Investing/Saving $9,000

[theweber3]

Im currently 16, I want to invest my savings in something that I will be able to take out when im 18 or 19.

I had it in a CD for about a year and had a 4.25% return on it. Im thinking of investing some in Apple. No not because im a fanboy, because I really think the company is going to take off. Im open to anything else though and just wanted some feedback.

Thanks,

Adam

 

[dukebound85]

honestly, the time to buy apple was like 4 years ago and anytime before that

i think they are to high and have been for a while

dont buy when the stock is high

what makes you think they are going to take off? that last moment was with the intel and iphone era. i dont see anything making the stock jump more than what it is now substanitally

 

[theweber3]

honestly, the time to buy apple was like 4 years ago and anytime before that

i think they are to high and have been for a while

dont buy when the stock is high

what makes you think they are going to take off? that last moment was with the intel and iphone era. i dont see anything making the stock jump more than what it is now substanitally

Right, but you dont think it will go so much higher?

 

[dukebound85]

Right, but you dont think it will go so much higher?

no, at least i dont believe so

id be looking at bargin stocks like GE right now for example

if they recover, you will make off like a bandit

of course, there is no promise things will get rosier either so yea its a risk

but thats how you get rich, buy low, not high

 

[Luigi239]

I would be really cautious about that. You already have a sizable amount of money. In this economy there are a lot of unknowns, and I wouldn't want to risk it in something like the stock market.

For example, God forbid, Steve Jobs could die tomorrow, and Apple's value could go down drastically. Unlikely? Yes, but if I were you I wouldn't want to take that chance. If you choose to do that anyway, I would leave about half of it where it is right now and invest the other half. That way you at least have something to fall back on.

 

[Demosthenes X]

AAPL peaked a couple years ago at $200/share. It then crashed back down to around $100/share (along with everything else, of course). It closed around $162 a share today. If they can keep the same level of interest that the Macbook Pro and iPhone 3GS releases created, then the stock may well continue to climb. New iPods in September - will they be good enough to push it over $200?

In any event, diversify your portfolio. There are lots of lots of theories out there, but the fact is, the best strategy you can have is to buy an index of stocks and hold them for a long period of time.

 

[dbo789]

At your age, with that kind of money, I DO NOT suggest investing directly in the stock market. It is way too risky, and honestly, at your age you don't have the risk tolerance needed.

If you want to invest in something that can earn you more than a term deposit, go to your local bank and look at mutual funds. That way your investment is diversified, managed professionally, and you can select funds that are much lower risk than direct stock investing. If you really want, keep a couple hundred out to play around with in stocks, but expect and be ready if you loose the cash. (Note: Never put everything into one mutual fund, and never put everything into one form of investment. Always keep some in a savings account or term deposit, 'just in case'.)

Honestly, I don't think anyone should be direct stock investing in large amounts unless they have a very large net worth or are professionally trained to know what they're doing.

I work in the banking industry, and over the past year have seen so many people that made unwise choices and lost everything when the market tanked. It definitely made my own investing strategies more conservative, but the old adage holds true: better safe than sorry.

 

[rhsgolfer33]

I don't know, I still don't see Apple as a bad investment. Their EPS has remained pretty good at $5.72 a share. P/E is at 28.46, which might be somewhat high, I haven't kept up on the industry average. The stock has traded anywhere from $78.20 to $180.45 during the last year and is at $162.79 currently. It certainly seems strong compared to some of the other tech sector stocks, but who knows. My guess is that over a year period Apple will probably see an increase in its stock price, if only to get back to what it was at pre-recession.

If you decide to invest in the market you need to buy more than just Apple stock. The key word in investing is diversification. Find some other companies you like in different areas and invest in them too. Hell, invest in some type of commodity or energy source if you can too. Putting all your eggs in one basket isn't the best way to invest, if you can select quite a few companies in many different areas you'll be able to minimize the impact of a catastrophe at the company level. If we have a market wide event, like the last recession, there isn't much you can do other than wait it out, but a diverse portfolio minimizes some of the risk at the single stock level.

You just have to remember that you might lose your money; its not a CD and nothing is guaranteed. You can't expect to win for sure in the short-term.

At your age, with that kind of money, I DO NOT suggest investing directly in the stock market. It is way too risky, and honestly, at your age you don't have the risk tolerance needed.

At his age he has more risk tolerance than almost anyone; if he sustains a large hit he has his whole life to make the money back. Unless, of course, we're talking about money you intend to use to pay college tuition, in which case you should definitely have some one with experience manage it.

Mutual funds are mutual funds, they aren't great, there can be some pretty high fees associated with them, but owning some as a regular part of your portfolio, in addition to stocks, bonds, and other investment tools, is a good idea.

I think the OP should start trading ForEx.

