MONEY Ask the Expert

Have Mutual Funds Lost a Key Advantage Over ETFs?

Investing illustration
Robert A. Di Ieso, Jr.

Q: ETFs seem to be taking the place of mutual funds, but my understanding is that mutual funds are still your best option if you want to reinvest dividends. Is that true? — Bill from Florence, S.C.

A: Once upon a time, there was some truth to this. But the popularity of dividend-focused exchange-traded funds has prompted most brokerages to tweak their policies to accommodate dividend reinvestors.

“From an investor standpoint the experience should be similar, though the process behind the scenes is different,” says Heather Pelant, a personal investor strategist with BlackRock, which manages mutual funds as well as ETFs via the firm’s iShares division.

Before ETFs became widely adopted, some brokerages charged ETF investors a transaction cost for dividend reinvestments, says Pelant. Hence the notion that mutual funds are a better vehicle for reinvesting dividends. “These platforms have since come up with procedures and features that are parallel to mutual funds,” she says.

Today, most large brokerages give investors the option of depositing dividend payouts into their cash accounts or automatically reinvesting dividends back into the security – be it an individual stock, mutual fund, or ETF. You should be able to make this choice on a fund by fund basis, change your preference at any time, and reinvest your dividends for free.

Still, it’s always a good idea to double check your broker’s own policy, lest you get dinged with additional fees.

One way ETFs are different (slightly) from mutual funds is the timing of reinvestments. Mutual fund dividend payouts are reinvested at a fund’s net asset value on the ex-dividend date, which is essentially the cutoff date for new shareholders to collect that dividend.

ETF investors, on the other hand, have to wait for all transactions to settle, typically a few days, to repurchase shares. If share prices swing widely during that short window of time, it could make a difference — for better or for worse.

For most investors, however, this nuance matters far less than all the other factors that go into deciding whether to invest via an ETF or fund.

Meanwhile, dividend reinvesting is a great tool to stay fully invested and systematically buy additional shares over time, says Pelant. Over the long term, these payouts really can add up.

Of course, because different funds will have different payouts, automatically reinvesting dividends could eventually throw off your allocations — even more reason to make sure you periodically rebalance your portfolio.

MONEY Ask the Expert

Can I Put My Required Minimum Distribution into a Roth IRA?

Ask the Expert Retirement illustration
Robert A. Di Ieso, Jr.

Q: Can I convert the required minimum distribution from my regular IRA into a new Roth IRA account after paying the income taxes if I am not working? I want to have access to the money in case an emergency comes up. — Richard D’Arezzo, Acworth, GA

A: Sorry, no. According to IRS publication 590-A, the annual required minimum distribution (RMD) from your traditional IRA cannot be converted to a Roth IRA, says Tom Mingone, a financial planner at Capital Management Group of New York. But you do have options that can minimize taxes yet provide access to your money for emergencies.

Before we get to these alternatives, here’s a quick review of RMDs. These distributions are required under IRS rules starting at age 70 ½—after all, you’ve been deferring the taxes that are owed on contributions to your IRAs, and the bill has to come due sometime. If you don’t take the distribution, you’ll pay a 50% tax penalty in addition to the regular income tax on the amount you are required to withdraw.

IRS rules prohibit putting your RMD into another tax-advantaged retirement account. But you can convert the remaining portion of your traditional IRA assets to a Roth IRA, though it will mean paying more taxes. “You just have to satisfy the RMD requirement before you do a Roth conversion,” says Mingone. (If you aren’t working and receiving earned income, you can’t make a contribution to a Roth but once the money is in a traditional IRA, you don’t need to have additional earned income to move the money to a Roth IRA.)

If you make a mistake and roll over or convert your RMD, it will be treated as an excess contribution, and you’ll pay a penalty of 6% per year for each year it remains in the Roth or traditional IRA. You have until October 15 of the year after the excess contribution to correct it.

Is it a smart move to convert a traditional IRA to a Roth? That depends on your goals and your finances, says Mingone. Putting money into a Roth gives you a lot more flexibility because you’ll no longer be subject to the RMD rule—you can choose when and how much you take out. And unlike traditional IRA withdrawals, money pulled from a Roth won’t trigger taxes.

Still, there’s a downside to the conversion: that tax bill on the amount you convert. Depending on the size of the bill and the years you have to invest, the benefit may be small. In any case, consider this move only if you can pay the taxes with money outside your IRA, says Mingone. (To get an idea of the taxes you would owe, try this Vanguard calculator.)

