Strategy for investing large amount of cash
Dollar Cost Averaging would be the likely balanced approach that I'd take. Depending on the size of the sum, I'd likely consider a minimum of 3 and at most 12 points to invest the funds to get them all working. While the sum may be large relative to my net worth, depending on overall scale and risk tolerance I could see doing it in a few rounds of purchasing or I could see taking an entire year to deploy the funds in case of something happening. I'd likely do monthly investments myself though others may go for getting more precise on things. I think a larger issue is that you're trying to do market timing. Whether you had a large or small amount of money to invest, no one wants to put the money in to watch it go down.  You can't really predict if prices in a market or security will go up in six months (in which case you want to put all your cash in now), of if it will go down (in which case you'd want to wait until the bottom), or if it will skitter around (in which case you'd want to only buy at the bottoms).  Of course, if you're magic enough to nail all of those market conditions, you're a master finance trader and will quickly make billions. If you're really concerned with protecting your money and want to take some long positions, I'd look into some put options. You'll of course pay the fees for those put options, but they'll protect your downside.  Much of this depends on your time horizon: at the age of 35, someone can expect to see ~6 more recessions and perhaps ~30 more market corrections before retirement. With that big of a time range, it's best to avoid micro-optimizing since that tends to hurt your performance overall (because you won't be able to time the market correctly most of the time).  One thing that's somewhat reasonable, if you have the stomach for it, is to not buy at somewhat-obvious market highs and wait for corrections. This isn't fool proof by any means, but as an example many people realized that US equities basically were on a ~5 year up run by December 2014. Many people cashed out those positions, expecting that a correction would be due. And around late summer of 2015, that correction came. For those with patience, they made ~15% with a few mouse clicks.  Of course many others would have been waiting for that correction since 2010 and missed out on the market increases.  Boiled down: Getting the right diversity of investments helps buffer you from some of the short term market swings. If you need advice it's worth spending a small part of that money on a consultation with a financial adviser, who can talk to you about your goals, your time horizon, and your risk tolerance and recommend a good starting distribution. (Free advice from brokers risks being biased by their commissions.) Once you have that plan, uou need to decide how to execute it. Low-fee index funds are a good way to get started until you learn more, and for many of us that's all we ever need. Then you need to decide whether to invest it all at once or dollar-cost average. I've heard arguments both ways; DCA does mean you risk missing some immmediate gains, but also reduces your risk of buying at a temporary high and taking some immediate losses. For me DCA seemed to make sense, but that's another decision for you to make. What you put that money into is quite relevant. It depends on how soon you will need some, or all, of that money.  It has been very useful to me to divide my savings into three areas...  1) very short term 'oops' funds. This is for when you forget to put something in your budget or when a monthly bill is very high this month. Put this money into passbook savings.  2) Emergency funds that are needed quite infrequently. Used for such things as when you go to the hospital or an appliance breaks down. Put this money in higher yeald savings, but where it can be accessed.  3) Retirement savings. Put this money into a 401-K. Never draw on it till you retire. Make no loans against it. When you change jobs roll over into a self-directed IRA and invest in an ETF that pays dividends. Reinvest the dividend each month.  So, like I said, where you put that money depends on how soon you will need it.
I would suggest looking into Relative Strength Asset Allocation.  This type of investment strategy keeps you invested in the best performing asset classes. As a result of investing in this manner it removes the guesswork and moves naturally (say into cash) when the stock market turns down. There is a good whitepaper on this subject by Mebane Faber titled Relative Strength Strategies for Investing. "Forecasts of stock market direction are not reliable, so you shouldn't be putting much weight on them.  Long term, you can expect to do better in stocks, but obtaining this better expected return has the danger of ""buying in"" to the market at a particularly bad moment, leading to a substantially lower return.  So mitigate that risk while moving in a big piece of cash by ""dollar cost averaging"".  An example would be to divide your cash hoard (conceptually) into say six pieces, and invest each piece in the index fund two months apart.  