Investing?!?! Rookie.?

Question

OK, so im 21 and I've been saving every dime ive made since i was 16. ive recently made some large purchases, but have a lot of money left over to invest. Im tired of it just sitting in my savings account, not making anything. I dont want to loose money, so i know stocks are probably not the best idea for me, but i also want to make more than what a CD would make me. I would only invest about 4,000$ and i would make it so by next june i would be able to have axess to it, or if i dont need it to, leave it in and not touch it. what should i do? who is the best to invest with...all that stuff

What does liquid mean? And how much of a risk are mutual funds....literally i know nothing!

Answer 1

Believe it or not, if you want zero risk, there are lots of savings accounts and money markt accounts boasting 4-6% savings rates. Money markets are competely safe investments and pay in that range also. I have a Vanguard NJ and US tax exempt account. It only pays close to 4%, but it is tax free. On 10,000, I made close to $400 on a zero risk investment.

Mutual funds are riskier but not by much. They are conservative ones, moderate, and aggresive ones. Most mutual funds give the best returns long term, but if you needed the money you can.

Stocks are best if you plan for the long haul, and research! Otherwise, its gambling.

I personally feel....set it up in a money market as an emergency account. Everyone of every age should have a few months of expenses set aside just in case of a major problem and you have no job, etc. Its important to have.

Answer 2

Good for you! You're really smart. Most people twice your age dont have that much in reserve. First lets start with "liquid". the more liquid an asset is the easier it is to spend. Cash being the most liquid, next savings account, checking account, CD's short to long term, then investments. You should keep some in a checking/ saving account so that you can get to it quickly in case of emergency. Next if you like the idea of investing in the stock market but dont know which stock to buy or don't want to put " all your eggs in one basket" then consider a mutual fund. A mutual fund lets many people put their money together in order to buy many different stocks. Most funds have dozens of individual stocks in a kind of package.Individual Stocks can be risky ( that is you can lose all your money) but the stock market as a whole has gone up as a general rule throughout history. Sooo, you must think of this as a long term investment. At least 5 years, Ive had mine for 25. You do not want to get caught in a pinch and try to get you money out when the market takes one of its inevitable dips. The other benefit of a mutal fund is that they all have professional managers. Their only job is to watch and pick all the best stocks. Also, you do not have to invest a large amount all at once. Most people who do really well start young and add a little every month or paycheck. Ours was taken out automatically so we didn't even miss it. An investment advisor can help you choose the right one for you. Keep in mind that the more aggressive a fund is the more risky it is. You might gain big or loose big. The general rule is that you go more conservative the closer you are to retirement. Thats because you have less time to recover from a dip in the market than if you are younger. I am leary telling you a specific fund, but we've had good luck with T. Rowe Price. Shop around and compare. Also check what fees they will charge you.

Answer 3

If you need the money within 1 year the stock market is not the place to be - sometimes the market dips severely in the short run. So the best return probably is a 1 year CD. "Liquid" means how easy you can get your money out. For example a savings account is very liquid since you can go tomorrow and take the money out - whereas an investment in a house is not liquid because to get your money out of the house would require you to sell it. CDs are not liquid to the point you could go tomorrow and take the money out, (but pay a penalty if you take it out early)

There are different time lengths of CDs, after which you don't pay a penalty to take it out.... so a 6 month CD lasts 6 months after which you can take the money and do whatever you want with it, same with 1 year or 3 month CDs.

If you could keep the money for 3-4-5 years than you'd probably want to go with a mutual fund in the stock market, but again, your $4000 could be $3500 in 1 year since the market dips and rises a lot in the short term, so in 1 year who knows where it will be exactly.

Answer 4

If you don't want to lose money, put your money in a bank, money market account, or CD. You'll make at most ~5%. After inflation and taxes, you'll barely break even.

However, you should consider putting a $1,000 into a no-load low expense mutual fund IRA that invests in a diversified group of stocks. Some years the mutual fund will make money, other years it will lose money. But stocks (with dividends reinvested) average a 10% rate of return. That means they double about every 7 years. If you wait 42 years, they should double in value 6 times. That makes $64,000 when you are 63. Now stocks are unpredictable, so you may have $32,000 (5 doublings) or you may have $128,000 (7 doublings). What ever happens, you will surely have a lot more than you have now. The only question is: Can you stand the down years, when you lose 20-30%?

Answer 5

If you are going to need that money by June, investing in mutual funds is a gamble. You could definitely lose money in such a short time frame. If it's only for a few months, just shop for an internet savings account or CD that's paying more than what you're getting now. Some savings accounts, like EmigrantDirect, are paying about 5.05% right now, and CDs slightly more.

If we're talking about the long-term, by all means, go with a mutual fund or ETF. Contrary to what one poster said, you don't need to pay a dime to purchase a mutual fund. Just look for no-load funds from a discount broker's no-transaction-fee list, or you can buy a fund directly from the fund family itself (Vanguard, for example). Learn as much as you can and avoid advisors and full-service brokerages, or you'll end up paying fees, loads & commissions up the ying-yang (technical term).

Good luck!

Answer 6

If you want it to stay liquid, your best bet is a CD, Money Market Account or a straight savings account. ing is currently paying 4.5% for savings accounts, which is pretty good.

The problem with trying to invest in Stocks or Mutual Funds, if you're not willing to leave it invested for at least a year, you wind up with short term capital gains taxes which can cut into your earnings. Plus, you have commissions to pay to whatever broker you use to purchase it from and another commission when you sell it. For me personally, I think Stocks and Mutual Funds are better left for long term investing.

Answer 7

If you want to learn about investing in the stock market, a good place to start is http://www.top10traders.com - this is a free site that lets you create a portfolio of stocks with $100,000 in "play" money. Each day the site ranks the best performing portfolios, so you can see how your picks perform compared to other investors. You can read posts on investing from the best traders, as well as share your own investing ideas. There is a charting feature, so you can see how your portfolio performs compared to the S&P 500. Also, you can create your own "group" so that you can see how you are doing compared to your friends.

Here are this month's best traders:

http://www.top10traders.com/Top10Standings.aspx

Hope this helps.

Answer 8

this is risk vs rewards. CD is practically no risk, and is liquid. If you want better returns, you can maybe go with mutual funds, they generally give good returns. if you would like it to stay liquid and safe maybe go with ING orange savings account.

Answer 9

you can open an online savings account, search around for the best rate, they give you more interest than a cd, and you can transfer the funds to your regular checking account or savings account any time

Answer 10

read tips on investing , stocks and mutual funds to help you more on this site