The case for a Roth is generally strongest for younger people who have more time for the money to grow tax-free. Still, even at 70 ½, you could have many years of growth. And if you want to leave money to heirs, a Roth offers the greatest flexibility.

But if you need access to the money for emergencies, a new Roth may prove costly. You can take the principle out, but any earnings on the amount you deposit will be taxed if you withdraw it in the first five years.

If you don’t want to tie your money up in a Roth, you could just invest in a taxable account. Look for tax-efficient options such as index mutual funds. And consider putting some of your RMD in municipal bonds, which are free from federal income tax and often state and local taxes too, Mingone says. Tax-exempt bonds have been a tear recently, which suggests that risks are rising. Still, if you’re willing to hold on through market dips, munis may provide higher after-tax yields than taxable bonds.

Do you have a personal finance question for our experts? Write to AskTheExpert@moneymail.com.

Read next: Why Roth IRA Tax Tricks Won’t Rescue Your Retirement

MONEY real estate

Four Moves That Will Make Your House a Great Place to Retire

Q: I want to remain in my current home when I retire. What can I do to make sure it is a place where I can age well?

A: If your home is where your heart is, then you have lots of company: Three-quarters of people 45 and up surveyed by AARP say they’ll remain in their current residences as long as they can.

Adapting your home to accommodate your needs as you age takes work, however. So the earlier you start, the better. Do it now, while you have the income and energy to tackle the project, advises Amy Levner, manager of AARP’s Livable Communities initiative. Here’s your plan of action:

Start with the easy fixes. Many of the upgrades that make it easier to stay in your home as you get older—such as raising electrical outlets to make them more accessible, installing better outdoor lighting, and trading in turning doorknobs for lever handles—aren’t expensive. “And these small changes can make a big difference,” says Levner. Check out AARP’s room-by-room guide at aarp.org/livable-communities for more suggestions of what to fix.

Assess the bigger jobs. To make your house livable for the long, long run, consider investing in some more extensive renovations. These include things like bringing the master suite and laundry room to the first floor to avoid stairs, adding a step-in shower, and covering entranceways to prevent falls. Such jobs can be costly (see chart below), so get a bid from a contractor—then determine if it’s worth that price to you to stay or whether you’ll just move later if need be. The good news is that changes you make for aging in place can also make the home more appealing to future buyers, says Linda Broadbent, a real estate agent in Charlottesville, Va.

Notes: Prices for grab bars, door handles, and lights are per unit. Sources: AARP, National Association of Home Builders, AgeInPlace.org, Remodeling magazine

Budget for outsourcing. No getting around the upkeep a house requires. Sure, when you’re retired, you’ll have more time to mow the lawn and paint the fence. But don’t forget that you may be away from home for periods traveling or visiting the grandkids. And later on, you probably don’t want the physical drudgery of home maintenance. Research the fees to hire out some of the tougher tasks such as snow removal and yard work, and build those costs into your retirement income needs.

Deepen community connections. Your close-by social network is just as important as the house itself. “Living in a place where people know you and can help you or provide social interaction will give you a better quality of life,” says Emily Saltz, CEO of geriatriccare-management service provider Life Care Advocates. Use these pre-retirement years to strengthen local ties—explore volunteer opportunities, check out classes, and get to know your neighbors.

Maintaining a social circle is especially important if your kids live far away or have demanding jobs. Good friends will shuttle you to doctors’ appointments and hold the ladder while you change the fire-detector battery, as well as help you up your tennis game.

 

MONEY Ask the Expert

The Best Way to Own Gold and Silver

Investing illustration
Robert A. Di Ieso, Jr.

Q: I’m looking for information on adding gold and silver to my investments. What are the advantages and disadvantages of buying coins? What about gold and silver stocks or mutual funds?

A: “We think gold and other precious metals can play a part in a well-diversified portfolio, but our preference is to own the stocks or the mutual funds that would give you that exposure,” says Joe Franklin, a certified financial planner and president of Franklin Wealth Management in Hixson, Tenn.

The trouble with coins, he says, is that dealers charge a premium. And the price you pay isn’t based purely on the value of the underlying gold, silver or platinum. There are other factors at play, such as historical value or the costs associated with minting commemorative pieces.

If do buy coins, you can start by searching the U.S. Mint’s site for an authorized purchaser in your region, then do additional research to make sure that the outfit is reputable. This is an area rife with scams.

Another consideration with owning the actual metal is storage: If you pay a third-party to hold the coins for you, there are additional fees. If you store it in a safe at home, there are additional risks. A bank safe deposit box may be your best bet, but annual fees range from about $20 to more than $200 depending on the size.