After a year you will have invested the whole sum at about the average of the index for the year." The advice to invest in yourself is good advice. But the stock market can be very rewarding over the long pull. You have about 45 years to retirement now and that is plenty long enough that each dollar put into the market now will be many dollars then. A simple way to do this might be to open a brokerage account at a reputable broker and put a grand into a very broad based all market ETF and then doing nothing with it. The price of the ETF will go up and down with the usual market gyrations, but over the decades it will grow nicely. Make sure the ETF has low fees so that you aren't being overcharged.   It's good that you are thinking about investing at a young age. A rational and consistent investment strategy will lead to wealth over the long pull. Don't know the name but it means you're long with conviction :P  Unlimited gains, maximum loss of 95$  + (8-6) = 97$.  Basically You are long @ 107  - -2 from 105 to 95.  You would have to be ULTRA bullish to initiate this strategy. "Eventually, you'll end up buying a stock at or near a high-water mark.  You might end up waiting a few years before you see your ""guaranteed"" $100 profit, and you now have $5K to $10K tied up in the wait.  The more frequently you trade, the faster your money gets trapped. There are two ways to avoid this problem: 1) Do it during strong bull markets.    If everything keeps going up you don't need to worry about peaks...but then why would you keep cashing out for $1 gains? 2) Accurately predict the peaks.    If you can see the future, why would you keep cashing out for $1 gains? Either way, this strategy will only make your broker happy, $8 at a time." First: it sounds like you are already making wise choices with your cash surplus. You've looked for ways to keep that growing ahead of inflation and you have made use of tax shelters. So for the rest of this answer I am going to assume you have between 3-6 months expenses already saved up as a “rainy day fund” and you're ready for more sophisticated approaches to growing your funds. To answer this part: Are there any other ways that I can save/ invest that I am not currently doing? Yes, you could look at, for example: 1. Peer to peer These services let you lend to a 'basket' of borrowers and receive a return on your money that is typically higher than what's offered in cash savings accounts. Examples of peer to peer networks are Zopa, Ratesetter and FundingCircle. This involves taking some risks with your money – Zopa's lending section explains the risks. 2. Structured deposits These are a type of cash deposit product where, in return for locking your money away for a time (typically 5 years), you get the opportunity for higher returns e.g. 5% + / year. Your deposit is usually guaranteed under the FSCS (Financial services compensation scheme), however, the returns are dependent on the performance of a stock market index such as the FTSE 100 being higher in x years from now. Also, structured deposits usually require a minimum £3,000 investment. 3. Index funds You mention watching the stock prices of a few companies. I agree with your conclusion – I wouldn't suggest trying to choose individual stocks at this stage. Price history is a poor predictor of future performance, and markets can be volatile. To decide if a stock is worth buying you need to understand the fundamentals, be able to assess the current stock price and future outlook, and be comfortable accepting a range of different risks (including currency and geographic risk). If you buy shares in a small number of companies, you are concentrating your risk (especially if they have things in common with each other). Index funds, while they do carry risks, let you pool your money with other investors to buy shares in a 'basket' of stocks to replicate the movement of an index such as the FTSE All Share. The basket-of-stocks approach at least gives you some built-in diversification against the risks of individual stocks. I suggest index funds (as opposed to actively managed funds, where you pay a management fee to have your investments chosen by a professional who tries to beat the market) because they are low cost and easier to understand. An example of a very low cost index fund is this FTSE All Share tracker from Aberdeen, on the Hargreaves Lansdown platform: http://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/a/aberdeen-foundation-growth-accumulation General principle on investing in stock market based index funds: You should always invest with a 5+ year time horizon. This is because prices can move up and down for reasons beyond your anticipation or control (volatility). Time can smooth out volatility; generally, the longer the time period, the greater your likelihood of achieving a positive return. I hope this answer so far helps takes into account the excess funds. So… to answer the second part of your question:  Or would it be best to start using any excess funds […] to pay off my student loan quicker? Your student loan is currently costing you 0.9% interest per annum. At this rate it's lower than the last 10 years average inflation. One argument: if you repay your student loan this is effectively a 0.9% guaranteed return on every pound repaid – This is the equivalent of 1.125% on a cash savings account if you're paying basic rate tax on the interest. An opposing argument: 0.9% is lower than the last 10 years' average