How to invest now to setup decent future?

Question

Im pretty young 23. And I want to start investing now so that when im older i'll have some decent size investments to help supplement my income. Right now im just a amateur buying stocks for dividends :( . I'm sure thats not the way to go but at least im picking companies that I feel are going to last. So any tips could help me alot! I have 0 clue about mutual funds and bonds so I could really use the help.

Answer 1

This is a great time to get started! There is a lot of good free education out there. I recommend you take the free online courses at Morningstar.com, and look for others.

As for your investments, I would start out with a good, well-managed mutual fund that concentrates on mid-sized companies. A good example is ING FMR Diversified Mid Cap S (IFDSX). This is one of many inexpensive funds that let you start with a small investment, and Morningstar gives it their highest, 5-star, rating.. You have a long time for your money to grow, so I'd recommend concentrating on mid-sized companies that have room to grow. A mutual fund will provide instant diversification for a small portfolio.

I'd later add a similar fund that concentrates on large companies. That provides another aspect of diversification, which reduces your risk.

I'd also set up a plan that automatically adds money to your investments every payday. You can have the fund automatically draw from your checking account, or you may be able to arrange to have part of your paycheck sent to the account automatically. If you make it automatic, you won't forget, and that makes a HUGE difference over time.

As you learn more about investing, you might want to buy individual stocks yourself, but I would start out by letting an expert with a good track record do it for me. And, as someone else said, maximize your contribution to a ROTH IRA, and to a 401(K), if that is available to you.

Another great trick that works wonders is to devote half of all raises to your investment program.

Good luck.

Answer 2

I'm the same age you are. I suggest using a discount broker (I use ShareBuilder) to invest automatically every month. I suggest investing in a few different ETFs (Electronically Traded Funds). They have all the benefits of a mutual fund but with little to no overhead costs. You are young so you might want to try something risky such as EEM that follows international emerging markets along with some more stable funds such as QQQQ and SPY which follow the major indicies.

For example, you can set up automatic investments such as:
Month 1: $200 in EEM
Month 2: $200 in QQQQ
Month 3: $200 in SPY
AND repeat.
It only costs $4 per investment using ShareBuilder, thats why I like it.

By entering the numbers in my calculator, if you average 8% return, you will have $550,000 at age 60. Thats a good start to retirement (since our Social Security will be less than the current generations). You can always adjust the values if you can afford to save more or less to stock away for retirement.

If I refer you to ShareBuilder, you will get a $25 credit (6 free investments!) after your first investment. So email me if you are interested.

Answer 3

Diversify! You're doing good by even considering this stuff at your age. Get a ROTH IRA, and a mutual fund.....Keep putting as much as you can into these, plus your income stocks. Don't touch that stuff! Try to save enough and buy a home - that's the best thing you can do.

Don't go spending tons of money on crap/drinks/etc. Life is LONG, and you will have more fun if you have money!

Answer 4

I agree, Mutual Funds have a 12% interest rate which means your money will double every 6 years! I am 22 and I am saving as much money as possible because in the early years it is expected for you to not have money because you have a lot of responsibility, thats what life insurance is for, but in the later years, you better have money and NO DEBT and the only way to do that is to save like crazy while you are young!!