 

[cantthinkofone]

I would keep it in a CD and let it build up until your 18 or 19.

3 years at 4% is 12%. 12% interest on 9k is 10,080

Dam good return if you ask me. I've lost money in the stock market. Not much, just about $30. But still, i haven't made any progress. I'm just going to leave it alone and see where it goes.

My 401k on the other hand....I'm 22 and started it when the stock market was at it's lowest. All my investments are up Sure some are only 0.6 or 7% but hey, profit it profit.

 

[dbo789]

At his age he has more risk tolerance than almost anyone; if he sustains a large hit he has his whole life to make the money back. Unless, of course, we're talking about money you intend to use to pay college tuition, in which case you should definitely have some one with experience manage it.

I disagree. At his age, you're at the cusp of your life. In under ten years a person begins making some of the largest purchases of their life: a car, a wedding, a home, etc. Plus, younger people on average have less job security than older people, who have established their careers. Once you've become established, you're in a much better position. Any large losses can often be offset by your other assets.

Something else the OP might want to consider is starting a retirement savings plan. Here in Canada they're called RSPs or RRSPs, but in the US I think they're called 401ks? (Yes? No?) Either way, unless there is post secondary school on the horizon, the sooner you start saving for retirement, the less you have to save later. Compound interest is an amazing thing.

 

[InvalidUserID]

I'll start by asking a question I ask all my clients: What is your goal for this money and when will you need it? How my clients answer this greatly impacts my advice.

Know that investing doesn't mean guaranteed returns and that there is a chance you will lose some, most or all of your money. If you aren't OK with that idea, don't invest in the stock market and put it into a guaranteed CD.

If this is something that isn't life or death to you and you are OK with the risks, good. I will say that if you are going to invest in a company, you should know it in and out. You say you think Apple is going to take off...why?

EDIT: I had a much longer response, but I'll hold it until I can hear the OP's answer to my what/when question.

dbo789, could be a 401k or an IRA.

 

[theweber3]

I'll start by asking a question I ask all my clients: What is your goal for this money and when will you need it? How my clients answer this greatly impacts my advice.

Know that investing doesn't mean guaranteed returns and that there is a chance you will lose some, most or all of your money. If you aren't OK with that idea, don't invest in the stock market and put it into a guaranteed CD.

If this is something that isn't life or death to you and you are OK with the risks, good. I will say that if you are going to invest in a company, you should know it in and out. You say you think Apple is going to take off...why?

EDIT: I had a much longer response, but I'll hold it until I can hear the OP's answer to my what/when question.

dbo789, could be a 401k or an IRA.

My goal for the money is to pay for my college. I will be partnering with my dad in our family business after college, if thats any help. The problem with the CD is the rate is only like 1.5% now so im not sure if I want to do something in that. I have already a couple grand invested in Silver and gold. Im debating if I should sell that or what?

Also I think Apple will take off because if you look at their stock it has jumped 900% in 5 years. I dont see why it would slow down... right?

I don't know, I still don't see Apple as a bad investment. Their EPS has remained pretty good at $5.72 a share. P/E is at 28.46, which might be somewhat high, I haven't kept up on the industry average. The stock has traded anywhere from $78.20 to $180.45 during the last year and is at $162.79 currently. It certainly seems strong compared to some of the other tech sector stocks, but who knows. My guess is that over a year period Apple will probably see an increase in its stock price, if only to get back to what it was at pre-recession.

If you decide to invest in the market you need to buy more than just Apple stock. The key word in investing is diversification. Find some other companies you like in different areas and invest in them too. Hell, invest in some type of commodity or energy source if you can too. Putting all your eggs in one basket isn't the best way to invest, if you can select quite a few companies in many different areas you'll be able to minimize the impact of a catastrophe at the company level. If we have a market wide event, like the last recession, there isn't much you can do other than wait it out, but a diverse portfolio minimizes some of the risk at the single stock level.

You just have to remember that you might lose your money; its not a CD and nothing is guaranteed. You can't expect to win for sure in the short-term.



At his age he has more risk tolerance than almost anyone; if he sustains a large hit he has his whole life to make the money back. Unless, of course, we're talking about money you intend to use to pay college tuition, in which case you should definitely have some one with experience manage it.

Mutual funds are mutual funds, they aren't great, there can be some pretty high fees associated with them, but owning some as a regular part of your portfolio, in addition to stocks, bonds, and other investment tools, is a good idea.

I think the OP should start trading ForEx.

You make a good point with all my eggs in one basket, what exactly is a mutual fund? I have heard of them but haven't looked into them so much.

At your age, with that kind of money, I DO NOT suggest investing directly in the stock market. It is way too risky, and honestly, at your age you don't have the risk tolerance needed.

