Wanting to Begin Investments

I have so far my money set aside in a bank checking account, with the money I have it hasn't made much sense to move it to a savings because the return does not justify not being able to access it as much as I do. But I am hoping to take some of this money and begin to invest. I have done a fair amount of research into benefits of Stocks, Mutual Funds, and IRA's, but all have different advantages/disadvantages and I would love some advice. I know that there is no better time to begin a IRA or any type of retirement fund that the present, but I also do not know if I want to tie my money up long term there right now. My second thought is with Stocks i was given money as a Senior Graduation gift to dabble in stocks so eventually I will begin down that road, so I am leaning away from that for the rest. So my final option, at least that I know and have read about is Mutual Funds. I like the idea of the diversified accounts these funds have and have found a couple such as the T. Rowe Price Health Sciences Fund, Vanguard PrimeCap Core Fund, and Nicholas Fund (Mid-Cap Growth). I like all of these for different reasons, such as the markets, returns, and expense ratios. But I'm still open to others.

I would love any advice at all honestly, Im just a little overwhelmed with the whole idea, but am finally ready to do something with the money and Im not investing in CD's because the rates are and have been terrible the past couple years.

 

about 4 months ago I started using a service called Acorns which monitors your bank account and places the dividends into an investment fund. The idea is if you have 3.85 to spend on a cup of coffee, you have $4. So it takes, $.15 and puts it into a fund that you have some control over. I run my own business which needs a lot of cashflow to operate, i can't dump my savings into something that I would not be able to empty quickly. From what I've read, this is a good way to get started in investing and I'm at a point in my life that I need to or I'll end up like my parents.

 

Sorry about that, Im 18, so just a freshman in college. But Im not employed but work in the summer and on breaks, so for part time work like that having an employer do a 401k is not really an option. But it would be nice if I was employed to start.

 

Just looked this up, and it has a great idea behind it, and looks very user friends, but can I ask are the only funds that you are able to invest in the 5 different types of portfolios they offer?

 

Wow! Most 18 year-olds are too preoccupied with trivia to plan ahead. I know I was. You will probably do well.

I would recommend you look into mutual funds. The financial advisers I have heard recommend mutual funds for those who cannot afford a portfolio of dozens of stocks. At your age you can afford to take more risk, with the potentially higher returns, than older folks. All the big mutual fund companies offer funds that cover the gamut of risk/reward. Take your time and check some of them out.

Good luck.

 

Thanks for the advice. Mutual funds are what I have been leaning to lately, but something with a hirer risk and reward because I have time to recoup from it if I was to loose it.

 

OP, before you can start investing you need to solidly figure out what your goal is with the money (what do you want it to return for you) and the time frame you have when you will need it or think you might hit a rough patch and need that liquidity (will you need it in one year? 5?) then you can figure out your strategy.

 

Well, I have flexibility, I am only looking to put about 2-3,000 away right now to start, and then later on invest again to have investments in multiple different sectors as well as return rates/risks. So I would have to say this initial investment is much more of a long term look, because I am still would be fairly liquid capital wise.

 

dont let anyone "manage " your money but you !!! open an acct @ Schwab, Fidelity, Vanguard stay away from the banks, the NY type firms,independent advisors, "fee only" advisors, stay away from most mutual funds as they do NOT beat their benchmarks hardly ever...open ROTH IRA asap...open 401k ...SAVE!! SAVE !! SAVE !!

BE PROACTIVE WITH YOUR $$$$ LEARN AS MUCH AS YOU CAN WHEN YOU CAN

Stay away from the Wall St hucksters I was an investment bnkr for 30 years... I KNOW from whence I speak..

 

Cold hard cash is the best from what I've learned in 20 short years. I save, I'm kinda cheap, I live at home, and I work on the road. I've had a 401k retirement plan for a year, since I started working. Really need to set up
a Roth. I've wanted to play the stocks but it just isn't like it used to be.. The company puts 3%, I put 7%. It's nice being this young with no bills and cutting a nice check for a 20 year old. I can live the way I want and buy what I want. There's always sacrifices, remember that.

 

At your age, I would save cash to be used for a down payment on a house.

After that, save more cash (separate from your down payment) to accumulate 6 months expenses.

After that, contribute into a 401(k). If your work matches, contribute as much as you can to maximize their match.

 

Yes, I don't want to invest too much and keep the other as those "6 months expense" for incase I ever happen to need money for something or other in case of emergency.