The fees and logistics of owning coins are only part of the problem, says Franklin. “Gold in and of itself doesn’t have a lot of utility,” he adds. “It doesn’t pay interest or dividends, and while it can go up in value it tends to be a fear trade.”

If you’re interested in pure exposure to gold, a better bet is an exchange-traded fund, such as the SPDR Gold Trust (ticker: GLD), which aims to track the spot price of gold bullion. “There’s more liquidity and transparency with a fund,” he says. “But you’re still going to see dramatic swings.”

For that reason, Franklin’s preferred strategy is a diversified natural resource mutual fund, which has the flexibility to invest in precious metals — namely via shares of mining companies, some of which pay dividends — energy concerns, and other commodities.

“Managers of these funds have a lot more latitude to pick their spots,” he explains. While he isn’t a proponent of market timing, Franklin warns that commodities tend to go through long periods of over- and under performance. “They’re either really in favor,” he says, “or really out of favor.”

MONEY Ask the Expert

Rental Properties vs. Stocks and Bonds

Investing illustration
Robert A. Di Ieso, Jr.

Q: I bought a rental property that has increased in value considerably. The cash is great, but I’m wondering if I should sell high and invest in a different asset.
– Russell in Portland, Ore.

A: “This is a situation where there really is no one-size-fits-all answer,” says David Walters, a certified public accountant and certified financial planner with Palisades Hudson Financial Group.

To tackle this question, you’ll want to first get a handle on just how well this investment is performing relative to other assets.

For a simple apples-to-apples comparison, take the property’s annual net cash flow (income minus expenses) and divide it by the equity in the home, he says. You can use this yield to see how the income generated by this property stacks up against that of other investments, such as dividend-paying stocks.

To calculate your total return, take that yield and add it to your expected annual long-term price gains. If your yield is 5%, for example, and you expect the value of the property to appreciate 2% a year on average, your annual total return would be 7%.

Next, you’ll want to figure out just how much you would have left to reinvest after you pay the real estate broker (typical commissions are 6% of the sale price) and the taxes. “In this case, taxes could be a big factor,” says Walters.

Remember, because this is an investment property, you are not eligible for the capital gains exclusions ($250,000 for individuals and $500,000 for couples) available when you sell a primary residence.

Assuming you’ve owned the house for more than a year, you’ll owe the long-term capital gains rate, which is 0% to 20% depending on your tax bracket; for most people that rate is 15% for federal taxes. Your state will also want its share, and in Oregon it’s a pretty big one – 9.9%.

There’s more to it. If you depreciated the property – odds are you did – you’ll need to “recapture” some of that write off when you sell, and at your marginal income tax rate. Here too you’ll owe both federal and state taxes.

One way to avoid paying a big tax bill now is to do a 1031 exchange, in which you effectively swap this property for another investment property in another neighborhood or a different market — though there are plenty of caveats.

Assuming you don’t want to re-invest in actual real estate, the big question is where you should invest the proceeds of the sale – and is it better than what you already have?

You could look at alternative assets that have a similar risk and reward profile — dividend-paying stocks, real estate investment trusts or master limited partnerships.

A better approach, however, may be a more holistic one. “You want to know where this fits in the big picture,” says Walters. Rather than try to pick and choose an alternative investment, you may just roll the proceeds into your overall portfolio – assuming it’s appropriately diversified. If you can max out on tax-deferred options such as an IRA or, if you’re self-employed, a SEP IRA, even better.

Depending on how much other real estate you own, you could allocate up to 10% of your overall portfolio to a real estate mutual fund, such as the T. Rowe Price Real Estate Fund (TRREX) or Cohen & Steers Realty Shares (CSRSX).

The tradeoff: “Most of these funds own commercial real estate,” says Walters. “There aren’t a lot of options to get passive exposure to residential real estate.”

Then again, investing in actual real estate takes time, lacks liquidity, and comes with some big strings attached. On paper, your investment property might seem like a better deal than any of the alternatives, says Walters, “but there are 50 other things you have to think about.”

With real property there’s always the risk that you’ll have to pay in money for, say, a new roof or heating and cooling system. That’s one thing you don’t have to worry about with a mutual fund.

MONEY Ask the Expert

The Pitfalls of Claiming Social Security in a Common-Law Marriage

Ask the Expert Retirement illustration
Robert A. Di Ieso, Jr.