If you want to invest in something that can earn you more than a term deposit, go to your local bank and look at mutual funds. That way your investment is diversified, managed professionally, and you can select funds that are much lower risk than direct stock investing. If you really want, keep a couple hundred out to play around with in stocks, but expect and be ready if you loose the cash. (Note: Never put everything into one mutual fund, and never put everything into one form of investment. Always keep some in a savings account or term deposit, 'just in case'.)

Honestly, I don't think anyone should be direct stock investing in large amounts unless they have a very large net worth or are professionally trained to know what they're doing.

I work in the banking industry, and over the past year have seen so many people that made unwise choices and lost everything when the market tanked. It definitely made my own investing strategies more conservative, but the old adage holds true: better safe than sorry.

Im looking to make some risk but also want to keep some of it maybe in a CD, so I could see the stock market crashing again but then again... it just did so wouldnt this be the time to buy? Or did I miss that train already?

 

[theweber3]

I disagree. At his age, you're at the cusp of your life. In under ten years a person begins making some of the largest purchases of their life: a car, a wedding, a home, etc. Plus, younger people on average have less job security than older people, who have established their careers. Once you've become established, you're in a much better position. Any large losses can often be offset by your other assets.

Something else the OP might want to consider is starting a retirement savings plan. Here in Canada they're called RSPs or RRSPs, but in the US I think they're called 401ks? (Yes? No?) Either way, unless there is post secondary school on the horizon, the sooner you start saving for retirement, the less you have to save later. Compound interest is an amazing thing.

Isn't my medicare already doing some of that? I've been paying into that since I was 12. But is investing in something in Canada a good idea... is that possible? I was thinking since their economy might be a little more stable then the US.

 

[InvalidUserID]

I applaud you saving up $9K for your tuition. Most young adults these days look to the bank of Mom & Dad or are have to take out loans (Trust me, I know. I'm in my mid twenties and still paying college loans). $9K at your age is quite an accomplishment!

I can tell from your posts though that you don't quite have a firm grasp on the basics of investing. I suggest going to the library and picking up a basic investment/finance book to get you started.

You mention Apple's stock up over the past 5 years, which may be true but you have to understand that you can't predict future earnings/performance from past performance. There have been countless companies who posted great numbers one year and then completely fall off. You have to be able to look into more than just the stock price to justify investing in a stock there is just so much more to it.

I asked because I was secretly hoping your parents worked for Apple or you overheard someone and you maybe had some inside info.

So, based on your answer, I know some of the CDs and other guaranteed returns aren't as sexy as a 20-50% jump as stocks but when you are playing with tuition money, 2-3% is a lot better than a loss.

Good luck.

 

[ucfgrad93]

Since you are looking to use it to pay for college, I would look into an online bank, like ING or something similar. Yeah, you may not make as much, but it will help you from having to borrow money to pay for your education. Way too many kids are graduating from college burdened with huge debts.

 

[rhsgolfer33]

My goal for the money is to pay for my college. I will be partnering with my dad in our family business after college, if thats any help. The problem with the CD is the rate is only like 1.5% now so im not sure if I want to do something in that. I have already a couple grand invested in Silver and gold. Im debating if I should sell that or what?

I probably would talk to a financial advisor if you're looking to use the money for college. Not that you can't lose money through a broker, but the last thing you want to do is lose your college money because of inexperience or lack of knowledge about the market. The broker will be able to help you select some diverse funds targeted at education saving. To be honest, I'd probably just keep it in CD or look into some US treasury notes that are low risk and may have a slightly higher return than a CD.

As for selling the silver and gold, I'd say it depends on what you bought it at. If you've already made a significant profit why not make sure that profit is realized, sure you might be able to make more, but you never know. Find out, from a reliable source, what they think gold and silver are going to do in the next few months and then decide if the risk of holding it is worth it or if you're happy with the gains you've already made.

Also I think Apple will take off because if you look at their stock it has jumped 900% in 5 years. I dont see why it would slow down... right?

That's the train that has lead a lot of people to lose a lot of money in the market. You never know what is going to happen. One error on a financial statement causing a reissue of the financial statements for one year can cause a stock to decline in value enormously. Its easy to look at the past when it comes to stocks, but no one really knows what is going to happen in the future, all we can do is crunch some numbers and take a guess.

You make a good point with all my eggs in one basket, what exactly is a mutual fund? I have heard of them but haven't looked into them so much.

Wikipedia is a good place if you're looking for basic information. Here's is the wiki page, you don't have to read the whole thing, but the first paragraph is an informative definition.

Mutual Fund

Isn't my medicare already doing some of that? I've been paying into that since I was 12. But is investing in something in Canada a good idea... is that possible? I was thinking since their economy might be a little more stable then the US.

