenuate your idea of an emergency so that it doesn't mean ""I didn't get a bonus check this year and can't afford gifts for the kids as nice as last year!"""

negative: Firstly well done on building a really sold base of savings. An emergency fund needs to have two key characteristics: Be enough to get you through a typical emergency event (often seen as approx. ~6 months’ salary in your style of situation assuming you have no dependents etc) Be liquid and available to you instantly if an emergency arises Once you have decided how much you will need for 1), you then generally find the best interest available on an instant access savings account and leave it there. It's important to note that because you need it very liquid and very secure you will basically never make (nor should  you expect to make) any sizeable rate of interest on your emergency fund. Once this is done, whatever left should be invested in an asset/mix of assets that best fit your risk profile - of which long term bonds are a completely legitimate option, but it's hard to say without knowing more about your long term aims/liabilities/job market etc.

negative: "Your question is listed as ""How to invest 100k"", not how would I find someone without a hidden agenda - so I'll answer that: It depends. I believe the best choices available are essentially as follows: If you are looking to pay for your childrens' college, it might be nice just to put the money in a Roth IRA and have that done right off the bat. If you disciplined enough to keep the money invested in some type of stock indexed fund, that might be good - the stock market has often outperformed almost every other form of investment over the very long haul. But if you could see yourself tapping it for things, then you might not want this. Another option is to put the money against your house. If that doesn't pay it off, refinance the remaining portion into a lower rate for less years. Obviously this knocks down a huge portion of the interest (duh) and gives you a nice cash flow you can use for investing. Also, the money you've put into a primary residence is pretty safe. I believe in some cases, safe even from bankruptcy. But as you've noted, being underwater on the home you are essentially throwing that money away in some way or fashion. And really, all in all, houses are terrible investments. You never really get your money out of your primary home, unless you downsize. The money is essentially ""saved"" without an equity line. This is a good choice if you're not disciplined. Your choice depends on: Of course, you can do any combination of these things and as Dave Ramsey is apt to remind his listeners and callers: you ought to have your emergency fund set before you do any of these things."

negative: This decision depends upon a few things. I will list a couple:- 1.) What is your perception about financial markets in your time span of investments? 2.) What kind of returns are you expecting? 3.) How much liquidity do you have to take care of your daily/monthly expenses? 1.)If your perception about financial markets is weak for the near future, do not invest all your money in a mutual fund at 1 time. Because, if the market falls drastically, chances are that your fund will also lose a lot of money and the NAV will go down. On the other hand, if you think it is strong, go ahead and invest all at one time. 2.) If you are expecting very high returns in a short time frame, then SIP might not be a very good option as you are only investing a portion of your money. So, if the market goes higher, then you will make money only on what you have invested till date and also buy into the fund in the upcoming month at a higher rate( So you will get less units).  3.) If you put all your money into a mutual fund, will you have enough money to take care of your daily needs and emergencies? The worst thing about an investment is putting in all what you have and then being forced to sell in a bear market at a lower rate because you really require the money. Other option is taking a personal loan(15-16%) and taking care of your daily needs, but that would not make sense either as the average return that you can expect from a mutual fund in India is 12-13%. To summarize:- 1.) If you have money to spare and think the market is going to go higher, a mutual fund is a better option. 2.) If you have the money to spare and think that the market is going to fall, DON'T DO ANYTHING!.(It is always better to be even than lose). 3.) If you don't have the money and don't know about markets, but want to be part of it, then you can invest in an SIP because the advantages of this are if the market goes high, you make money on what you've put it, and if the market falls, you get to buy more units of the fund for a cheaper price. Eventually, you can expect to make a return of 14-15% on these, but again, INVESTMENTS ARE SUBJECT TO MARKET RISK! Please watch the funds average return over the last 10 years and their portfolio holdings. All the best!:) PS:- I am assuming you are talking about equity funds.

negative: i think emergency fund should be in a more liquid account (like regular saving or money market) so you can withdraw money any time, while your regular saving can be tied up in a long term CD, bond or an investment account.

negative: "You could put in in a Money Market Fund. These are designed to always be $1 per share, and not lose money. Of course, it still, very rarely, happens and is called ""breaking the buck"" when they do.  Sounds like the high yield savings is the way to go. The rates will be the same as what you can get from a Money Market Fund, but you also have the added advantage that the account is FDIC insured. BTW, using a Roth as an emergency fund is a terrible idea. It is true that, since you already paid taxes on your contributions, you can withdraw those contributions without incurring penalties. However, you have to file paperwork to do it, and since it's not common, the IRA custodian is likely to screw it up. Plus, you have to keep track of what were contributions, and what was investment returns, to not run afoul of the penalties. And it will take time to do it, which you may not have in an emergency. Considering you're only looking at getting 1% interest anyway, there's no reason to use a Roth account as an emergency fund. You can set those same automatic deposits into a savings account."

