If you had $20,000 to invest with?

Question

I am pretty much new to this all. I am 19, planning on joining the air force. I have no credit card yet. No bills no nothing all I do is work and pocket the money. I heard estate and mutuals are the way to go... not even sure which or what. CD are very low return...money market is like a savings account and low returns....I dunno what to do! help anyone? I kinda want to play cautious but aggresive enough to go somewhere with my money.

Answer 1

You should invest in stocks, bonds, and money market funds. You want to buy a diversified portfolio of stocks, as individual stocks are too risky. For most folks this means buying mutual funds. I like Vanguard.com, other people like Fidelity, TIAA-CREF, and DFA. Buy no-load, low cost funds. If you are like most people you will invest part of your money conservatively, in money market funds and bond funds, and part aggressively in stock funds. Vanguard.com has an on-line questionnaire which will give you an idea how aggressive you want to be.

I like index funds. Because of their broad diversification, you are less likely to have a dramatic drop in value. They also have the lowest expenses. For stock funds, I would suggest putting ~70-80% of your money in the Vanguard Total Stock Market Index Fund. and ~20-30% in a foreign stock index fund. However, there are many different opinions out there on what the best mutual funds are. Read the links below and form your own opinion

The Air Force allows you to invest part of your paycheck in their TSP investment program; try to invest as much as you can. I like their life-cycle funds, but you can consider their other funds as well. They have mostly index funds. Investing in a mutual fund IRA is also a good idea.

As far as real estate, buying rental property can also be a good investment. However, being a landlord can be hard work, and many people are not good at it. If you don't know how to handle deadbeat renters, you can have trouble. You have to be available to handle problems, and it would be difficult to do this while serving in the Air Force. Buying real estate that you don't rent out doesn't tend to make much.

Believing advice you get on Yahoo answers can be risky, so read these websites for further information. If you find it too confusing, contact a professional financial advisor. They will charge you significant commissions, however.

Answer 2

I can't honestly recommend any mutual funds anymore because of the crash of 2001. Just an fyi, I have $12,000 in my roth that has made a whopping $400 in 3 years. Big friggin' deal, it's a huge myth that those make money.

I invest in the real estate market when I see a sleeper property, but you need someone who's really knowledgable in the area you live in to help you with that one. Buying a house instead of paying rent is always the way to go, but if you're living in base housing with no overhead, why do that?

CD's are at least guaranteed not to lose their value, another route would be buying a rental property and playing landlord IF the figures are in your favor! It's ultimately what you feel comfortable with, if it doesn't feel right? Don't do it. And low risk is always better than high risk unless it's someone else's money.. LOL

Answer 3

If you were an Old Geezer, I'd tell you to invest in whatever the widows and orphans are investing in.

But since since you're 19 and obviously have your head on straight, I urge you to invest in high quality stocks and No-Load mutual funds.But do it gradually. Don't plow the whole $20,000 into the market in one day or one month. Investing in high quality stocks is "Cautious but aggresive enough to go somewhere with the money". And you won't lose any sleep over these.

Whatever you do, avoid penny stocks. You'd stand a good chance of losing your butt.

Also: Diversify. Invest in several industries in the years ahead. That way, if one or two industries suffer a set-back, like the housing industry) other industries will increase in value. so you won't lose very much, if anything. Finally think twice before you sell a stock. Warren Buffett said he would have been better off if he had held on to all his stocks.

I wish you the best. Good luck.

Answer 4

First thing to do is figure out your goals for this money. Retirement in 45 years? Mutual funds may be ok then. Or will you meet that "Miss right airwomen" and want to get married, buy an off base house, etc. in 2 or 3 years? Then a good CD (returns are not so low anymore) may be better. Next thing to do is learn. Check www.bankrate.com for the highest rates in the nation. For mutual funds, read "Investing for Dummies" or "Mutual Funds for Dummies" by Eric Tyson.

Answer 5

All the options you have mentionned earlier are great investments.

I went down the mutual funds road and it pays off well by having security/risk.

Since you have 20 000$ to invest, ask yourself this question. "Do you need this money now?

Do you need this money in 1 year, 5 years 10 years? Think ahead, this is important because nothing is worse than banking money in funds only to take it out in 6 months of so. Not very worth it. Long term, Mutual funds are great to build wealth. This is a great start for beginner.

Heres a tip for you, in order to gain as much money with the minumum of losses, than spread the wealth around. In other words "Don't put all your eggs in one basket"

Diversify and research whats best. Also check with the bank regarding investments and such.



goodluck bud and have fun


cheers

Answer 6

Buy stock in Insurance companies. That's how Warren Buffett made his fortune. Two really good choices are Prudential (PRU), my shares have tripled since I started buying and I still buying them. And another good performer is Cigna, but it's on the upswing right now so be aware of downside risk.

Insurance companies are low risk because of the nature of their businesses due to reinsurance and the necessary float they maintain. They are also a good investment because you have a strong chance at Capital Gains.

If you would feel safer in Mutual Funds, buy FSPCX Fidelity Select Insurance. However, it's making all it's money right now on the performance of Prudential and just diluting the return by holding several other companies.

I am a veteran investor seasoned and cautioned by the huge losses of 2000, 2001, 2002

Answer 7

Like you said, some things are low returns. Since you aren't too sure on what you're doing, I would advise you to get a broker and talk about where you can invest your money. This will give you the best results and it's playing it very safe. After talking with the broker, you will definitely have a better understanding and what to do.

Good luck and have a great day.

Answer 8

If you're long-term (and I assume you are by your age), stick to the basics. An index mutual fund will probably outperform any managed mutual fund out there over the long haul. Also, the risk profile and expenses will probably be the most favorable for your investment return.

Look it up-- most specialty mutual funds have a difficult time beating their benchmarks consistently over period of say greater than five years. All the while, their expenses are usually higher as well.

Also, I'd reccommend that you try to steer clear of brokers---brokers are salesmen first, not really advisors. They will inevitably sell you something that enriches them first, then maybe it does alright for you. Try to learn what you can about low-cost efficient investing on your own and 9 times out of 10 when you talk to some broker, you'll figure out he's full of BS.

Check out passive investing on Wikipedia and you end up knowing more that Joe-Stockbroker who thinks he's Warren Buffett but really is just a broke errand-boy constantly trying to sell you garbage.

try to learn as much on your own about investing--it's important for yor own financial well-being.

Answer 9

I would take it to Vegas and put it all on RED and double it real fast! J/K Congrats on the Air Force that is a bold step that is appreciated by a vast majority of the USA. My prayers are with you. Honestly I am a huge fan of Real Estate but with you leaving you may want to be cautious of this. I would speak to a financial planner and see what ALL your options are. This is usually a free service and he/she could give you some professional advice. Hope this helps and good luck!

Answer 10

If you are risky, try out the Pink Sheet penny markets. If you want to play it safe pick a company with good financials and go with them. Mutual funds are for weenies! Etrade pays 5.05% (at least last I checked) on funds in their online bank and you can transfer that money to invest. You should check them out.