Do you invest?

[Motley]

Yea, I love ING. Their website is really easy to use, and the Real Estate mutual fund went up 32% for me. I'm thinking next to go into the Global Real Estate Fund- I'm young so I'm fine with high risk. After that I might set up an automatic investment prog. for another fund cause I don't have $1000 laying around.

LOL, just noticed the new smiley.

Yeah, those were the ones I was considering. I'm already using the savings account, though I now have enough that I'll probably move it into the electric orange account for that 5.05% APY.

 

[RufusSwan]

these are all good ideas. how does a young man just getting a steady salary begin investing?

I know what kinds of risks and returns i'm going to get for the different investments. i just don't know where are who to talk to in order to begin.

jcarm,

This single best thing anyone can do for "investing" is to begin a savings plan. Setup a savings account at your bank. Each time you get a paycheck, write YOURSELF a check equivalent to 10% of the paycheck and deposit it in your savings account (your bank may do this automatically for you). As that account builds, you can move money from savings into higher interest venues; CD's, stocks, bonds, mutual funds, real estate, etc. The main point is to start saving and never stop.

If you have a 401K device at your employeer, take advantage of it. Many have an employer 'match'.

The 1st best thing anyone can do to "look out for themselves in the future" is to live within your means. I would suggest that once you have the religion of savings and living within your means, if you get a "raise", take 50% to increase your lifestyle, and save the other 50%.

Paz

 

[n-abounds]

Yeah, those were the ones I was considering. I'm already using the savings account, though I now have enough that I'll probably move it into the electric orange account for that 5.05% APY.

I signed up for their Electric Orange checking account yesterday, but now I no longer see it on their website. But I don't think i pays 5.05%APY...

 

[job]

CD's are silly There so many better things to do then a cd.

What would you suggest?

 

[therevolution]

What would you suggest?

I think what he means is that a CD at 5.00% doesn't stack up too well against many savings accounts these days, where the interest can exceed what you're getting (for example, HSBC and EmigrantDirect are currently offering 5.05% APY). Not only that, but savings accounts are completely liquid (you can withdraw the money at any time, which might be nice in case of an emergency) versus the CD, where you can't take the money out early without a penalty.

If you are willing to accept more risk, even greater gains can be had - mutual funds, index funds, and individual stocks, for instance. It's all about your investment strategy and what you're comfortable with.

 

[jessep28]

IRA's are a thing of beauty. It's too bad that they are not used as much as they should be. If the normal person would just contribute from day 1 the 15% of their income, they would adjust and just learn to live with the pay cut - knowing their retirement is well on its way.

Fortunately for me, when I graduate from college in May, I will have a good head start in terms of mutual funds whcih started from life insurance money given to me from my father when he passed away.

I plan on after getting my job using 15% of my income as "allocation" funds. I will pay up to the employer matching and it will go into IRA. The other 9% or so that normally isn't matched will go towards college debt repayment.

Hopefully I will have student loans paid off within 5 years (I will be 28) and I can then go full swing into planning for my retirement.

 

[job]

I think what he means is that a CD at 5.00% doesn't stack up too well against many savings accounts these days, where the interest can exceed what you're getting (for example, HSBC and EmigrantDirect are currently offering 5.05% APY).

Gotcha. I'm curious, is there really any downside to a savings account that offers a really high interest rate?

If you are willing to accept more risk, even greater gains can be had - mutual funds, index funds, and individual stocks, for instance. It's all about your investment strategy and what you're comfortable with.

I will admit though that having the money locked away in a CD is helpful to prevent me from spending a lot of it. And at this point, as a college student, I'm having a hard enough time balancing my classes, so as much as I'd like to maximize my return on my money, I don't have the time to focus on it.

Are there any other options other than a CD where I can invest my money and let it sit and ignore* it for a few months/years?

*not completely, but something that doesn't take as much effort as, say, day-trading.

IRA's are a thing of beauty. It's too bad that they are not used as much as they should be. If the normal person would just contribute from day 1 the 15% of their income, they would adjust and just learn to live with the pay cut - knowing their retirement is well on its way.