Q. I lost my WWII husband on January 14, 2014. It was a common-law marriage. I worked for over 50 years in the fields of education and medicine. However, many of the places where I worked did not have Social Security. I have turned in all the evidence required to prove that we presented ourselves as husband and wife. Texas recognizes common-law marriages. I am confined to a wheelchair. I served our country, as a civilian commissioned as a 2nd Lt., in the Air Force and Army overseas. Please help me as I am going to be homeless. – Joan

A. In the six weeks since Joan wrote me this note, she found a place to live. But she is no closer to resolving her problems with Social Security. It is easy to paint the agency as a heartless bureaucracy preventing an impoverished, 80-year-old veteran from getting her widow’s benefit. But there’s nothing about Joan’s story that is easy, and her problem is one that is becoming all too common.

Today more and more couples are living together without getting married, especially Millennials and Gen Xers. And many of them are having children and raising families. More than 3.3 million persons aged 50 and older were in such households in 2013, according to the U.S. Census Bureau.

There can be sound reasons for avoiding legal marriage. But when it comes to Social Security, you and your family may pay a high price by opting for a common-law union. Quite simply, it may be difficult, if not impossible, to claim benefits. And that can damage the financial security of your partner, children and other dependents. If you are in a common-law marriage, here are the three basic requirements for claiming benefits:

1. Your state recognizes common-law marriage. And yours may not. Only 11 states plus the District of Columbia recognize these marriages—among them, Colorado, New Hampshire, and Texas, which is Joan’s state of residence.

For your partnership to qualify, these states generally require that you both agree that you are married, live together and present yourselves in public as husband and wife. But the specifics of these rules are different in many states and usually complicated.

Social Security rules follow state laws when determining eligibility for spousal and survivor benefits. (The same policy applies to same-sex marriage.) If you do qualify, you will be able to receive the same benefits as you would with a traditional marriage, including spousal or survivor benefits.

2. You’ve got plenty of documentation. Social Security requirements for claiming survivor benefits call for detailed proof of the union. For an 80-year old, wheelchair-bound person like Joan, that’s a challenge to provide, especially in the case of a deceased spouse. Among other documents, she must complete a special form, plus get similar forms filled out by one of her blood relatives and two blood relatives of her late partner, John.

3. You’re prepared to fight bureaucratic gridlock. Joan has had multiple meetings with Social Security postponed for reasons she does not understand. She has been told she does not qualify as a common-law spouse under Texas laws. But the reasons she has been given may be incorrect. She says, for example, a Social Security rep told her that she and John needed to own a home to qualify. This is not true. She needs only to document that they lived as husband and wife and held themselves out to be married. Beginning in 2003, Texas made it harder for couples to qualify as common-law spouses, which could complicate Joan’s case.

Making matters even more difficult, Social Security has other convoluted rules that can change or even invalidate her benefits. Joan, it turns out, took a lump-sum payment from her government pension decades ago. That triggers something called the Government Pension Offset rule, which may prevent her from receiving a survivor’s benefit based on John’s earnings record. (For more on that rule, click here.)

Clearly, older Americans need more help than we’re giving them to navigate Social Security, Medicare, Medicaid and other highly regulated and complicated safety-net programs. This is hard stuff even for experts. It is not possible for the rest of us to understand without more knowledgeable assistance.

Meanwhile, for those in common-law marriages it’s important to plan ahead now. If you can’t qualify for Social Security benefits, you will need to save more while you’re still working. If your state does recognize common-law marriage, find out what documentation you’ll need, so you’ll have it when you file your claim. The last thing you’ll want to do in retirement is struggle with the Social Security bureaucracy.

“I am pushing 80 and this has been going on now for two years,” said Joan, a former special-needs educator, in a recent email. “I hope my health holds up as I have no life. What a way to treat an American citizen in a wheelchair who can teach the deaf to talk, the dyslexic to read and the stuttering to talk. I am just useless living in a room.”

Joan has another Social Security appointment scheduled this week.

Philip Moeller is an expert on retirement, aging, and health. He is co-author of The New York Times bestseller, “Get What’s Yours: The Secrets to Maxing Out Your Social Security,” and a research fellow at the Center for Aging & Work at Boston College. Reach him at moeller.philip@gmail.com or @PhilMoeller on Twitter.

Read next: The One Investment You Most Need for a Successful Retirement

MONEY Ask the Expert

What to Say When a Job Interviewer Asks You an Illegal Question

Robert A. Di Ieso, Jr.

Q: I was recently being interviewed for a job, and it seemed to be going well. But then the interviewer asked if I was planning to have children. Is she allowed to do that?

