[Nathans_Dad]

Well from reading what you wrote about your current situation, here is my $.02 (which is actually worth much less than that in real dollars...).

If you are 40 and do not have an immediate need for the cash I would put it into a standard taxable investment account. You will still be able to withdraw the money if needed (less transaction costs and any capital gains tax) but will have it in the market to get the better returns. Again, this ONLY applies if it is money you do not think you will need in the next 5 years. If this is savings for something or you will kill yourself if you lose money, then put it into a money market account or buy government grade bonds.

Now then, to address what to do with that money. In general, every portfolio should have a mix of equities (stock), bonds and cash. What those percentages are depend on your age, your proximity to retirement and how risk tolerant you are. Currently I have 95% of my stuff in stocks and mutual funds and 5% in cash (not counting my savings account). I have no bonds because I am only 34 and have tons of time to allow my money to sit in the market. Thus bonds really don't make sense for me. A financial planner would probably say that I could use a small amount of bonds or precious metals to offset my market risk, but I am a pretty risk tolerant person, especially given my time frame.

As far as which mutual funds you should choose, I have a mix of index funds and privately managed funds. Index funds try to emulate whichever index they track. Thus you will always get the same return as the "market", but will never "beat the market". The bottom line is that less than 10% of actively managed funds every beat the market anyway. I would say about 50% of my stuff is in indexes, another 30% in actively managed funds and 15% in individual stocks. I would say that indexes are a good place to start, I started adding in actively managed funds once I had a decent amount in my IRAs (>$50k for me). Whatever you do, stay away from load funds. There are plenty of no load funds which will give you good returns without paying a load.

Anyhow, I hope that helps some. A great book to pick up if you are thinking of getting into investing and portfolio management is Rick Edelman's The Truth About Money. It is an easy read and covers all the basics of the markets and financial planning.

Financial planning is just like Porsche's. It's a hobby and the more you read about it the better you get. Personally I get a kick out of managing my own money, some people would rather not deal with it and get a planner, that's ok too.

P.S. Don't be tempted by the stories of 85% gains. Yes they happen, but 85% losses are much more common. There is an old saying in the markets: "Bulls make money, bears make money...pigs get slaughtered."

Don't be a pig. If you aim for a nice 10% return annually that is certainly attainable and sustainable. If you happen to luck into a 30-40% return a couple years then count yourself lucky.