negative: Thank you for your service.  My first suggestion since your car is a planned for the near future is keep that amount in savings and just pay cash. There are plenty of attractive offers to entice you to finance your vehicle but there really is no compelling reason to do it considering the savings you have.  Second I would keep an additional portion of savings as a rainy day emergency fund. How much is based mostly on what you feel comfortable with. The number of possible emergencies that can come up is limited and your expenses are limited which is normal given your age. This fund might be for something such as emergency travel for a sick family member, cover a deductible for an auto accident, whatever unforseen event might occur (hence the name emergency fund). What investments you are comfortable with will be determined by risk tolerance. While in the military individual stocks that are aggressive risky investments may not be a good idea because of the extra attention they require and you can't really babysit a portfolio while deployed but there are many good low or no cost mutual funds or ETFs that you could get into.  I would look into setting up a recurring purchase with a set dollar amount monthly so you will continue to accumulate whatever option you are investing in regularly even if you are deployed. Which fund or ETF you pick will depend on your goals and risk tolerance but you could very easily pick several for diversity. Good luck and thank you again for your service.

negative: If I were in your shoes (I would be extremely happy), here's what I would do: Get on a detailed budget, if you aren't doing one already. (I read the comments and you seemed unsure about certain things.)  Once you know where your money is going, you can do a much better job of saving it. Retirement Savings: Contribute up to the employer match on the 401(k)s, if it's greater than the 5% you are already contributing. Open a Roth IRA account for each of you and make the max contribution (around $5k each).  I would also suggest finding a financial adviser (w/ the heart of a teacher) to recommend/direct your mutual fund investing in those Roth IRAs and in your regular mutual fund investments. Emergency Fund With the $85k savings, take it down to a six month emergency fund.  To calculate your emergency fund, look at what your necessary expenses are for a month, then multiply it by six.  You could place that six month emergency fund in ING Direct as littleadv suggested.  That's where we have our emergency funds and long term savings.  This is a bare-minimum type budget, and is based on something like losing your job - in which case, you don't need to go to starbucks 5 times a week (I don't know if you do or not, but that is an easy example for me to use).  You should have something left over, unless your basic expenses are above $7083/mo. Non-retirement Investing: Whatever is left over from the $85k, start investing with it. (I suggest you look into mutual funds) it.  Some may say buy stocks, but individual stocks are very risky and you could lose your shirt if you don't know what you're doing.  Mutual funds typically are comprised of many stocks, and you earn based on their collective performance. You have done very well, and I'm very excited for you. Child's College Savings: If you guys decide to expand your family with a child, you'll want to fund what's typically called a 529 plan to fund his or her college education.  The money grows tax free and is only taxed when used for non-education expenses.  You would fund this for the max contribution each year as well (currently $2k; but that could change depending on how the Bush Tax cuts are handled at the end of this year). Other resources to check out: The Total Money Makeover by Dave Ramsey and the Dave Ramsey Show podcast.

negative: "Which of these categories are emergency funds meant to cover? Emergency funds are for emergencies, which to me means expenses that are unanticipated and can't be covered out of ""normal"" cash-flow.  Oil changes are not an ""emergency"" and should be part of your normal budget.  Car/house repairs and doctor visits might be an emergency depending on the severity and the urgency (e.g. do I need to fix this now or can I save up and fix it?) For known, predictable expenses that are infrequent (Christmas, birthdays, car insurance, home insurance/taxes if it's not part of your mortgage payment), I use an escrow account.  I calculate how much I'll need for all of those things put together over the year and set aside a fixed amount each paycheck to ensure that I have enough to cover each item.  You could do something similar for minor doctor visits, car repairs, etc.  Estimate how much you might spend and set aside some money each month. If you find you're spending more than you thought, just increase the amount.  You can use envelopes for each type of expense, have a separate checking account for those, whatever.  The point is to set it aside and make sure you have enough left over to cover your known expenses. The whole point of an emergency fund is to be able to pay cash for emergencies rather than borrowing to pay them and dealing with interest, late fees, etc."

negative: Emergency funds, car funds etc tend to have to be accessible quickly (which tends to rule out CDs unless you have the patience to work something like a monthly CD ladder, an I don't) and you'll want your principal protected. The latter pretty much rules out any proper investment (ETFs, mutual funds, stock market directly, Elbonian dirt futures etc). It's basically a risk-vs-return calculation. Not much risk, not much return but at least you're not losing from a nominal standpoint). Another consideration is that you normally aren't able to decide freely if and when you want to pull money out of an emergency fund. If it is an emergency, waiting three weeks to see if the stock market goes up a little further isn't an option so you might end up having to take a hit that would be irrelevant if you were investing long term but might hurt badly because you're left with no choice. I'd stick that sort of money into a money market account and either add to it if necessary to keep up with inflation or make sure that my non-retirement investments over and above these funds are performing well, as those will and should become a far bigger part of your wealth in the longer run.


query: Should market based health insurance premiums be factored into 6 months emergency fund savings?

