I am 19 yo. and have $10,000. What is the best mutual fund for me to invest in to get the best return?

Question

I am 19 years old and a college student. I won't need this money any time soon and am just looking to get in early with my money to start building up my portfolio and start building up my financials. Seeing as though I won't need this money anytime soon, I am looking towards stock mutual funds seeing as I can withstand flucuations in the market as long as it gets me a great return in the long run. I hear index funds such as Vanguard 500 index are a very good option to start out with. Just want to get some opinions as to what I should do with my money to allow it to grow and work for me. Don' really want to stick it in a 401K or any retirement accounts as I may need money from it to buy a home in 5-10 years and don't feel like taking that 10% hit to do that. So whats my best option growth wise and tax wise? Thanks for your help!!

Answer 1

I like your line of thinking ... I'd go with a stock mutual fund, since you have 5-10 years to go. I like the Vanguard Total Stock Market fund myself. (I have the bulk of my long-term money in that and the Primecap fund, but Primecap is closed to new investors.)

An index fund is better tax-wise, since they don't turn-n-churn their holdings as much as a non-index fund does, so you have less distributions that you'd have to pay taxes on.

Good luck! You are a smart 19 yr old! Most would just spend their $10,000 on frivolous stuff!

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Answer 2

You can put money in an IRA and take it out for a first time home purchase without paying the 10% penalty (taxes are another issue), but you can only put $4,000 there. Check out Publication 590 at www.irs.gov for more.

If I were you, I would put the money somewhere relatively safe and liquid. Although you have the best of intentions, it is the extremely rare 19 year old who does not eventually wind up blowing their money, I've seen it way too many times. Don't add insult to injury and invest in a security, and then sell it possibly in a down market (and maybe paying a charge), at a lost, or with tax due. Then the following year when you have to pay capital gains tax, you wind up owing the IRS because you don't have the money anymore. Invest in a 5 year cd, you won't get a great return, but it will be kind-of locked up (which might prevent you from breaking into it) and safe.

If you're going to prove me wrong and be that rare individual, then choose a conservative mutual fund, maybe a balanced fund or an equity income fund. For such a short-term investment horizon, you want to play it fairly conservatively. Best of luck.

Answer 3

I am not a fond believer in index funds. I know that many people are because of their low expenses and the fact that 70% of mutual funds underperform the stock market in general. But if you compare the annual return of that index fund with the return of good mutual funds, you will find that the good mutual funds way outperform the 500 index funds. 5 year return is only 6.85%. Sure is nothing to write home to mom about. Forbes Fund screen program shows 1418 out of 11,000 funds that have returned better than 15% annually over the last 5 years. That is over twice as good as the S&P 500.

However, if all you have to invest is $10,000 putting it into just one fund is likely to not be the wisest choice. I would place it into at least 3 different funds, just to increase the odds of getting a decent long term return.

Here are some suggestions:

Bruce Fund 5 year annual return 28.5%. I am a little dubious that this fund can continue performing so well in the future, but I have to admit it does have an excellent record.

IIF This is a closed end fund that invests in India. Five year annual return 48.6%. Ten year annual return 22.8%. You buy this one like you would buy a stock, on the stock exchange.

Here is another you buy like a stock TDF invests in China. Five year annual return 31.2%. Ten year annual return 13%.

Answer 4

ok first off do NOT put it in a 401 leave your 401 for workplace because the employer may make a yearly contrubition to it. Since you may need it in 5-10 years that is not an option for you.

taxes are assesed on dividends and whatever your profit is after selling whatever.

What you want to look for are fees since you can take some risk. ETFS generally have lower fees than mutuals BUT because ETF's are treated like stock you have to pay a broker fee every time to buy/sell it.

Vanguard tax managed growth VTGIX may be right up your alley well diversified (which is a plus for me) VERY LOW expense ratio of .14% decent yield affordable price. If I had 10k yea I would put it here. Take a look at it courtesy of Morningstar.

Fees are very important someone further down recommended two stock funds both of those have an expense ratio of over 1.25% each. EEM (Emerging markets etf) checks in at far lower than that.