inflation in the UK. There are so many advantages to making a start with growing your money for the long term, due to the effects of compound returns, that you might choose to defer your loan repayments for a while and focus on building up some investments that stand a chance to beat inflation in the long term. The goal of the kelly criterion strategy is to find a balance between preservation of starting capital and returns. One of extreme you could bet the entirety of your account on one trade, which would maximize your returns if you win, but leave you unable to further invest if you lose. On the other extreme, you could bet the smallest amount of capital possible over the course of several trades to increase the probability that you'll even out to 70% accuracy over time. But this method would be extremely slow.  So for your case, investing 40% each time is one way to find an optimal balance between these two extremes. Use this as a rule of thumb though, because your own situation and investing goals may differ from the goal of  optimal growth. In the United States investing towards donation is a great idea because you can donate appreciated securities directly rather than donating cash.  Notice how much this can benefit you: So you get to both (a) donate untaxed money and then (b) deduct that unrealized money from your income total on your tax return. With the above in mind, a good strategy for investing towards this type of donation would be to pick securities that are likely to increase in market value but not likely to produce any other sort of income.  So bonds (which produce lots of interest income), or stocks with dividends, or equity mutual funds (which distribute dividends as capital gains) would all be suboptimal for this purpose. Of course, an even better strategy would be to establish a widely diversified investment portfolio without thought to future donations.  Then, once a year (or whenever), evaluate all your investments and find some where the market value has increased.  Then donate some of those shares.  No special advance planning necessary. Note that your tax consequences could be more complicated depending on your exact situation.  Read the section about Capital Gain Property in IRS Pub. 26 for all the details.  There may be special limits on the amount you can deduct.  Also, donations of short term capital gains are treated much less favorably, so make sure you donate only long term capital gain property. "Here is, from Yahoo Finance, the S&P 500 over the last ~60 years (logarithmic scale):  The behavior since ~2000 has been weird, by historical standards. And it's very easy, looking at that graph, to say ""yes! I would have made so much money had I invested in March '09!"". Of course, back in March '09, it wasn't so clear that was the bottom. But, yes, over the last 10 years or so, you could have made more money by adopting a rule that you'll accumulate cash in a FDIC (or similar) insured savings account, and dump it into an S&P index fund/ETF when the index is n% off its high. Of course, if you look at the rest of the chart, that strategy looks a lot less promising. Start in the early 80's, and you'd have held cash until the crash in 2000. Except for the recent weirdness, the general trend in the S&P 500 (and stock markets in general) has been upward. In other words, to a first-order approximation, the S&P 500 is always at an all-time high. That's just the general trend." No one knows if the market is high right now.  To know that you would need to compare it to the future, not the past. If you put all your money in right now, you run the risk of putting it in at what turns out to be a bad time.  If you spread it out, you will for sure put some of it in at a bad time (either the stuff you put in now, or the stuff you put in later).  The strategy that, on average, will make you the most money is to put everything in now.  If your risk tolerance allows that (it sounds like it does) then I think going all in makes sense. There really aren't significant downsides to buying a ton at once.  You aren't going to move the needle on a big Vanguard fund with that amount and there isn't a tax consequence or anything to buying.  Of course, when you sell, you will need to pay capital gains tax on any gains, but that's a later chapter. The bigger consideration is to be smart right now about avoiding taxes.  If your income is low, max out your Roth IRAs.  If you need to you can later use that money for a house or you can pull the contribution part out at any time if you want without a penalty. Is a $50K buffer too much?  Normally I would say yes, it's excessive.  I have 5 rather expensive kids and I keep $20K in cash, which seems high, if anything.  However, if you are unemployed or your income isn't covering your expenses, then keeping a larger pot in cash makes good sense until your cash flow firms up.  Setting $50K or something close to that aside sounds a lot like something I would do in your shoes. BTW where are you finding a savings account that pays 2%? "The process of borrowing shares and selling them is called shorting a stock, or ""going short.""  When you use money to buy shares, it is called ""going long."" In general, your strategy of going long and short in the same stock in the same amounts does not gain you anything.  