positive: "Yes, you should budget some amount of your emergency fund for healthcare expenses.  How much you budget is really dependent on your particular anticipated costs.  Be aware that health insurance likely costs significantly more than your employer charges you for access to its plan. Since healthcare reform mandated guaranteed issue individual coverage you will have the ability to buy individual coverage for you and, if applicable, your family.  When buying individual coverage you have essentially two choices, your decision hinges on whether or not you'd qualify for a premium subsidy.  If your AGI is below 400% of the poverty line you'll be able to receive subsidized coverage at a state or federal health insurance exchange.  If the subsidy is not meaningful to you, or you wouldn't qualify, you can buy an ""off exchange"" plan offered either directly through a carrier or an insurance agent (some insurance agents are also licensed to sell exchange plans though it's somewhat rare).  In order to receive subsidized coverage you must buy through a state or federal exchange, or an agent licensed to sell exchange products specifically. If your employer was large enough to be required to offer its plan via COBRA or you live in a state that extends the COBRA requirement to smaller businesses, you can choose that as well.  Bear in mind this option is likely to be expensive relative to individual plans.  It's becoming a less relevant solution with the advent of guaranteed issue individual coverage.  COBRA is not a special type of insurance, it's a mandate that your employer allow you to remain on its plan but pay the full gross premium plus an up to 2% (10% for calCOBRA) administrative fee. Despide popular vernacular, there is no such thing as Obamacare or ACA coverage.  Obamacare reshaped the insurance market.  The ACA outlines certain minimum coverage requirements, generally referred to as ""Minimum Essential Coverage.""  While employers and plans are not ""required"" to meet all of these coverage requirements there is a penalty associated with non-compliance.  The single exception to this is grandfathered plans which can still sidestep a few of the requirements.  The penalty is harsh enough that it's not worth the cost of offering a non-compliant plan. Whether you buy coverage through a state or federal exchange, through an insurance agent, or via your employer's COBRA program you will have ""ACA"" coverage (unless on the off chance your employer's plan doesn't check the ""Minimum Essential Coverage"" box).  So generally all plans available to you will have $0 preventive coverage, pregnancy benefits, cancer treatment benefits etc. Another thing to consider is your entire family doesn't need to be on the same plan.  If your family is healthy with the exception of one child, you can purchase $0 deductible coverage for the one child and higher deductible more catastrophic plan for the remainder of your family. In fact you could choose COBRA for one child and purchase individual coverage for the remainder of the family.  The things to consider when you face a lay-off: I tried to mitigate my use of ""all"" and ""always"" because there are some narrow exceptions to these requirements, such as the ""Hobby Lobby"" decision allowing closely held organizations with highly religious owners the ability to remove certain contraception benefits.  Understand that these exceptions are rare and not available to individual plans."

positive: "The guideline for the size of an emergency fund is just a guideline.  I've usually heard it expressed as ""3 to 6 months,"" but everyone has a different idea of exactly how big it should be. The purpose of the fund is to give you enough cash to be able to pay for unexpected expenses that have come up that you have not budgeted for without you having to borrow money to pay for them. To figure out how big this fund should be, we look at the worst case scenario.  Suppose that you lost your job tomorrow.  What would you do? Cut your expenses.  You'd probably be much more careful how you spend money. Secure health insurance.  This would be done by either continuing your employer's policy with COBRA, or by purchasing your own insurance, likely through the Obamacare/ACA market.  Keep in mind that most likely your employer is paying for a portion of your insurance now, so this expense will go up quite a bit no matter which option you choose. Look for another job.  You'd probably begin your search for a new job immediately. The size of your emergency fund determines how long you will be able to go without income before you need to start a new job. Regarding cutting your expenses, it is up to you how much you would cut.  There are things that are easy to cut temporarily (or permanently), such as restaurants, entertainment expenses, vacations, etc.  You would probably stop retirement investing until you have income again.  The more you cut, the longer your emergency fund would last.  Things you don't want to cut are necessities, like housing, groceries, utilities, transportation, etc.  I would also include health insurance in this list.  Certainly, if you have a pre-existing condition, you do not want to let your health insurance coverage lapse. Your employability is also a factor.  If you believe that you would have an easy time finding similar employment to what you have now, your emergency fund might not need to be quite as big as someone who believes they would have a harder time finding another job."

positive: Yes factor into your fund the cost of health insurance.  You basically have three options when facing a loss of income for 3-6 months: Pre-ACA the COBRA one was the default option many planned for because there was no need to change doctors. Of course many people were shocked how expensive it was compared to just looking at the employees share of the monthly premium. For planning you can do some research into the cost of one of the ACA approved plans in your state. Keeping in mind that the lack of income might qualify you for a subsidy. As to the coverage level, that would depend on your situation and the perceived gap. I have known many people who didn't have to pick COBRA until after the new job started so they knew exactly what they needed to cover and what their bills were during the gap.

positive: Yes, it should be. As, where one has insurance, its an expense one would expect one to continue to incur in a normal budgetary emergency, even drop in the extreme.