Answer 5

Here is one thing to keep in mind about the Roth IRA account. There is never any tax on it where as there is on your 401k. This becomes important when considering your asset mix. Income producing investments are taxed at the full tax rate as will be your 401k. Hence it makes sense to invest at least some of your 401k in income producing assets--bonds, LPs, REITs. The income from each of those is taxed at the full tax rate anyway. Now since the Roth IRA is never taxed, it also makes sense to put those types of assets into the Roth IRA also. And also equity investments. What you neglected to mention are investments outside of these two vehicles. If you have some, they should be investments that would be taxed at the capital gains rate--equity investments. Actually, unless you are in the highest tax bracket it makes sense to have a portion of your equity investments outside of a 401k. By doing so your total tax bill will be decreased, especially if you are a long term investor. If you have the least hankering to invest some of your money in gold and silver those absolutely should be within a Roth IRA. Both are taxed as collectibles otherwise. Another thing to consider in regard to the 401k is that in future years the tax rate might actually be higher, perhaps much higher, than it currently is. Since you really have no choice of placing non-mutual fund investments within a 401k except for perhaps company stock, it certainly does make sense to invest Roth IRA money in company stocks rather than mutual funds. But be careful. It is very tempting for many to speculate with their Roth IRA account especially short term trading which otherwise would be taxed at the full tax rate. That would be a good way to reduce that value of the Roth account. Be just a little cautious. Invest in the likes of MCD, WMT, JNJ, BDX, KO, etc. Or maybe ETP with its 8% dividend or PAA with its 7.5% dividend. And do not invest it in fewer than 5 different companies.

Answer 6

Open a Roth IRA. If you wait til the new year, you can get $8000 in. Contributions can be taken out tax and penalty free, so you can use the 8K for a house, plus you have earnings growing tax free for retirement. Try PAEAX at Putnam. Gives you exposure to the best markets at the best times. Take the other $2000 and buy stock.

Answer 7

I'm not a true beliver in mutual fund as well. Mutual funds are for people who don't have the skills or knowledge (maybe a beginner), or people who don't have the time to invest (that's why they rely on the mutual fund managers (which frankly to me some of them are not qualified to become one)!!
Regardless, I still have to give u credit for a 19 years old.
Ask your bank and make sure you invest in what you NEED. Don't ever invest in a particular mutual fund just because your bank happens to sell it!!! If they don't have what u're looking for (your needs) then seek another bank. MY suggestion is to go with the big guys since they have tons of investment vehicles.
If you don't know what are your needs and wants...then take some time to discover them first.

Answer 8

Here’s a simple, three-fund portfolio consisting of low-cost ETF’s that is likely to outperform anything your stock broker throws at you over the next 10 years.

Vanguard's Total Stock Market ETF – VTI – total market
iShares International MSCI EAFE value fund – EFV – value fund
iShares Lehman Aggregate Bond Fund – AGG – aggregate bond fund

Here are some of the mutual fund sites.

http://www.metlife.com/applications/corp...

http://www.metropolitan.co.za/home/defau...

Top 65 Mutual Funds – Money Magazine
http://money.cnn.com/magazines/moneymag/...

CNN Money 100 best funds
http://money.cnn.com/2000/05/15/mutualfu...

Vanguard Mutual Funds and Resources
http://mutualfunds.about.com/cs/fundfami...

SmartMoney Fund Map 1000
http://www.smartmoney.com/funds/...

E*Trade Mutual Fund SuperStore
https://us.etrade.com/e/t/invest/mutualf...

20 Investments you should know
http://www.investopedia.com/university/20_investments/

Retirement Plans
http://www.diligence-due.com
http://www.401k-retirement.org
http://www.retirement-401k.com

Credit Counselor – Agencies by State
http://www.managedebttoday.com/states.htm

Advisor Finder
https://secure.investopedia.com/leads/pal_fin_advisor.aspx

Answer 9

The bank, I used PNC, usually have an investment banker that will help you choose what to do with your money for FREE. They will manage your money in your investment package you choose for FREE. You can access your money without penalty when you want it. It seems best to let it ride in the portfolio, until you really need to use it. I lost about $3000. this summer but made it back plus a little since (like ) September. You must remember to let it ride and not get scared and you could have enough in 5 or 10 years to have the interest or your growth pay your college loans monthly. Good luck, remember the bank will do it FREE

Answer 10

If I were you I would go talk to a financial advisor. I just rolled my 401K over into two mutual funds one is Legg Mason and the other is Van Kampen. I have been watching them and they both seem to be doing pretty good. I didn't want to go to aggressively but you are young you may want to go that route.

Very wise decision to invest rather than spend it.