Investing at a young age..
 

I've always heard that the most succesful (read: rich) people start investing in a very young age. That way, they're working and their money is working FOR them. Since I'm 19, I should start doing that now and go for something with a long-term return rate. I've got like 300 or more dollars per month to throw into it, but I don't know what my best bet is... 10 year fund, stock market? I feel comfortable taking a medium to high risk, since I don't have much to lose at this point..

Any suggestions?

Well, if you are comfortable with Medium to High risk I would imagine that the stock market could be one of the better options for you.

I certainly wouldn't invest all you money in high-risk stocks, but I wouldn't avoid them completely.

Because you are starting at such a young age, you may want to consider the Warren Buffet method - buy and hold forever.

Do your research now and find a few exceptional companies - buy a significant (read: $3000+) amount of stock for each company as you can afford it and watch your money grow over the years.

If you decide to be a bit riskier, make sure you don't get greedy - and don't go for incredible long shots - invest intelligently, but decide if the risk is worth the reward...

I'm going to do a different take than investing into stocks directly. Stocks are quite romantic in nature just like gambling in Las Vegas.

Invest in real estate, had I done that at your age, I'd be much further ahead than I am now.

I bought my first property in 1999 for $6,000 down on a $61,000 condo in Las Vegas. My HOA fees are about $100 (which includes property taxes), my mortgage is about $400, my managerial fees are $75 (10% of the rental price.) I rent for $750/month a furnished 1 bedroom. Each month my rental income brings nets about $100.

If I was to sell the property today, similar units have listed and sold for $145,000.

Until you find a better place to put your money, open an ING direct account and just sock that 300 a month away in there. It will start growing and you don't have to do anything but save your money. (PM me if you want a $25 referral bonus).

http://ingdirect.com

ING Direct is super legit. I found out about it here and have the majority of my money in it right now.

Good luck :)

I would avoid stockpicking. The majority of actively managed funds (and these are run by full-time professionals whose jobs are to pick stocks) underperform the market after fees and expenses.

Depending on your situation (e.g., do you need a source of emergency money, or can you count on someone in the case of an emergency? ) I would:

1. Read and find out more about investing. I strongly suggest www.diehards.org

2. Build up an emergency fund, somewhere between 3-6 months of living expenses. Put this into something relatively accessible and liquid, such as an ING Direct account, which at 3% APR, barely covers inflation.

2. Invest for the long-term. Buy and hold forever. I would start putting money into a Roth IRA. This lets your investments grow tax-free until retirement. This makes a lot of difference when taking compound interest into account. You can put up to $4000 a year of after-tax money into this. I would strongly advise opening one at www.vanguard.com. They have a very wide range of very low-cost mutual funds. The strongest correlation between any factor and investment returns is the expenses of a mutual fund.

4. Decide on an asset allocation (between stocks and bonds). A rough rule of thumb is to hold your age in bonds (i.e, hold 20% of your assets in bonds if you are 20 years old)

5. If its too complicated, consider the Vanguard Target Retirement funds (for your age, I would probably suggest the 2045.) It automatically adjusts the risks and asset allocation, assuming that you will be retiring in 2045. So the risk profile starts off aggressive, and automatically becomes less risky as 2045 approaches. Its holdings are primarily in the Total Stock Market Index, and Total Bond Market Index, and International Stock indices. So you'll be broadly diversified across the entire US economy, and the world economy as well.

I'm not with vanguard, but most of my money is. .......

By the way, Warren Buffet strongly advises most investors to invest in index funds.

oh, by the way, congratulations. You're way ahead of most of your peers. Kudos for starting to plan so early.

I would advise reading and learning more on your own.

When I was 14 or so, I invested in a 10 yr bond. Right now, I am contributing about $350 per paycheck to two different investment companies. I'm only 20 and I would recommend that you start now before it is too late. As said above, read and learn on your own. The only person that I listen to about my investments is the broker that I go to. So far, she has made me a little bit of money.

Also, if your current job has a stock program. I recommend inquiring about some information about that. Every paycheck, 6% comes off and invests in the company stocks. I think so far I have about $400 in stocks and I have been there about 4 months.

But it is up to you. Find a direction that you want to go. Long term, short term, high risk, medium risk.... there are many different options. Ask questions, even if it may sound stupid, you are going to learn something from it none-the-less.

Good luck!

I would be careful to make sure that the broker is looking out for you, and not for himself. Most brokers and "financial planners" are simply glorified salesmen, with precious little more financial knowledge that you can obtain yourself.

If they are given strong sales commisions if you buy certain investments, you can be sure they will sell those to you. If they get commisions if you trade a lot, you can be certain you'll end up trading a lot. Think about it, if you were in the broker's shoes, you'd do the same.

If you want to get a financial planner, get a fee-only planner. That is, they don't get any commisions from any of the funds that they recommend, and the fee only covers the advice that they give you. This removes any conflict of interest that they might have.....

I would reconsider why you want to invest. No one got rich getting a small return on money they socked away in the bank. They got financial security, not wealth and riches. I will go agianst the grain as this is a decision I made as well. I could be investing my money and getting a small return on it but I prefer to use it to enjoy my life. I have enough to pay for several months of living expenses if need be and I intend to spend the rest to pay for my college education, quality furniture (not ikea), material possesions that bring me pleasure, travel and having fun. I am making the least amount of money that I will in my lifetime right now and I don't intend to make sacrifices so that I can earn a few hundred dollars extra a year in intrest or growth.