negative: How's your savings and emergency fund? Everyone should have an emergency fund that will last them 6 months, and the goal should be two years' worth.  This should be in an easily accessible account, such as a savings or money market account at your bank (you could consider CDs, but unless you're laddering them there will be penalties to get at the money). Once you've got 6 months' worth saved, the next thing to focus on is a tax advantaged retirement account.  Only when you've maxed out your contributions (and the tax benefits) should you consider other investments.  After all, those tax benefits are free money from Uncle Sam :)

negative: Emergency funds, by the name it implies that they should be available on hand at a very short notice if needed. Conservation of principal (not withstanding inflation, but rather in absolute terms) is also a very important criteria of any kind of account that you will use to save the emergency fund. I would suggest the following breakup. The number in brackets signifies the amount of per month expenses that you can keep in that account. = total 6 months living expenses

negative: Let me first start by defining an emergency fund. This is money which is: Because emergency's usually need to be deal with ASAP, boiler breaks, gears box in a car. Generally you need these to be solved as soon as possible, because ou depend on these things working and you can't budget for this type of expenditure using just your monthly salary. This is a personal opinion but I prefer investment types that don't have another fee on access. I really don't like having another fee on top on money that I need right now. Investment Options: Market based investments should be seen as long term investments, therefore they do not really satisfy requirement one, they can also have broker fees, therefore you might pay a small extra charge for taking money out, and so do not satisfy requirement two. Investment Options for Emergency Funds You want to get the best return on your money even if it's your emergency fund. So use regular saving accounts, but from you emergency fund or use tax effective savings accounts, like a cash ISA if based in the UK. Don't think of an emergency money as just sitting there, you have options just makes sure the options fit the requirements. UPDATE Given feedback I appreciate there are levels of emergency fund, the above details things which might be about 1-2 month salary in cost, car repairs, leaks, boiler repairs. Now I have another fund which is in P2P funds which is higher risk than a deposit account but then gives me a better return and is less subject to market fluctuations and it would be the place I go to for loss of job level emergencies say 6 months of salary, this takes a bit longer to access but given I have the above emergency fund I have given myself time to get the money from the P2P account.

negative: Firstly well done on building a really sold base of savings. An emergency fund needs to have two key characteristics: Be enough to get you through a typical emergency event (often seen as approx. ~6 months’ salary in your style of situation assuming you have no dependents etc) Be liquid and available to you instantly if an emergency arises Once you have decided how much you will need for 1), you then generally find the best interest available on an instant access savings account and leave it there. It's important to note that because you need it very liquid and very secure you will basically never make (nor should  you expect to make) any sizeable rate of interest on your emergency fund. Once this is done, whatever left should be invested in an asset/mix of assets that best fit your risk profile - of which long term bonds are a completely legitimate option, but it's hard to say without knowing more about your long term aims/liabilities/job market etc.

negative: Regarding Medical insurance premiums - The premiums are only part of the cost. You need to know if you have a deductible, your out of pocket maximum and what co-pays you have. If you take medications on a daily basis you need to account for those costs. Some programs allow you to put money aside pre-tax to pay for these known expenses.  I would split Emergency fund / general savings into two lines. You can set a goal to save X months worth of expenses as an emergency fund, but the general savings will be whatever is left over from the rest of your budget. Unless you have a goal for the savings: car, home...

negative: It sounds like you're putting all your extra money into insurances because you feel that one can never have too much insurance. That's a very bad idea, financially. Basically it means you'll end up giving your money away to insurance companies in order to satisfy that feeling. Do realize that the expected value of every instuance is negative: on average, you'll pay more money than you'll receive. Otherwise, insurance companies would go bankrupt, so they are very good at ensuring that they get more in premiums than they pay out. Insurance should only be bought to cover essential risks, things that would ruin you: major health problems, death (to cover dependants), disability, liability. For everything else, you should self-insure by saving up money (up to a few months' wages) and putting it into safe and liquid investment vehicles as an emergency fund. That way, you are much more flexible, don't pay for the insurance company's employees, fancy offices and profits, and may even earn some interest.

negative: I would say that, for the most part, money should not be invested in the stock market or real estate.  Mostly this money should be kept in savings: I feel like your emergency fund is light.  You do not indicate what your expenses are per month, but unless you can live off of 1K/month, that is pretty low.  I would bump that to about 15K, but that really depends upon your expenses. You may want to go higher when you consider your real estate investments.  What happens if a water heater needs replacement?  (41K left) EDIT:  As stated you could reduce your expenses, in an emergency, to 2K.  At the bare minimum your emergency fund should be 12K.  I'd still be likely to have more as you don't have any money in sinking funds or designated savings and the real estate leaves you a bit exposed.  In your shoes, I'd have 12K as a general emergency fund.  Another 5K in a car fund (I don't mind driving a 5,000 car), 5k in a real estate/home repair fund, and save about 400 per month for yearly insurance and tax costs.  Your first point is incorrect, you do have debt in the form of a car lease.  That car needs to be replaced, and you might want to upgrade the other car.  How much?  Perhaps spend 12K on each and sell the existing car for 2K?  (19K left). Congratulations on attempting to bootstrap a software company.  What kind of cash do you anticipate needing?  How about keeping 10K designated for that?  (9K left) Assuming that medical school will run you about 50K per year for 4 years how do you propose to pay for it?  Assuming that you put away 4K per month for 24 months and have 9K, you will come up about 95K short assuming some interests in your favor.  The time frame is too short to invest it, so you are stuck with crappy bank rates.