Let's look at your two scenarios to see why. When you start, LOOT is trading at $20 per share.  You purchased 100 shares for $2000, and you borrowed and sold 100 shares for $2000.  You are both long and short in the stock for $2000.  At this point, you have invested $2000, and you got your $2000 back from the short proceeds.  You own and owe 100 shares. Under scenario A, the price goes up to $30 per share.  Your long shares have gone up in value by $1000.  However, you have lost $1000 on your short shares.  Your short is called, and you return your 100 shares, and have to pay interest.  Under this scenario, after it is all done, you have lost whatever the interest charges are. Under scenario B, the prices goes down to $10 per share.  Your long shares have lost $1000 in value.  However, your short has gained $1000 in value, because you can buy the 100 shares for only $1000 and return them, and you are left with the $1000 out of the $2000 you got when you first sold the shorted shares.  However, because your long shares have lost $1000, you still haven't gained anything.  Here again, you have lost whatever the interest charges are. As explained in the Traders Exclusive article that @RonJohn posted in the comments, there are investors that go long and short on the same stock at the same time.  However, this might be done if the investor believes that the stock will go down in a short-term time frame, but up in the long-term time frame.  The investor might buy and hold for the long term, but go short for a brief time while holding the long position. However, that is not what you are suggesting.  Your proposal makes no prediction on what the stock might do in different periods of time.  You are only attempting to hedge your bets.  And it doesn't work.  A long position and a short position are opposites to each other, and no matter which way the stock moves, you'll lose the same amount with one position that you have gained in the other position.  And you'll be out the interest charges from the borrowed shares every time. With your comment, you have stated that your scenario is that you believe that the stock will go up long term, but you also believe that the stock is at a short-term peak and will drop in the near future.  This, however, doesn't really change things much.  Let's look again at your possible scenarios. You believe that the stock is a long-term buy, but for some reason you are guessing that the stock will drop in the short-term.  Under scenario A, you were incorrect about your short-term guess.  And, although you might have been correct about the long-term prospects, you have missed this gain.  You are out the interest charges, and if you still think the stock is headed up over the long term, you'll need to buy back in at a higher price. Under scenario B, it turns out that you were correct about the short-term drop.  You pocket some cash, but there is no guarantee that the stock will rise anytime soon.  Your investment has lost value, and the gain that you made with your short is still tied up in stocks that are currently down. Your strategy does prevent the possibility of the unlimited loss inherent in the short.  However, it also prevents the possibility of the unlimited gain inherent in the long position.    And this is a shame, since you fundamentally believe that the stock is undervalued and is headed up.  You are sabotaging your long-term gains for a chance at a small short-term gain." The biggest hedge funds seem to be copying the large mutual fund company strategy.  Launch many funds.  Take positions with high beta to the sector or asset class that is the focus of the fund.  Wait and see which asset classes outperform. (For Och-Ziff: Their massive bullish bet on credit!)  Promote the outperforming funds and their portfolio manager to gullible investors. "Money is a tool. Here is an ""oversimplified"" order of investments:" In general, investors with a long period of time until they would need to withdraw the cash are best off holding mostly equities.  While the dividends that equities would return are less than the interest you would get in peer-to-peer lending, over long periods of time not only do you get the dividends from equity investment but the value of the stock will grow faster than  interest on loans. The higher returns from stocks, however, comes with more risk of big downturns.  Many people pull their investments out of stocks right after crashes which really hurts their long term returns.  So, in order to get the benefit of investing in stocks you need to be strong enough to continue to hold the stocks through the crash and into the recovery. As for which stocks to invest in, generally it is best to invest in low-fee index funds/etfs where you own a broad collection of stocks so that if (when) any one stock goes bust that your portfolio does not take much damage.  Try to own both international and domestic stocks to get good diversification.  The consensus recommends adding just a little bit of REITs and bonds to your investments, but for someone at 25 it might not be worth it yet. Warren Buffett had some good thoughts on index investing. Yes, one such strategy is dividend arbitrage using stock and in the money options. You have to find out which option is the most mispriced before the ex-dividend date.