A: If the question made you uncomfortable, there’s a good reason. It’s illegal to ask—and the person interviewing you may not even know it.

One in five hiring managers say they have asked a question in a job interview only to find out later that it was a violation of federal labor laws to ask it, according to a CareerBuilder survey.

In the same survey, one third of employers who were given a list of banned questions also said they didn’t know the queries were illegal.

Things that are out of bounds for companies to ask about include your age, race, ethnicity, religious affiliation, disability, plans for children, debt, and whether you are pregnant, drink, or smoke.

While it’s unlikely that an interviewer will bluntly ask your age or religion (though that does happen), a lot of interviewers veer into dangerous territory just by making small talk, says Rosemary Haefner, chief human resources officer at CareerBuilder. “Casual conversation is part of the interview process. When you’re chit-chatting, sometimes the conversation turns more personal.” In other cases, hiring managers want to make sure people are a good cultural fit, so they try to tap into other parts of a candidate’s life, Haefner says.

Sometimes it’s just how the question is framed that makes it illegal. For example, you can ask if a job candidate has been convicted of a crime, but not if he or she has an arrest record. You can’t ask a person’s citizenship or national origin, but it’s OK to ask if the person is legally eligible to work in the U.S.

Some hiring managers may be in the dark because they’ve never gotten formal training or don’t interview people often. But not everyone is just clueless. Anti-discrimination labor laws exist for a reason, says Haefner. “You shouldn’t be asked about information that’s not directly relevant to whether you can perform a job,” she says.

Understanding what’s allowed and what’s not is in a company’s best interest too. A job candidate who isn’t offered a position may say certain questions were used to discriminate against her and file a complaint with the Equal Opportunity Employment Commission or hire a lawyer. Though discrimination may be hard to prove, the company could face legal action and financial penalties.

If you’re the person doing the interviewing, check in with your HR department about training, and prepare your questions in advance so you are less likely to stray into illegal territory.

When you’re on the other side of the interview table, it’s a little trickier.

Whether you should answer a personal question is your choice, but if the question seems inappropriate, Haefner suggests responding with a question of your own. “Say, as diplomatically as possible, ‘I just want to clarify how that is relevant to the job.’”

If the questioner doesn’t take the hint, then it may not be a company you want to work for anyway.

MONEY Ask the Expert

Which Wins for Retirement Savings: Roth IRA or Roth 401(k)?

Ask the Expert Retirement illustration
Robert A. Di Ieso, Jr.

Q: I am 30 and just starting to save for retirement. My employer offers a traditional 401(k) and a Roth 401(k) but no company match. Should I open and max out a Roth IRA first and then contribute to my company 401(k) and hope it offers a match in the future?– Charlotte Mapes, Tampa

A: A company match is a nice to have, but it’s not the most important consideration when you’re deciding which account to choose for your retirement savings, says Samuel Rad, a certified financial planner at Searchlight Financial Advisors in Beverly Hills, Calif.

Contributing to a 401(k) almost always trumps an IRA because you can sock away a lot more money, says Rad. This is true whether you’re talking about a Roth IRA or a traditional IRA. In 2015 you can put $18,000 a year in your company 401(k) ($24,000 if you’re 50 or older). You can only put $5,500 in an IRA ($6,500 if you’re 50-plus). A 401(k) is also easy to fund because your contributions are automatically deducted from your pay check.

With Roth IRAs, higher earners may also face income limits to contributions. For singles, you can’t put money in a Roth if your modified adjusted gross income exceeds $131,000; for married couples filing jointly, the cutoff is $193,000. There are no income limits for contributions to a 401(k).

If you had a company match, you might save enough in the plan to receive the full match, and then stash additional money in a Roth IRA. But since you don’t, and you also have a Roth option in your 401(k), the key decision for you is whether to contribute to a traditional 401(k) or a Roth 401(k). (You’re fortunate to have the choice. Only 50% of employer defined contribution plans offer a Roth 401(k), according to Aon Hewitt.)

The basic difference between a traditional and a Roth 401(k) is when you pay the taxes. With a traditional 401(k), you make contributions with pre-tax dollars, so you get a tax break up front, which helps lower your current income tax bill. Your money—both contributions and earnings—will grow tax-deferred until you withdraw it, when you’ll pay whatever income tax rates applies at that time. If you tap that money before age 59 1/2, you’ll pay a 10% penalty in addition to taxes (with a few exceptions).