negative: "Jeez - you want me to come over and read the articles to you as well?   >Ghana operates the National Health Insurance Scheme to provide citizens with health insurance. The level of premiums citizens must pay varies according to their level of income. Most medical facilities are run directly by the Ministry of Health or Ghana Health Service.[8]  >Rwanda operates a system of universal health insurance through the Ministry of Health called Mutuelle de Santé (Mutual Health), a system of community-based insurance where people pay premiums based on their income level into local health insurance funds, with the wealthiest paying the highest premiums and required to cover a small percentage of their medical expenses, while those at the lowest income levels are exempt from paying premiums and can still utilize the services of their local health fund. In 2012, this system insured all but 4% of the population.[11]  >Israel has a system of universal healthcare as set out by the 1995 National Health Insurance Law. The state is responsible for providing health services to all residents of the country, who can register with one of the four national health service funds. To be eligible, a citizen must pay a health insurance tax.  Now if you want to be nitpicky about whether income-based taxes levied on an individual for nation-wide healthcare counts as ""requiring a person to purchase insurance"" you can - but I think we both know that level of semantics is reserved for people who've said something stupid and now have to retreat into word games."

negative: I will attempt to answer three separate questions here: The standard answer is that an emergency fund should not be in an investment that can lose value.  The safest course of action is to put it in a savings account or other very low risk investment somewhere. This question becomes: can a reasonable and low risk investment in Sweden be comparable to or better than a low risk investment in Brazil? Inflation in Brazil has averaged a little less than 6% over the last 10 years with a recent spike up above 8%.  A cursory search indicates interest rates on savings accounts in Brazil are outpacing inflation so you might still expect a positive return on money in a savings account there. By contrast, Sweden's inflation rate has been around 1% over the last 10 years and has hovered around 0 or even deflation in recent years.  Swedish interest rates for savings accounts right now are very low, nearly 0%.  Putting money in a savings account in Sweden would likely hold its value or lose a slight amount of value. Based on this, you might be better off leaving your emergency fund invested in BRL in Brazil. The answer to this a little unclear.  The Brazilian stock market has been all over the place in the last 10 years, with a slight downard trend in recent years.  In comparison, Sweden's stock market has shown fairly consistent growth in spite of the big dip in 2008.  Given this, it seems like the fairest comparison would your current 13% ROI investment in Brazil vs. a fund or ETF that tracks the Swedish stock market index. If we assume a consistent 13% ROI on your investment in Brazil and a consistent inflation rate of 6%, your adjusted ROI there would be around 7% per year. The XACT OMS30 ETF that tracks the Swedish OMS 30 Index has a 10 year annualized return of 9.81%.  If you subtract 0.8% inflation, you get an adjusted ROI 9%. Based on this, Sweden may be a safer place for longer term, moderate risk investments right now.

negative: "Discounting premiums based on some past history is not unique to auto policies.  Other insurers will discount premiums based on past claims history they just don't shout about it as a marketing means to attract customers.  Life insurance is underwritten based on your health history; if you want to consider your ""preferred"" underwriting status based on your clear health history a ""discount based on your healthy habits"" you're free to do so.  All sorts of lines of insurance use all sorts of things to determine an underwriting classes.  The fact that auto insurers trumpet specific discounts does not mean the same net effect is not available on other lines of coverage. Most states require auto rates and discounts to be filed and approved with some state regulator, some regulatory bodies even require that certain discounts exist.  You could likely negotiate with your business insurance underwriters about a better rate and if the underwriters saw fit they could give you a discount.  Auto insurers can offer discounts but are generally beholden to whatever rate sheet is on file with the applicable regulatory body. For the person who downvoted, here's a link to a spreadsheet outlining one of the CA department of insurance allowable rating factor sheets related to auto insurance."

negative: You will find lots of rules of thumb but there is no universal truth to how much you should save. There are factors you DO need to consider though: you should start as early as possible to set money aside for retirement. You should then use a retirement calculator to at least get an understanding of the amount you need to set aside each month to achieve the desired retirement income; your default should be not to spend money and only spend money when you must. Leisure, travel and eating out should come last after you have saved up; you should have funds for different terms. For example, my wife and I have an emergency fund for unexpected expenses or losses in income. The rule of thumb here generally is to have 3-6 months of salary saved up. A longer term fund should be created for larger expenses like buying a car or preparing the cashdown on a property. Finally, the retirement fund which should cover your needs after you have retired.

