How should I invest my money as an undeducated 25 year old?

Question

So before you give me an answer I'll give you a little bit of background. I'm a 25 year old who has been investing through a broker for the past 4 years. I want to take more control and hopefully get better returns.

My annual salary is $90,000. I have approximately $12,000 in my previous employer's 401k program and $27,000 in a fidelity money market account and distributed among various mutual funds. Recently I just relocated and sold my home leaving me with about $20,000 to invest. I have quite managable debt, a student loan, a car payment and some old hospitable bills all with low interest.

I have started doing some research but it seems quite complicated. If someone could provide some guidance or even a good place to start I would be grateful. Thanks in advance!

Just some more details. When I relocated I did not buy a house. I'm in the Phoenix area where housing prices are continuing to decline. I don't feel that real estate would be a good investment at this point in time as all indicators point to decreasing values.

Answer 1

with that much of an annual salary i would try to save a little more for retirement in an aggressive mutual fund or something. cause you make more than most people and even more than most famalies so i would try to retire early man.

if you like to gamble open a scottrade account, read investing for dummies or take a college class in stock trading and invest a little at a time until you learn all the ropes and then youll have complete control.

Answer 2

Just a couple of comments. If you are investing through a regular broker, you're paying pretty high fees. Think about a place like Scottrade.com
Second, money market accounts generally don't pay very well. At your age, you can afford to be a bit more aggressive than money markets accounts. Haven't looked for a bit but there were some very attractive stocks available at reasonable prices.
If you are making more on your investments than you are paying in interest on your loans, keep doing what you are doing. I'd question whether it is economical to not pay off the car loan. Can't quite feature that hospital bills would be at a low interest rate either but I've been surprised a lot of times.
You say you've started doing some research but don't indicate the field. Take a look at Vanguard (www.vanguard.com). It is a very low cost, investor-friendly company with a wide variety of funds.

Answer 3

First thing I would do is open an online account with Fidelity or other good brokerage house. Mail them the $5K for deposit into your account. You will earn money market rates while it is in there. I would then buy a 1 year CD where you should be able to get a 5% rate. That will give you a whole year to learn more about what to do with your money and in that year, you will discover that things change so hasty decisions are usually not good ones. Some will recommend a Roth IRA, but I believe you want to get into common stocks as a buy and hold strategy. You have a long life ahead of you. Starting now to learn the ways of investing and saving will make you wealthy. A 5% firm return in hand is always better than a possible 10% return that goes south. Reach carefully to start with.

Answer 4

You are on the right track, take your 20K equity money and purchase another property, mortgages are low interest against how much you can borrow and the property values pretty much always increase over time.Keep building your equity base.

Continue to invest the 5-10% of your income through your broker and diversify like you have done through the mutual funds.
At your age of 25, you have a huge advantage because your money will outpace your earnings as long as you invest....even if it is 10% of your income. By the time you are 35 or sooner you could be earning more than 90K in investments income alone.

Most of all....... Pay your Taxes and watch out for marriage and divorce. Avoidence of those 2 alone will bring your entire estate down.

Answer 5

You need first to become better educated in investing. Start hitting the books. "Security Analysis" by Grahm, Dodd, and Cottle is a classic as is "Technical Analysis of the Financial Markets: A Comprehensive Guide to Trading Methods and Applications (New York Institute of Finance S.)" A decent beginning book is "Investing for Dummies"

Answer 6

Take this best advice from a former stockbroker: Your community college will most likely offer a course on investing from a licensed stockbroker. The stockbroker is not allowed to solicit your business... but if you like him or her, you can certainly give them a call. Your mission is to learn as much as you can from the course... it's better than just trying to do it on your own because the course will be organized and focused. For you, pay particular attention to mutual funds and retirement plans.

Answer 7

I’m 37 and have two older brother I work with, we all invest. In watching what they have done, my father has done, father in laws, friends etc. I would suggest that you avoid assistance in investing like the plague. Pick up a copy of Money magazine, Fortune, Forbes or the like. After reading such magazines for several years they all seem to lean towards www.vanguard.com go to the site and run through their educational resources. If I had to choose for you I’d plunk most of it in their Windsor 2 fund.

Hope this helps.

Answer 8

Investing is like a cruise ship......you want to be the first one on, and when its full, you want to be the first one off....

think about what themes of investing that will be profitable in the future, and invest in them now...for example, the baby-boomers will get old and will die....buy a coffin manufacturer's stock(I won't tell you which as I'm in Indiana) and sell it when the news of the high number of deaths hit the news and the profits (and hopefully stock price)are high....think ahead people, whatever you invest in....later.

btw, good call on renting...give it a couple years and they'll really be cheap.

Answer 9

you sound like you have a good idea of what you are doing at such a young age. I work for a mutual fund company and you are doing the right thing by dollar cost averaging..look into real estate maybe foreclosures , rental property can be very profitable. I have to say you are one smart young man

Answer 10

Just a suggestion, I would payoff my debts first, even if they are low interest. You did not mention if you bought a second home when you relocated? If you did, was it paid out right or did you take out a mortgage? If you have a mortgage, don't you think the wise thing to do, would be to pay down the mortgage as often as your mortgagor will allow ,without a penalty.