No, not really. Medicare is the medical insurance you get at age 65 and over. Not sure how you've been paying into since 12 unless you've been getting regular pay checks since that age, since it is funded by payroll taxes and another tax on the self-employed. Social Security is what you pay into and then can receive as monthly income after age 62 or so. That is also funded via a payroll tax and a separate tax on self-employed. You need significantly more than what you will get via Social Security if you want to have a nice retirement, its not intended to be your only retirement income.

You probably can't invest in a Canadian retirement account and if you can it would probably be quite costly and involved to do as a U.S. citizen. The equivalent over here would likely be a 401(k), which is offered through employers, or an IRA, which may be either employer provided or obtained on your own. There are different tax benefits and consequences to an IRA and a 401(k), in all likelihood you aren't eligible for a 401(k). You may or may not be eligible for an IRA, I'm not terribly up on penalties and benefits associated with each and the requirements for getting them.

If you're going to consider investing I think you'll want an account with fewer restrictions and intricacies than an IRA; if you opt for an IRA you will likely need to go through a broker.

 

[heehee]

Also I think Apple will take off because if you look at their stock it has jumped 900% in 5 years. I dont see why it would slow down... right?

It's very hard for ANY large corporation to double their share price, let alone 9 times in 5 years.

Simple example, in 2005, Apple have a market cap of $35B (this number might be off cause I have no idea how many share outstanding they had). Today, they have a market cap of $146B. Judging by your logic, in 5 years, they will have a market cap of $1.3 TRILLION in 2014. Do you know how many ipods you have to sell in order to have a market cap of over $1T?

It's very easy for a small company with a $2 share price to jump to $20 if they have a good product or in my field, found gold. It's very hard for a large company with a $100 share price to jump to $900/share. For example, it's easy for a small shop to open 10 other shops around the city if they have a good product, but in Walmart's case, they have 7,000 stores around the world now, guess how many stores they have to open if they want to 9 times their size?

It's just an example, it's more complicated than what I stated above.

 

[iShater]

Since this is your first "intro" into the market, I would jump in the stocks yet.

This is what you can do. First, take half the money and keep it in safe place like you are doing today. Although returns are crap in those, it is not worth it to lose everything now is it?

2nd, whatever money you are willing to try out, take a chunk look at index funds, those are funds that are following the S&P, DJIA or other indexes. Similar mutual funds would probably be a good idea as well because you don't have to bet on a specific company stock.

That being said, whatever is left look at some companies and do some research and invest in them. Don't do it really for the return, because there is no guarantee in that, but do it to learn about the stock market and how invest in it.

I hear similar advice on Market Place from PRI if you ever listen to that show.

 

[theweber3]

I applaud you saving up $9K for your tuition. Most young adults these days look to the bank of Mom & Dad or are have to take out loans (Trust me, I know. I'm in my mid twenties and still paying college loans). $9K at your age is quite an accomplishment!

Well, if my dad just gives me 50% of a company the least I could do is pay for my college. Thats just the way I see it. I pay for all of my things now, clothes, gas, lunch ect. Not that my parents couldn't easily give it to me but it teaches me to budget and manage

No, not really. Medicare is the medical insurance you get at age 65 and over. Not sure how you've been paying into since 12 unless you've been getting regular pay checks since that age, since it is funded by payroll taxes and another tax on the self-employed. Social Security is what you pay into and then can receive as monthly income after age 62 or so. That is also funded via a payroll tax and a separate tax on self-employed. You need significantly more than what you will get via Social Security if you want to have a nice retirement, its not intended to be your only retirement income.

Well I get a regular paycheck when I work from spring till fall basicly, the company takes the cut for me and sends it to the government. So yea, im paying social security too. Ill get that back for retirement, well if its not bankrupt.

 

[moral-hazard]

I'm 20 and have been saving for a while, mostly with bank accounts and ING direct (for the past 8 yrs or so they have had the best interest rates of anywhere). Got into investing last year - at a very bad time. I've found CD's to be the most hassle-free investment, they have a nice "set it and forget it" type effect. Though I have been doing well with my recent stock investments. I do wish I had bought apple at $80 back in march, but it was a scary time and couldn't bring myself to do it.

I currently have about alot of CD's at 3.5-4% that are about to mature, and ING isn't offering great rates. I just opened an account with ally bank and dumped $4k in there, will continue to do so as CD's mature. They offer 1.75 on savings, 2.0 on CD's. Fact is - until unemployment goes down (causing inflation), interest rates are gonna be low.

 

[mysterytramp]

The key point here is that he wants to use the money in two years. Best to keep it in a CD. If he were thinking 10 years or more, there are plenty of stocks worth gambling on. (I'm tempted to go heavy with GM or Ford. They've got nowhere to go but up.)

I wouldn't be keen on Apple for a short term investment. About six months ago, they were at $85, a great price. Now they're about double that. While they could have some growth, I doubt it'll be much better than the 4.25 percent CD.

mt