negative: "I'm going to answer your questions out of order. Emergency fund: Depending on how conservative you are and how much insurance you have, you may want anywhere from 3-12 months of your expenses on hand. I like to keep 6 months worth liquid in a ""high-yield"" savings account. For your current expenses that would be $24k, but when this transaction completes, you will have a mortgage payment (which usually includes home-owners insurance and property taxes in addition to your other expenses) so a conservative guess might be an additional $3k/month, or a total of $42k for six months of expenses. So $40-$100k for an emergency fund depending on how conservative you are personally. Down payment: You should pay no less than 20% down ($150k) on a loan that size, particularly since you can afford it. My own philosophy is to pay as much as I can and pay the loan off as soon as possible, but there are valid reasons not to do that. If you can get a higher rate of return from that money invested elsewhere you may wish to keep a mortgage longer and invest the other money elsewhere. Mortgage term: A 15-year loan will generally get you the best interest rate available. If you paid $400k down, financing $350k at a 3.5% rate, your payment would be about $2500 on a 15-year loan. That doesn't include property taxes and home-owners insurance, but without knowing precisely where you live, I have no idea whether those would keep you inside the $3000 of additional monthly home expenses I mentioned above when discussing the emergency fund. That's how I would divide it up. I'd also pay more than the $2500 toward the mortgage if I could afford to, though I've always made that decision on a monthly basis when drawing up the budget for the next month."

negative: The iron-clad rule of investing is that risk and return are directly related. It is impossible to get a higher return than you are getting without putting principal at risk. Your emergency fund should be in cash, preferably in government insured cash (like a savings account). The best you could probably do is laddered 3-month CDs. That way, you could cash them out, one per month, as they mature.

negative: While the OP disses the health insurance coverage offered through his wife's employer as a complete rip-off, one advantage of such coverage is that, if set up right (by the employer), the premiums can be paid for through pre-tax dollars instead of post-tax dollars. On the other hand,  Health insurance premiums cannot be deducted on Schedule C by self-employed persons. So the self-employed person has to pay both the employer's share as well as the employee's share of Social Security and Medicare taxes on that money. Health insurance premiums can be deducted on Line 29 of Form 1040 but only for those months during which the Schedule C filer is neither  covered nor eligible to be covered by a subsidized health insurance plan maintained by an employer of the self-employed person (whose self-employment might be a sideline) or the self-employed person's spouse. In other words, just having the plan coverage available through the wife's employment, even though one disdains taking it, is sufficient to make a Line 29 deduction impermissible.  So, AGI is increased. Health insurance premiums can be deducted on Schedule A but only to the extent that they (together with other medical costs) exceed 10% of AGI. For many people in good health, this means no deduction there either. Thus, when comparing the premiums of health insurance policies, one should pay some attention to the tax issues too. Health insurance  through a spouse's employment might not be that bad a deal after all.

negative: Fifteen thousand dollars is not a whole lot of cash.  It should probably be kept liquid.  To that end, savings accounts and certificates of deposit (CDs) are typically used.  (There are also money market funds, but I am not sure that makes sense once trading costs are figured into the equation.) I would set some of that money aside, for an emergency fund.  (Start with at least 6 months of realistic living expenses  and also consider a fund for unforeseen emergencies.)  I would consider using 2-3 thousand to setup a retirement account.  The rest, I would place into CD ladders, so that it is somewhat accessible.

negative: I mean  a checkings/savings combo is fiscally responsible if you're putting a 3-6 month emergency fund in there. Hell, I'd argue that you'd be insanely bad with money not to keep an emergency fund if you got the cash to spare.  401(k),IRAs, and stocks are great investment vehicles, but having a portion of your funds be liquid is important.

negative: With $800/month extra?  Do both. (I am ethnocentric enough to assume you live in the same country as me) First, figure out what your emergency fund should look like.  Put this money in a high yield checking or savings account.  Add to it monthly until you reach your goal.  It should be 3 to 6 months of your total monthly expenses.  It will be a lot more than $2k I suspect.  You will earn bubkis in interest, but the point of the emergency fund is a highly liquid asset for emergencies so you can choose cheaper car insurance and not buy warranties on stuff. With your $800/month, split it up this way: $416/month into a Roth IRA account at Vanguard (or Schwab or Fidelity) in the Star Fund (or similar low cost, diversified fund).  The star is $1000 to open, pretty diversified.  $416 is a lazy number that comes close to the $5000 annual limit for a Roth IRA in the US.  Contribute like clockwork, directly from your paycheck if you can.  This will make it easy to do and get you the benefit of dollar cost averaging. $200 or $300 into your savings account until you reach your emergency fund goal. $85 - $100.  Live a little.  Speculate in stocks with your vanguard account.  Or rent fancy cars.  Or taken a vacation or go party.  If you are saving $800/month in your early 20 be proud of yourself, but have a little fun too so you can let off steam.  It isn't much but you know you can play with it. Once you reach your emergency fund, save up for your future house or car or plane tickets to Paris.  Ask another question for how to save up for these kinds of goals.

negative: I think that Dave Ramsey has a good approach to emergency funds. Save $1,000 that is immediately accessible in an emergency, pay off your debts, then build a 3-6 month fund. Two years is great, but takes a really long time to build up.