I started a Roth IRA with the first $1000 I ever earned. I just wish that I had a job right now so I could contribute more money to it. Part of me wishes I already graduated college so I could take advantage of these early years and have compounding interest work for me.

Hopefully I will have student loans paid off within 5 years (I will be 28) and I can then go full swing into planning for my retirement.

A man after my own heart.

 

[Motley]

I signed up for their Electric Orange checking account yesterday, but now I no longer see it on their website.

It's only available to current users so you have to be signed in to see it.

But I don't think i pays 5.05%APY...

There are 3 tiers, so it depends on how much you have in it

 

[n-abounds]

It's only available to current users so you have to be signed in to see it.



There are 3 tiers, so it depends on how much you have in it

Ah, see I am a current user, but I wasn't logged in.

And getting 5.05%...that's a ****load of money you have there. Want to share the wealth?

 

[sushi]

To the OP: Fantastic thinking about investing for the future!

Many good points have been made. I offer this advice:

In financial planning, you want to look at the following items:
- Savings
- Investments
- Life Insurance

All three play a roll in your investment strategy.

Savings. Save for emergency purposes. First determine how much it takes to live each month. Then set a goal to save 6-12 months of this amount. Some people will want to save more to have peace of mind. Loosing a job and having enough to live on for a year is a nice feeling while you are trying to recover your situation. ING and HSBC have good Internet savings accounts. HSBC is at 6% right now.

Investments. Investments fall in many areas. Some of the more common ones are Stocks, Bonds, Money instruments (CDs, Money Market accounts), Mutual Funds, Investment Real Estate and Rental Real Estate. Try to put at least 10 percent of your gross income into these type of accounts. If you can put more then great! As someone already mentioned, for every pay raise that you receive put 50% of the raise into this area. For those who have no investing experience, check out an S&P500 Index Mutual Fund. Great way to get a feel for the stock market. Stay away Margin Accounts and other risky investment strategies until you really know the market. The key to investing is to start early, invest as much as you can, and then don't touch it for a long time!

Life Insurance. Emotional subject for many. There are a few types out there. Term insurance is good for debts. A Whole or Universal Life policy is good to get when you are young and healthy. Get a cheap policy with a reputable carrier. You can always increase the value later on. But you will have insurability regardless of your health. And after a few years, the policy will be paid up and you will not have any premiums to pay.

Like I stated earlier, many good points have already been made. Just wanted to add to those good comments. Best of luck investing!

 

[dmw007]

ING and HSBC have good Internet savings accounts. HSBC is at 6% right now.

6% for a savings account is a great rate....I just opened an account with them. Thanks for the tip sushi!

 

[sushi]

6% for a savings account is a great rate....I just opened an account with them. Thanks for the tip sushi!

You're very welcome!

 

[kretzy]

Since I've been working a lot recently I actually have some money to invest so opened a high interest account. It pays 6.2% interest which is pretty good, there are no fees or charges involved and the only catch is that if I want to use the money from it I first have to transfer it via internet banking to my cheque account.

 

[miniConvert]

I'm more of a saver than an investor, and I'm more of a spender than either, but it's so important to put some money away.

With interest rates going up in the UK savings accounts almost look worthwhile again. Then there's the pension, ISA, and some in managed funds. I think it's a good idea to spread it around, though not too thinly.

I don't invest in the stock market directly.

 

[combatcolin]

Im guessing an IRA is very, very different to what IRA means to a Brit.

Anyway, i save a lot - and i have over £3000 in investments, gives you a nice comfortable feeling knowing that if you lose your job its not the end of the world.

 

[job]

Im guessing an IRA is very, very different to what IRA means to a Brit.

Yeah, something more along the lines of Individual Retirement Account versus Irish Republican Army.

 

[sushi]

It pays 6.2% interest which is pretty good, there are no fees or charges involved and the only catch is that if I want to use the money from it I first have to transfer it via internet banking to my cheque account.

Nice find!

Every little bit counts.

Reference transferring funds from savings to your checking account before you can spend the funds is becoming more of the norm these days.

Brick and mortar places cost money to operate. By going the Internet route, banks are saving huge operating costs and passing some of the savings on to the customers in the form of higher interest rates.

 

[dmw007]

Im guessing an IRA is very, very different to what IRA means to a Brit.