With a Roth 401(k), it’s the opposite. You make your contributions with after-tax dollars, so there’s no upfront tax deduction. And unlike a Roth IRA, there are no contribution limits based on your income. You can withdraw contributions and earnings tax-free at age 59½, as long as you’ve held the account for five years. That gives you a valuable stream of tax-free income when you’re retired.

So it all comes down to deciding when it’s better for you to pay the taxes—now or later. And that depends a lot on what you think your income tax rates will be when you retire.

No one has a crystal ball, but for young investors like you, the Roth looks particularly attractive. You’re likely to be in a lower tax bracket earlier in your career, so the up-front tax break you’d receive from contributing to a traditional 401(k) isn’t as big it would be for a high earner. Plus, you’ll benefit from decades of tax-free compounding.

Of course, having a tax-free pool of money is also valuable for older investors and retirees, even those in a lower tax brackets. If you had to make a sudden large withdrawal, perhaps for a health emergency, you can tap those savings rather than a pre-tax account, which might push you into a higher tax bracket.

The good news is that you have the best of both worlds, says Rad. You can hedge your bets by contributing both to your traditional 401(k) and the Roth 401(k), though you are capped at $18,000 total. Do this, and you can lower your current taxable income and build a tax diversified retirement portfolio.

There is one downside to a Roth 401(k) vs. a Roth IRA: Just like a regular 401(k), a Roth 401(k) has a required minimum distribution (RMD) rule. You have to start withdrawing money at age 70 ½, even if you don’t need the income at that time. That means you may be forced to make withdrawals when the market is down. If you have money in a Roth IRA, there is no RMD, so you can keep your money invested as long as you want. So you may want to rollover your Roth 401(k) to a Roth IRA before you reach age 70 1/2.

Do you have a personal finance question for our experts? Write to AskTheExpert@moneymail.com.

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How to Get the Raise You Deserve

Two-thirds of people asking for a raise get at least some of the money they request. MONEY's Donna Rosato has tips on how to ask for more pay.

MONEY Ask the Expert

When Going All In Is Not A Risky Bet

hands pushing poker chip stacks on table
iStock

Q: I’m 33 and recently received a $200,000 windfall. But I’m lost on how I should put it to work. Should I invest in phases or all at once? I’m nervous about investing at all-time market highs. – Rod in Los Angeles

A: Assuming you’re investing this money for the long term — and you have sufficient cash set aside to meet short-term needs and emergencies — go ahead and invest it all at once, says Jerry Miccolis, founding principal of Giralda Advisors, a Madison, N.J. firm that specializes in risk management. “Don’t let headlines about the market hitting new highs make your nervous because, if the market does what it’s supposed to do, that should be the norm,” says Miccolis.

Now, you may have heard the term “dollar-cost averaging.” This notion of automatically investing small amounts at regular intervals, as you do in a 401(k) retirement plan, does tend to smooth out the natural ups and downs of the market. It’s one of many perks of investing consistently, come what may.

Still, if you have cash at the ready to put to long-term use, says Miccolis, it’s just as well to invest all at once – and given your age primarily in equities.

This isn’t to say that short-term market corrections – even sizable ones – won’t happen again. “You’ll probably see many in your lifetime,” says Miccolis. “But you risk losing a lot more waiting around for something to change before you invest.”

In fact, investors who’ve had the bad luck of getting in at the very top of a market have ultimately come out ahead – provided they stayed the course. Consider this analysis from wealth management tech company CircleBlack: An investor who put $1,000 in the Standard & Poor’s 500 index of U.S. stocks at the beginning of 2008 (when stocks fell 37%) and again in early 2009 would have been back in positive territory by the end of 2009.

A critical caveat: This advice assumes that you actually keep your savings invested, and not panic sell when things look ugly. Hence, before you make your decision, try to gauge your tolerance for risk – here’s a quick survey to understand your comfort level – as well as your capacity for risk.

While tolerance generally refers to how risk affects you emotionally, capacity refers to how much risk you can actually afford. (You may have a high tolerance for risk but low capacity, or vice versa.)

If you have a steady income, little debt, and several months of emergency savings, the odds that you’d be forced to tap your long-term savings should be low, meaning that your capacity for risk is adequate. If the rest of your financial advice is a bit of a mess, however, you’ll want to use some of this windfall to tighten your ship before you commit to investing it.

Another exception to the advice to invest in one-fell swoop: If you can’t afford to max out on your 401(k) plan, earmark some of this money for living expenses so you can divert a bigger chunk of your salary to these tax-deferred contributions.

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