negative: i think emergency fund should be in a more liquid account (like regular saving or money market) so you can withdraw money any time, while your regular saving can be tied up in a long term CD, bond or an investment account.

negative: "This may sound very ""tongue in cheek"", but the best thing you can invest in is to raise your income in order to increase your retirement savings.  How much are you able to contribute to retirement now?  I think you would be lucky to do $150/month and most months probably less than that.  However, if you were making like 60k/year, and allowed a little lifestyle bloat, you could probably easy put away 20k/year.  Once you are able to do that the savings you can manage now will be quickly eclipsed.   Often times when people consider ""having their money work for them"" they often neglect to factor risk.  Prior to investing one should have a proper emergency fund in place.  That is 6 months or so of living expenses in a nice safe savings account.  Those earn about 1.25% these days, which is pretty meager, but it does earn something.   Once the emergency fund is in place, one can invest with impunity.  Without it, you will have to liquidate investments if economic calamity strikes you.  This could be done at a loss furthering the harm done by the calamity.   Increase your income and create an emergency fund.  Do those things first."

negative: I would say it depends on what your long term plans and goals are.  If you are trying to get rid of credit cards and never use them again, then I would say to keep $1000 as an emergency fund, pay the cards off and then save to build your emergency fund up to 3-6 months expenses.  However, if you are just going to run the balances back up, I would save save 3-6 months expenses out of the money you just received and pay down the higher interest cards with what is left over.

negative: "First, don't save anything in a tax sheltered vehicle. You will be paying so little tax that there will be essentially no benefit to making the contributions, and you'll pay tax when they come out. Tax free compounding for 40 years is terrific, but start that after you're earning more than a stipend. Second, most people recommend having a month's expenses readily available for emergencies. For you, that would be $1500. If you put $100 a month aside, it will take over a year to have your emergency fund. It's easy to argue that you should pick a higher pace, so as to have your emergency money in place sooner. However, the ""emergencies"" usually cited are things like home repair, car repair, needing to replace your car, and so on. Since you are renting your home and don't have a car, these emergencies aren't going to happen to you. Ask yourself, if your home was destroyed, and you had to replace all your clothes and possessions (including furniture), how much would you need? (Keep in mind any insurance you have.) The only emergency expense I can't guess about is health costs, because I live in Canada. I would be tempted to tell you to get a credit card with a $2000 limit and consider that your emergency fund, just because grad student living is so tight to the bone (been there, and 25 years ago I had $1200 a month, so it must be harder for you now.) If you do manage to save up $1500, and you've really been pinching to do that (walking instead of taking the bus, staying on campus hungry instead of popping out to buy food) let up on yourself when you hit the target. Delaying your graduation by a few months because you're not mentally sharp due to hunger or tiredness will be a far bigger economic hit than not having saved $200 a month for 2 or 3 years. The former is 3-6 months of your new salary, the latter 5-7K. You know what you're likely to earn when you graduate, right?"

negative: "Since it's not tagged united-states, I'd like to offer a more general advice. Your emergency fund should match the financial risks that are relevant to you. The two main classes of financial risk are of course a sudden increase in costs or a decrease in income. You'd have to address both independently. First, loss of income. For most, this would simply equate to the loss of a job. How much benefits would you expect to get, and for how long? This is often the most important question; the 6 months advise in the US is based on a lack of benefits.  With two incomes, you're less likely to lose both jobs at the same time. That's a general advise, though. If you both work for the same employer, the risk of losing two jobs at the same time is certainly real. Also, in countries with little protection against dismissal (such as the US), the chance of being layed off at the same time is also higher. On the debit side, there are also two main risks. The first is the loss or failure of an essential possession, i.e. one which requires immediate replacement. This could include a car, or a washing machine. You already paid for one before, so you should have a good idea how much it costs. The second expenditure risk is health-related costs. Those can suddenly crop up, but often you have some kind of insurance. If not, you'd need to account for some costs, but it's hard to come up with an objective number here. The two categories are dependent, of course. Health-related costs may very well coincide with a loss of income, especially if you're self-employed. Now, once you've figured out what the risks are, it's time to figure out how to insure against them. Insurance might be a better choice than an emergency fund, especially for the health costs. You might even discover that you don't need an emergency fund at all. In large parts of Europe, you could establish a credit margin that's not easily revoked (i.e. overdraft agreements), and unemployment benefits are sufficient to cover your regular cost of living. The main risk would then be a sudden lack of liquidity if your employer goes bankrupt and fails to pay the monthly wages, which means your credit should be guaranteed sufficient to borrow one month of expenses. (This of course assumes quite good credit; ""pay off my car"" doesn't suggest that.)"

negative: As for a formula, there isn't a simple one that you can apply to every type insurance. I'll try my best for a simple answer. Is the event devastating enough to change your lifestyle (looking at life necessities, not wants and nice to haves)? Is the event very likely to happen? Do you have enough emergency funds to cover such an event? Once that emergency fund is utilized, how long does it take you to restore that fund to be ready for the next event? If the event is devastating enough and is very likely to happen and you do not have the cash to cover the event, and/or it would take too long to restore that emergency fund, then it makes sense to consider insurance. Then you would have to examine if the benefit(s) outweight cost of the premium paid for the insurance. If it is pennies of premium for a dollar of benefit, then it makes sense.

