Where should I invest my $1350 monthly cashflow?

Question

I am 24 years old and after taxes and cost of living expenses I have $1350 coming in every month. Before I just blew it all away on junk (electronics, trips, women, drinking) but now I think I should invest it but how do I get the best return on investment (ROI) for my money? Should I look for the best long term or short term ROI?

I should mention that I'm living in Seoul, South Korea for the next 2 years so I don't have much access to financial advisors... At least I don't think so.

Answer 1

It can be difficult just starting to invest. There is so much that you do not know but need to know. And for some there really is not the aptitude or the desire. For those, mutual funds and index funds are the best bets. They allow investment into a diversified porfolio and do not require constant monitoring and worrying whether they had picked the next World Com or Enron or Global Crossing.

For starters go to your local book store or library and obtain a copy of "Investing for Dummies". It is a decent book that will provide you with much of the background information that you need before you start investing.

With $1350 a month you have plenty of dinero so that you could stilll blow 1/2 of it and still have plenty left to invest.

The very first thing you should do in open a Roth IRA account. You can deposit $4000 into the account annually. Once the money is in the account, it earns tax free for ever. No taxes will ever have to be paid on any money in that account. It is a retirement account. The $4000 I believe is indexed to inflation and will increase each year. I do not know what it will be for 2007. The account is a retirement account and the money can not be withdrawn without penalty until 59 1/2 with some exceptions. But starting now and earning 10% annually, by the time you are 64, the account should have $1,770,370. All tax free.

The other thing you should do is make sure that you have emergency funds on hand for the unexpected. In your case about $10,000 if you do not already. This is not rainy day money. This is hurracane devastation money not to be touched unless there is an absolute emergency. You can start out depositing it into a bank account and later after you have accumlated about $5000 switch it to t-bills. They pay better interest that is free from state and local taxes.

Do not even think about short term ROI. The taxes will kill you and your returns. Think long term. Have a portfolio of maybe 5 different index and mutual funds to start out. Of course you will not be buying 5 all at one time. Start with one. After you have accumulated about $5000 in it. Pick another and begin investing in it. You want funds that have different investment strategies and good track records if they are mutual funds. If they are index funds, you also want to consider the track record, but diversity is the key with them. After you have built a core portfolio of funds, they are a foundation upon which you can think about broadening your investment horizon if you choose to by beginning to invest in individual stocks. At that point you have an overall diverse portfolio and if you put $3000 into a stock and it heads south on you it will not ruin your whole day, just part of it.

There are many mutual funds and even index funds that have historic returns of much better than 10%, but 10% is a good long term number to shoot for.

There is one major drawback to mutual funds. They have to pay realized capital gains each year upon which you will then have to pay taxes, unless of course they are contained within a Roth IRA account.

Index funds have much lower realized capital gains because they have more of a buy and hold philosophy.

Answer 2

You need to diversify. with that type of extra cashflow to invest i would make sure to speak with an actual professional and make a truly informed decision. I used to work for a mutual fund company and in my time there I watched many people blow all of their money on "blue chip" stocks. which is another word for high risk funds that are new to the market. Like stated above speak with a couple different professionals like Charles Schwabb or Merrill Lynch. At your age you would still be safe to make some risky bets but I would also advise making some safe bets in case those risky bets fall through. It is very wise for you to be thinking about your retirement now instead of continually blowing it just make sure to get some "real" help on your decision so you don't continue to blow it.

Answer 3

Go to Vanguard .com They have some of the best funds no load and low expenses. They are very well respected,. I like the Equity Income Fund. It does well and is in the middle of the road it pays a dividend every 3 months an cap gains in December.

Answer 4

Go and see a stock broker..... Tell your broker that you want to get a diversified portfolio...... Your stock broker can serve as your portfolio manager...... He may offer stocks and can suggest when to take risks and when not......

You may also want to open an IRA..... Roths are pretty wise....

Then, there is always the opportunity to invest in CDs and mutual funds..... these can be added to your portfolio.....

I would do both.... you'll have a retirement account and a portfolio..... Your portfolio can be used for future events such as buying a house... a really nice car... unexpected hospital expenses...... etc.... but your reitrement account you wont want to touch.....


Your sister,
Ginger

Answer 5

Go to yahoo finance and scroll down to the investing education section on the left side. They cover stocks, bonds, mutual funds etc . . . at your age you should be more in equities but not until you have done your homework. Park it in something like the Citi 5% savings while you do your studying, then go with a broker like Schwab. They do not get paid on commission and can't churn sales in your portfolio to make themselves $$. You make all your own buy and sell decisions.
Congratulations, you should do well.
ps: also lots of columnists to get ideas from & it's free !

http://finance.yahoo.com/education

Answer 6

u cannot make such an amount everymonth by any means except if u r risking money by investing in stock market of any such kind of risky places. mutual funds if u put in 30 lakhs in one year according to my observation u will be lucky if u can get back what u have invested. but if u r a long term investor ur average returns would be around 8-15% per annum. considering lower returns u will end up with approx 20k permonth from second year of investments.

Answer 7

Hi,

Why don’t you start your own forex or shares trading? I could introduce you to one brokerage company in Austria that allows to trade from same account currency (forex), commodities, metals and cfd on shares. Total 500 instruments available; spread from 1 pip. If you open trading account under my referral I provide you for free with trading techniques that I successfully use for several years and you’ll get my assistance in the future.

Currency (forex) trading is very attractive due to very high income and you could trade from any place in the world and at any time from Sunday night to Friday night.
Yes, it is risky business but reward worth it.

Another way you could find trader who accepts private investments and invest with him/her.

If you are interesting and/or have any question please do not hesitate and pm or e-mail me (press on my name) and I provide you with further information.

Good luck!