Yes, IRA = Individual Retirement Account, as opposed to IRA = Irish Republican Army.

 

[therevolution]

Gotcha. I'm curious, is there really any downside to a savings account that offers a really high interest rate?

Not that I'm aware of. It's basically the same rate of return, but again, you have that instant liquidity available to you as well, which is worth something.

I will admit though that having the money locked away in a CD is helpful to prevent me from spending a lot of it.

So, you think if the money is liquid, you'll be tempted to spend it? The best thing for you to do is get out of that mindset. Don't consider that money as available to you for spending. If you *absolutely* need a way to protect your money from yourself, stick it in your Roth - then you can't withdraw it without incurring a penalty.

And at this point, as a college student, I'm having a hard enough time balancing my classes, so as much as I'd like to maximize my return on my money, I don't have the time to focus on it.

Are there any other options other than a CD where I can invest my money and let it sit and ignore* it for a few months/years?

*not completely, but something that doesn't take as much effort as, say, day-trading.

Day trading isn't really investing, at least not in the long-term sense. Not to say it's a bad thing, but it's not what you want to do.

Investing in stocks doesn't mean you have to (or should) trade in and out of them frequently. You can research and find an undervalued company, buy in, and let the shares sit for years. Bonus points - if that company pays a dividend, you can enroll in a dividend reinvestment plan (DRIP) where that cash will automatically be converted to more shares instead of sitting in your account doing nothing.

Or, if you want something easier, put the money into an index fund such as one that tracks the S&P 500 or the Russell 2000. That's an easy way to invest while gaining the benefits of diversification.

 

[scem0]

I've got about ~2500 bucks in a mutual fund. I plan to invest more in the near future .

e

 

[sushi]

Day trading isn't really investing, at least not in the long-term sense. Not to say it's a bad thing, but it's not what you want to do.

I completely agree. Most day traders loose money over time. Sure they won't tell you this. Very few of them are successful. Most who day trade will only tell you their wins, but will never tell you about their losses. Kind of like those who go to Las Vegas. Nobody likes to talk of their losses yet Las Vegas keeps growing.

Avoid anything that sounds like a get rich quick scheme such as penny stocks, margin accounts, puts and calls, day trading, etc. Many people loose fortunes believing that they can compete with the big boys (Wall Street). Most start out small and have some success then start hanging it out and then get nailed to the wall loosing everything that they have.

A much better way is a slow but steady investment system.

Here's an example. What would you have if you could max out an IRA account over your life time. Currently that is $4,000 per year. If you start at age 20 and put in the maximum amount into an S&P500 index mutual fund that makes say a very conservative 8.5% per year rate of return, you would have around 2 million dollars by the time you are 65. Not a bad start on your retirement.

BTW, if you would average a slightly more aggressive estimate of 9% (just .5% more) you would have close to 2.5 million dollars by age 65. The stock market has historically been returning around 9-10 percent over the years. At an aggressive 10% estimate, you would have 3.5 million dollars by age 65.

Once you get a better understanding of how the market works you can dabble in other areas. Such as right now International and Real Estate funds are doing very well having much higher returns.

The key is to set up a system where payment into your IRA happens automatically. That way each month the payment to the IRA is automatically deducted from your checking account without you thinking about it. This keeps you from using the money else where and forces you to be disciplined.

Please check out David Bach's web site. He provides many gems of wisdom that will make you successful over time.

I've got about ~2500 bucks in a mutual fund. I plan to invest more in the near future .

Fantastic start. Keep adding to it!

As I mentioned above, suggest that you set up an automatic investment system. You will be glad that you did!

 

[pimentoLoaf]

I have a couple of CD's for different amounts that I manually rollover to keep getting the highest yield -- that is, sometimes I can lock in something great if I extend the timeframe from 24 months to 48 months, even though there's a risk I might need the money.

If you have other investments that cover what you have in a CD, then lock in the best rate you can, otherwise select the shortest term if you think you'll need the money for something.

Otherwise, I have stocks in two companies, one of which is Apple. The other I wish I could unload, but unless the price goes above what I bought it for, it wouldn't pay to sell. When I do sell, I'll put it into something else.