| Im 20, where should I put my money? |
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Twain
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| Im 20, where should I put my money? |
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Hi there. I am 20 years old, currently in college, and have a small part time job pulling in about $100/week. I have about $1500 in the bank and I want to make some investments.
From the research I've done it seems my best move is a Roth IRA. What I'm having a tough time figuring out is who should I open the IRA with. Also, is the Roth IRA the best move I can make at this time? Any other helpful hints for me?
Thanks so much for any advice, I appreciate any direction you can give.
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Sat Sep 03, 2005 2:34 am |
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Ryz
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You'd be surprised what you can do with $1500. Whatever do you, make sure you are financially educated first!
Unfortunately, I do not know much about Roth IRAs, but I know they seem to go hand-in-hand with the whole 401k concept, which I tend to frown upon. I tend to frown on 401ks because I believe there are much better investment vehicles out there. I plan on studying the stock market within the next year, and hopefully, will become a knowledgable trader in the years to come- that's where the real investment profit is made.
What's good about the Roth IRAs? Well, you don't have to worry about taxes, which is always a pro for younger adults. Tax-free growth can definitely increase your investments' potential. No taxes will allow you to earn more money, which in turn allows you to gain even more money if you keep investing. This is practicality: The more money you invest at a given percentage, the more profit you will yield.
But, if you want to become a sophisticated investor, you'll need to know the stock market eventually. But, no worries! You're still in college and still young. In fact, I'm right there with you in college, except I'm only 18. 
It's good to see more young people thinking about their future and becoming interested in investing. Good luck!
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Sat Sep 03, 2005 7:47 pm |
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BlankenshipFP
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Yes, a Roth IRA makes good sense in your case - because the money you're putting in the account today is probably being taxed at the lowest overall rate you'll see in your lifetime. Within the account, you'll probably want to look at a broadly-diversified index mutual fund. The earlier suggestion of Vanguard is an excellent choice for custodying the account and for breadth of mutual fund choices.
Good luck!
Jim Blankenship, CFP�, EA
Blankenship Financial Planning, Ltd.
www.BlankenshipFinancial.com
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Tue Sep 06, 2005 5:32 pm |
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The Financial Guru
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I too am a young investor, and I opened a Roth IRA through Ameritrade. I think that Ameritrade offers a great service, and their are many great features that you will have access to such as a live streamer. A good fund to look at right now is the Fidelity Contrafund, FCNTX. I am not sure what your financial goals are, but in the long run the Roth would probably be a better investment choice for you. You will experience more options with the Roth further down the road such as being able to withdraw funds for a down payment on your first home, possible funding for your children's college, and much more without having to pay taxes and a 10% penalty for an early withdrawl.
You also said you have 1500 in the bank. Having liquid assets available is a good idea too because you never know what financial emergency may occur. Usually 2-3 months worth of expenses should be adequate.
Good Luck
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Wed Sep 14, 2005 4:23 pm |
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pandashark
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If you wish to be that hands on, you can always open you Roth IRA with a broker (or discount broker) and manage the stocks on your own. But otherwise, going with a mutual fund isn't bad. Generally, most mutual funds don't outperform the S&P 500, so investing in an S&P 500 fund, such as the one vanguard offers, is definitely a good idea, if you want a decent growth rate for your money and you don't want to have to fiddle around too much with it all.
Personally, I opened an account this year with Legg Mason, putting my Roth IRA money in one of their funds (I forgot which one it is, but it has an impressive track record in recent history, having outperformed the S&P 500 for 14 years or so).
Also, with a Roth IRA, after 5 years, you can take out your original contributions (but not the money you've earned on those contributions) tax free, if needed. So it's not as if you're necessarily locking up that money for the next 3 or 4 decades.
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Wed Sep 14, 2005 8:31 pm |
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Rolo
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| Re: Im 20, where should I put my money? |
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quote:
Originally posted by Twain
Re: Im 20, where should I put my money?
My wallet!
eeeheheheheehe
"Expect me when you see me."
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Wed Sep 28, 2005 11:51 pm |
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correltrade
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If you do not know anything to trading and would like to invest, I suggest you to buy an indice.
Since it contains to a lot of stocks, its volatility is low, implying less risk.
Futhermore this kind of investisment is not time consuming: buy indice tracker on November, sell it in May and enjoy your profits during the remaining months
bests,
Maxim
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Thu Sep 29, 2005 12:27 am |
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Rolo
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quote:
Originally posted by correltrade
Since it contains to a lot of stocks, its volatility is low, implying less risk.
A stock index fund does NOT have low volatility.
The S&P500 index has a volatility, called "Beta", of 1. You can look up the Beta of any fund (Morningstar.com). A Beta of 0.5 is half as volatile as the aforementioned index.
True, 2/3 of mutual fund managers do not outperform the market, but that is a lame excuse for people to get out of doing their due diligence; there are THOUSANDS of funds that DO outperform the market.