The person that I go to makes no money what-so-ever from the investments that I make. I looked into it and thats why I listen. As you said above, she is a fee planner, and with the investments and plan that I chose, she makes nothing off of what I have put into my plan.

I'll somewhat second the recommendation above from Cynthetiq on investing in real estate. I wouldn't neccesarily go into rental real estate as my first choice though. Do you own your own place right now? Depending on where you are in your education or career, you might consider buying a place of your own instead of renting. If you have just started a 4-year college degree, buy a house now! I did the same exact thing when I was 19. I thought to myself: I know that I am going to be in this same town for the next 3 years minimum. I can continue to pay higher rent to some landlord, or I can invest in a house, have lower payments than rent, build equity and come out ahead.

In my situation, I ended up buying a 4 bedroom house and renting the other rooms out to fellow students. I had some good and some bad experiences with doing that. I also ended up staying in the same place for longer than I originally planned. But when I did sell the house, I came out WAY ahead. Plus the whole time I lived there, I rarely paid the mortgage myself since I had renters in the other three rooms of the house. Something to consider...

Get control over your money, get the skills to make it grow yourself, rather than through a third party, don't open yourself to the risks of devious business practices, work in a transparent market. PM me for details.

I wanted to share a short simulation of the power of time and compound interest. Investing early is a great way to build wealth.

I'm a visual person, so I hope that this will help you appriciate the concept more. http://flagship3.vanguard.com/VGApp/...ompContent.jsp

EDIT: for some reason, the link was leading to the wrong place. "the power of compounding" @
http://flagship5.vanguard.com/VGApp/...ompContent.jsp

There are 3 things that will always be of value:

Land
Gold/silver/gems
yourself (education..... the higher you go in it the more your earning potential rises)

Stocks may be in a drop cycle when you need the money

Long term T-Bills, CDs, Bonds, Munis, managed accounts all punish you if you take the money out early if you need it and the interest rates right now won't cover the rate of inflation and the taxes.

I can tell you one thing I have that has helped me over the years. I have a $2500 paid insurance policy that my real father had given my mother when I was born. By the time I was in my 20's that policy had huge cash values I could borrow on and use the continuing interest on it to pay the loans.

7 years ago I had borrowed every cent out of there. Today, the loan value is still up around $4800. The face value, if I were to sell it would actually net me less money. I don't know if insurance companies still offer these though.

Honestly, I'd advise investing in a mutual fund or IRA and having plans of LEAVING it....Because later, when it'll be time for retirement, you'll be glad you did.

Also, as stated above, land will ALWAYS be of value....The stock market may crash, but land will always be there....remember that.

If you want to invest in "stocks", I'd advise some of the larger, more stable ones....Coca-Cola, Wal-Mart, etc...they may not make you rich overnight, but they have a history of growth, or they wouldn't be where they are today...

If you're looking for a quick dollar, then its gonna be a gamble. I'd adivse some serious research before you invest....look at their 3 year history, forecasts, etc....If you get lucky and catch a trend in its beginning, you could make $$$...but good luck with that lol

IMHO, a savings account isn't a bad idea...Its not gonna earn more than a small percentage a year, but its SURE money, that is a bit more easily attainable in the case of an emergency...

just my useless .02 :)

-Will

Randerwolf after I saw that I did the calculation for a $2000 investment with compounded interest at 6% for 60 years. Really got me thinking about how I should start investing soon. The difficult part is raising the initial capital while being a full time student.

I'm in the same boat actually....I've decided that I'm gonna focus on saving up the minimum amount required, and deposit as I go....It'll add up over time, but I can't seem to save up a worthwhile amount any other way.

-Will

I just looked at my first post, 06-16-2005, 02:29 PM.. thats coming up on a year ago already.. and I haven't done SHIT as far as investing goes. Thanks for the replies, it reminded me that I need to do something with it..

I need an automatic way of doing this. I made well over $1000 / month to spend, and I usually end up pilfering a ton of it on useless shit. Anyone know a way I can have it automatically withdraw something like $500 / month -- and into something with high yield in 5 or 10 years? I'm apparently too lazy or irresponsible to remember to do it myself.

Personally, I have an account with www.vankampen.com - they allow me to automatically withdraw a specific amount from my account monthly, weekly, or however I want to set it up.

Another option you may consider if you are looking to invest your money in specific increments would be to open a savings account (I'd recommend ING) that has a decent interest rate as a place to put your money making it more difficult for you to touch. Then, every six months or so you'll have around $3000.00 to put in an investment of your choice.

That animation really got me thinking, and I'm planning on opening an accoutn with ING with my next paycheck and adding $25 a week to it. My question is, in that little video type thing they use a 8% compound interest. That seems pretty high, is there anything that's solid with that kind of interest, or is that just to exaggerate the effects to teach you?

Most mutual fund companies have an Automatic Investment plan that will allow you to have a set amount automatically invested each month. Some will take it right out of your paycheck, while others will draw from your bank account each month.

There is also the option of having a 401k or company stock, that can be withdrawn automatically monthly, but I tend to advise against loyalty based investing, and instead advise researching and investing in companies or funds that truly interest you.

Well, the average stock market return over the last 40 years or so was 12% per year...

Right now isn't the greatest time to get a high interest rate on savings account, but the situation will slowly but surely improve. Not too long ago the average savings account rate was nearly 5% - you could get long term Certificates of Deposit at a rate of 15%+