 

Sign up for Dave Ramsey's financial peace university. It answers a lot of questions and puts things in perspective. I agree with the post above, have 6-8 months saved for a rough time. Biggest thing I can say is don't rush into anything. Only buy what you understand. Again, financial peace university will answer a lot of questions you have, it helped me a lot.

 

Looks like there are a couple of these classes around my area, so I may just go and sit through one and see what I think, looks like the first one is this Sunday.

 

I know this has been resting for a while but just wanted to add my two cents worth. Listen to what partnerpal said.
I listen to Dave Ramsey because of debit but he will recommend you use one of his ELP's. Like I said follow what partnerpal said. Open an account with Vanguard, Fedelity, or maybe Schwab. Low low cost mutual funds. You will have a tendency to want to take risks but just know if you do a total stock market fund or SP 500 fund you will outperform a majority of investors. If you like these forums, check out Bogleheads. This and Bogleheads are the only two forums I belong to, its worth checking it out. The people like to help with questions you have. I felt the need to send this because I wish I was in your situation, thinking about this at a young age, if you start now you will have a very happy retirement. Look up compound interest, its the 8th wonder of the world.

 

Definitely Sub'd. I was actually thinking about this a couple hours ago.

 

Lots of good advice here. A couple of other good, no-load fund companies are T Rowe Price and Janus. I have had good luck with them and Vanguard.

 

I'm 24 and have had a brokerage account since I was 19. Like others have said since you're young, you can be more risky with your investments. I personally love the stock market and find it fascinating, it's a hobby.

Before I started I read this:

$32 The Intelligent Investor Rev Ed.: The Definitive Book on Value Investing

http://www.amazon.com/The-Intelligent-Investor-Definitive-Investing/dp/0060555661

I've had good success so far and I've begun diversifying into bonds. I also have a traditional 401k through my job with a 3% match.

I agree that managing your own investments is the way to go but it's something you have to stay on top of, especially with stocks.

*I also think that your safety net shouldn't be considered as your investments. They should be separate imo. IE your SHTF money should be sitting in your savings account while your investment funds are going straight to those accounts.

 

For sure, the disaster relief fund should be in a money market fund, at least get 1% but still accessible.

Yes, staying engaged and paying attention to what is taking place is important, I would not recommend individual stocks. For those who don't want to pay close attention and do passive investing I would recommend putting your Roths and other money into stock index (the entire stock market) mutual funds. You cant go wrong with this. Many people who try to beat the system end up losing or over time end up doing just as well as the stock market, but had stress trying to chase.

For new investors, you need to figure out what your asset allocation will be. For example 80% stocks, 20% bonds. This will be based on your risk tolerance. The reason so many people lost money in the recession is people sold when the market went down rather than just waiting it out for the market to eventually come back.

I have heard, don't quote me but if you invest in a Vanguard or Fidelity total stock index and total bond mutual fund you will beat 87% of all investors. This stat has really made me consider following this advise. There are a lot of people who want to keep it simple and lower the stress and anxiety of investing stick with the following three basic funds;

Total stock market, total bond market and total international.

I am not promoting any specific company, I am recommending a low cost provider, 0.07% rates for example.

The other good thing about the total stock, bond market funds is they are not heavily managed, which allows them to operate at such a low cost.

Some of the brokerage firms out there, the main ones charge you as much as 2.5% yearly. That's a lot when you figure that out over the stretch of many years. If you feel the need to talk with an adviser, its best to work with a paid only adviser who doesn't take a percentage of your savings/retirement. You just pay for the appointment, there are multiple reasons for this.

I could keep going, I have learned all this the hard way, by waiting to long to start the process. The people in this thread that are in there 20's are in such an amazing position to create a positive future. The best thing about your age is you don't have to save a ton of money (if you can by all means, just trying to encourage those who can only afford a small amount each month). Since you are young you have a lot of time. If your young and dont make a lot, still $100 a month is a great start. Or you can wait until you get to 40 and have to start saving 1000 a month just in an attempt to catch up... JUST DO IT!

 

Roth IRA all the way at your age. Put what you can in it and if you are overwhelmed by picking stocks just go with a fund. My favorite is Vanguard, super low expense. My account is still small so I am staying spread across the market until it gets bigger. I am all in VTI which is a total market index fund, super low expense, and it pays about a 2.5% dividend. The nice thing about a Roth is that you can pull out your principal when you buy a house without a tax penalty.