Okay, Twain,
Yes, open your Roth, Jim nailed it on the head. Diversify with a couple/three mutual funds or just one broad market fund. Let that ride while you buy some books and learn about investing...what's available, how to do it, the different philosophies...and discover what appeals to you. Get comfortable with funds, then move on to stocks if you like.
You might like it enough to make it a hobby, or you might just want to know enough to be average. Either way, you did the most important thing in retiring wealthy: started early.
"Expect me when you see me."
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Thu Sep 29, 2005 1:03 am |
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correltrade
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quote:
Originally posted by Rolo
A stock index fund does NOT have low volatility.
The S&P500 index has a volatility, called "Beta", of 1.
Volatility as nothing to do with the "beta".
Volatility is a measure of the statistical dispersion (see http://en.wikipedia.org/wiki/Volatility) and is one of the most important parameter used to determine option's price.
On another hand, the "beta" is a measure of the (linear) correlation between a security and an indice (see http://help.yahoo.com/help/uk/fin/treport/treport-03.html )
So obviously an indice as a beta 1, since it is more than strongly correlated to itself
Bests,
Maxim
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Thu Sep 29, 2005 2:00 am |
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Rolo
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quote:
Originally posted by correltrade
On another hand, the "beta" is a measure of the (linear) correlation between a security and an indice
Correlation of what between the two? Volatility!
From http://www.investopedia.com/terms/b/beta.asp
quote:
A measure of a security's or portfolio's volatility, or systematic risk, in comparison to the market as a whole. Also known as "beta coefficient."
Beta is calculated using regression analysis, and you can think of beta as the tendency of a security's returns to respond to swings in the market. (Rolo: That would be volatility, the "swings" that is) A beta of 1 indicates that the security's price will move with the market. A beta less than 1 means that the security will be less volatile than the market. A beta greater than 1 indicates that the security's price will be more volatile than the market. For example, if a stock's beta is 1.2 it's theoretically 20% more volatile than the market.
quote:
Originally posted by correltrade
So obviously an indice as a beta 1, since it is more than strongly correlated to itself
Not quite: the S&P500 index (not just any index) is fixed at a Beta of 1; it is the reference point.
"Expect me when you see me."
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Thu Sep 29, 2005 2:56 am |
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correltrade
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quote:
Originally posted by Rolo
Correlation of what between the two? Volatility!
No, the volatility measure the standard deviation of the price's variation over a certain time period: it's a number.
The beta is the correlation coefficient between two set of data: price's variation of the stock and price variation of the indice.
It cannot be the correlation of two volatilities: correlation coefficient between 2 numbers is not defined.
quote:
Not quite: the S&P500 index (not just any index) is fixed at a Beta of 1; it is the reference point.
This is too restrictive:
You can compute the beta of a stock compared to its industry, sector or sub-sector (or even to your own portfolio).
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Thu Sep 29, 2005 3:21 am |
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asdf82
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quote:
Originally posted by Rolo
True, 2/3 of mutual fund managers do not outperform the market, but that is a lame excuse for people to get out of doing their due diligence; there are THOUSANDS of funds that DO outperform the market.
But isn't it true that most investors arn't cabable of finding that 1/3?
I'm 22 and like the OP looking to start out investing but I just got my first job out of college paying about 60k. I defenitly like the fact that index funds provide solid returns with no thinking. I am not interested in becoming a serious investor (picking individual stocks etc.) but want good long term returns.
I know funds like contrafund are doing well right now, and will probably keep doing well for the near future but the hard part is knowing when to get out. Historically don't all high flying funds falter and underperform eventually?
How about emerging markets, medical and energy index funds. It seems to me that these should be poised for huge long term growth, and might be a good choice for the OP.
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Sun Oct 09, 2005 6:36 pm |
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Rolo
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quote:
Originally posted by asdf82
But isn't it true that most investors arn't cabable of finding that 1/3?
Not if you cannot spell 'capable'. 
What reason could one have for not finding the top 1/3 at least most of the time? That's a one-in-three chance, so, statistically, you will get it 1/3 of the time with no thought behind it.
And that is the breakdown: are 'most investors' putting thought behind the design of their portfolios? If modern television is any indication, I would say 'no'. So we give up before we try because the proverbial 'they' say we are incapable of succeeding at it? Bah! See the other thread I just posted...I have always outperformed a diversified portfolio and the index/average, so there is no debate for me.
"Expect me when you see me."
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Mon Oct 10, 2005 12:22 am |
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LottomagicZ4941
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quote:
Originally posted by Rolo
quote:
Originally posted by asdf82
But isn't it true that most investors arn't cabable of finding that 1/3?
Not if you cannot spell 'capable'.
I think spelling and ability to invest are weaker then ability to invest and math.
Rolo I think the investment proes recommend diversification because the masses will go in to late. Look at what happened with teck. When the masses get into oil then I'll be moving some chips so to speak.
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Mon Oct 10, 2005 4:43 pm |
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