Where To Invest My Free Money? Suggestions Please

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So, I have my Free Money Account all set up and ready to go. Now I just have to figure out what to invest in. At $1 a trade, I can dollar-cost-average into a new ETF every month for the price of a Wendy’s Frosty. Now, I want to be aggressive but somewhat diversified, so I am looking for suggestions for index ETFs with low expenses in the following areas:

Micro-Cap / Small-Cap / International / Emerging Markets

So far, I have the following on my list: IWC, PZI, IWM, IJS, VBR, EFV, EEM, VWO. Opinions on these? Any other suggestions? I’m somewhat open to different areas like sector ETFs, but you’ll have to argue a good case.

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  1. I-Bonds…take the free money and then avoid (at least a portion) of taxes on that free money.

  2. I would do something more aggressive like investing in the International Markets which have been doing well lately. Here are a couple funds I have been in for a while….

    Fidelity Diversified International Fund (FDIVX)
    Fidelity Emerging Markets Fund (FEMKX)

  3. I’d just take the Frosty and run!

  4. EWY and EWZ have been making me richer

  5. I’d pick 1 to 5 ETF’s.

    Some of my favorites:

    RWR – REIT
    ADRU – Europe
    EPP – Pacific
    ADRE – Emerging Mkts
    IJS – Small Cap Value

  6. I have a couple international mutual funds I like: HLEMX and MINDX. Of course, this is at your own risk.

  7. AEPGX

  8. “Agressive” and “ETFs” in the same context is oxymoronic. You’re better off picking 10 stocks that you believe in and hold it. You have to remember not to overdiversify and pass the efficient frontier.

    If you REALLY don’t want to pick stocks, go to your favorite fund’s profile and just buy their top 10 holdings; your risk adjusted return will be better than investing in that fund.

  9. This is the portfolio I like:

    20% IWN (small cap value)

    20% IWC (micro cap)

    40% RSP (s&p weighted – midcap)

    20% EEM (emerging market global exposure)

    Solid agressive portfolio.

  10. James, your idea of buying the top holdings had me saying “Why didn’t I think of that?” for a second there. Then I googled on it and found this discouraging paper on that very idea:

  11. I really like the following two energy sector etf’s, XLE and VDE. I personally would lean towards XLE because of the lower turnover ratio. I think the energy sector is a great place to be exposed to right now. While it may not achieve the 30% returns of last year it easily could do 15-20%. If this thing in Iran escalates, the returns could be even greater.

  12. I like your site a lot! I just opened my Emigrant Dream Savings Account – based on my own research – and then came across your site today. Good to see that other people like it too. I have already referred 2 people to it.

    I have EWO & EWZ – they’ve been doing really well for me. I also have DVY & VHT – doing ok..but large cap will come back..

    My best fund is SASPX – it’s a fund, but it’s been incredible – I hope I didn’t just jinx it.


  13. It doesn’t make sense to have a separate investment plan for your free money.

    Free money is not different from the rest of your money.
    It’s your money after all, no matter where it comes from.

  14. I would tend to agree with David. It doesn’t matter where the money comes from but it is more exciting to think of it that way.

  15. Yes, I know, you should treat all your money as one portfolio. That is the proper practical way. Shrug =). It’s not a huge amount, and it’s for fun. Better than buying that Plasma right before the Super Bowl, right?

    My goal is to use it to show how much money one can save up by just not spending money that they come across, like parts of raises, gifts, etc.

  16. Ever look into HYIPs/Autosurfs? IMO it’s as risky as picking individual stocks – it’s almost like gambling (actually it probably is). You did say the money is for fun…

  17. Japan is still in a secular bull market. Some good Fidelity funds (not ETFs) that has treated me well are FJSCX and FJPNX. The fact that the Japanese markets bounced back so quickly is a good sign. I would also look to add energy ETFs / Funds. Personally I’m just in a fund – once again Fidelity (FANAX) which has done well.

    Good luck!

  18. Jonathan:

    I do the same thing. I have a strategy plan for 401(k) and strategy plan for my brokerage account and strategy plan for my IRA’s. It works for me. My entire portfolio is up an average of 28% – not too shabby.

    I like to think of them as separate. My “free money” budgeted for the year – after bills and savings are taken out – will sit in my ED account, since I will be spending it continuously – that’s the “free money” strategy.

  19. One more comment about this…my point is that I look at savings the same way I look at bills and taxes – you must pay it. It’s not “free money” for me.

    In January, I plan for the year and take out savings (mandatory 20% of my gross household income), taxes, emergency fund and all bills out of the mix and what is left becomes my estimated “free money.” I use that as my budget for the year and stick to it. This way I know exactly where every cent goes.

    I clip coupons and look for deals. If there is “free” money at the end of the year that I did not spend (which there usually is some), that goes into my brokerage account as a bonus savings.

    That’s how I like to do it – if anyone care – haha

  20. Should focus more on the Asian market, especially China. Just my thought.

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