negative: Depends on the insurance company itself, as well as the costs of treatments. Imagine an ideal scenario where costs of treatments stayed the same, and that all insurance plans were segregated and pulled from the same pool of funds to pay for treatments. Then employer subsidized health insurance plans would be unaffected by the drama in the ACA plans. Those are the factors to consider, from my understanding. But I wouldn't be surprised if the burdens of accepting people that would previously never have been serviced by these companies has greatly distorted the market as a whole.

negative: Savings accounts with 8% APY? Unheard of these days. You're lucky if you find one at 1%. You should use checking and savings accounts only to hold an emergency fund (6 to 12 months of living expenses), or money that you will need in 2 years or so. The rest, invest in stocks and bonds.

negative: "Discussions around expected values and risk premiums are very useful, but there's another thing to consider: cash flow. Some individuals have high value assets that are vital to them, such as  transportation or housing.  The cost of replacing these assets is prohibitive to them: their cashflow means that their rate of saving is too low to accrue a fund large enough to cover the asset's loss. However, their cashflow is such that they can afford insurance. While it may be true that, over time, they would be ""better off"" saving that money in an asset replacement fund, until that fund reaches a certain level, they are unprotected. Thus, it's not just about being risk averse; there are some very pragmatic reasons why individuals with low disposable income might elect to pay for insurance when they would be financially better off without it."

negative: In all probability, having lower coverage levels will result in higher premiums. As my insurance agent explained to me, the higher your coverages, the lower the insurance company believes your risk to be - because you think about insurance smartly, you're less likely to make spurious claims. I have my coverages run at various levels every 18-24 months, and it is almost always true that higher coverages result in lower premiums. Also, there is no guarantee you'll still be employed by the same company if an injury happens. Or that they'll continue to offer the same plans every year. Insurance is a calculated risk on the part of the insurer, and a means of sharing/deflecting risk (at a cost known as your premium) on the part of the insured. Even if your premiums are slightly higher (on the order of a couple dollars per month, for example), do you really want to save a couple dollars and then be surprised when your health insurance company doesn't want to cover something?

negative: As others have noted, you can do better than a checking or savings account. If you're going to invest emergency money, the vehicle you put it into should be: Liquid - Wherever you put it, you should be able to quickly cash it out. Highly liquid exchange traded products are good for this.   Low volatility/drawdowns - If you need at least 6 months of your paycheck to cover you in the event of an emergency, you don't want to park it in a portfolio that can potentially lose 30% value. Insured - Your investments should have SIPC coverage (protection against losses resulting from failure on part of broker). Moderate/Steady Growth - If the emergency fund doesn't grow, you'll need to continually pump money into it. My 'steady growth' portfolio is majorly allocated to fixed income. Within that, a major portion is allocated to high yielding instruments. Over the past 10 years, it's seen at least a 7% annualized return.

negative: A Roth IRA is intended for retirement. Before age 59.5 (I think), you can only withdraw the amount you deposited without penalty. It's great you're saving in a Roth, but you shouldn't put savings in there that you will need before you reach sufficient age. And since it's long-term, you can invest in things you expect to grow over the long term, like equities. You should keep emergency funds either in federally insured, extremely liquid accounts (bank savings) or money market funds (which aren't insured, but are close enough to zero-risk). Yes, the interest rates are terrible right now. But anything else would potentially leave you with insufficient funds in the event of, you know, an emergency.

negative: "6% isn't ""too high"" in terms of market rates at the moment, however it's a very subjective question whether it's too high for you. The real question to determine is if paying 6%, can you make more than 6% return (to cover the costs plus your profit)? As for a rule of thumb, there's none I know of, however your best bet is to take the time to model it in Excel (not difficult).  It's different for each portfolio or investment. Something with a high standard deviation of returns is already high risk, adding margin to it only makes it worse.  So, long story short is that, ""it depends""."

negative: The simple answer is absolutely.  With the parameters you quote, if you will pay off the loan in 82 months or less, you will be ahead taking the variable rate. You have put your finger on the important question as well. The higher initial interest is buying insurance against rates rising if you don't pay off the loan within 82 months.  I suspect the contract loan term is much longer than that, because otherwise a variable rate does not make sense.  You need to assess whether the insurance you are buying is worth the premium.  You can look at what the formula for the variable rate would set the rate at today. It is probably somewhat higher than the 3.79%.  That will tell you how much rates have to rise to make the variable rate go above 5.02%. Note that if the loan term is around 160 months (and it could well be 180 months, 15 years) you can afford the interest to rise to about 6.2% for the last half and you will still be dollars ahead.  It could even rise higher if you discount expenses in the future.  You could also hope that if inflation rises to make interest rates rise like that you will get cost of living raises that make this easy to pay.