I have $2,000 - Do I get a Mutual Fund, ETF, or Index Funds?

Question

Or stock market...? I'm still in college and i'm not sure where is a good place to start investing?
I'm going to get investing for dummies this weekend - and I've been trying to read around but I haven't gotten a clear answer.


Thanks!!

Answer 1

OK, you're really getting the run-around here with some of these answers. The answer to your question depends on your financial situation. If you're in college, I'm going to assume you have no earned income right now (thereby making you ineligible to contribute to an IRA). I'll also assume this is all the savings you have. So here's my advice based on those assumptions:

1. Keep some of it (if not all of it) in cash. You need to have cash for short term goals and emergencies so that you don't have to rack up credit card debt to pay for that stuff when it comes up. If you're wanting to go on spring break or vacation, buy a car, or buy furniture for an apartment within a year or so, then you should keep this money in cash to cover those expenses.

2-A. However, if your parents are willing and able to pay for that stuff, or if you have other savings for that, then you don't necessarily need to have this money in cash (though you may still want to in case you want/need to buy stuff that they won't pay for or without their knowledge). In that situation I would recommend putting the money in a low cost US stock market index fund. (Remember, you should only invest in stocks if you won't need this money for several years--otherwise keep it in cash). It can grow untouched for years and you'll have a nice little nest egg when you want to get your own place, pay for a wedding, or whatever down the road.

2-B. If you DO have any earned income (for 2006 or 2007), then I would open a Roth IRA and put that index fund in there. There are many advantages to this; you'll read about them in any financial planning book you choose.

Mutual funds, index funds, and ETFs all are different ways to own stocks; in fact you can buy the exact same stocks through each different vehicle. Index funds are a type of mutual fund; the difference is that they passively mimic the market rather than having active managers who pick stocks and try to outperform the market. Because of this they are much cheaper to own and invest in than mutual funds. ETFs are funds that mimic the market, like index funds, but they are traded like stocks through a brokerage account. You'll be best off with a plain old index fund; most people are. I highly recommend Vanguard or Fidelity; they have the best reputations, lowest fees, and many top rated funds to choose from (index and mutual).

Answer 2

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Answer 3

First and foremost: ANY investment is better than spending, or worst yet, getting debt from expenses.

So you may open an account with an ETF, SPY would be the choice, it follows the Standard and Poor's 500 index, it's in the middle both in risk and rewards between Dow Jones and Nasdaq indexes.

At first you may want to buy and hold,
read some books, some info over the internet, and then practice "fake trades" with the same ETF. After a year of succesful trades you may want to actively trade your ETF, but meanwhile you practice, hold it.

Answer 4

First of all, BRAVO to you for thinking about investing this money; most young people would use to impulse-purchase something they didn't need like a new HDTV or Playstation3. If I were in your shoes, I would start fully funding a Roth IRA.

In simple terms a Roth IRA is a retirement fund into which you deposit after-tax money. So, in other words, your use your take home pay - your paycheck from work with Federal and State taxes taken out - or gifts, etc... to fund the account. The beauty here is that when you withdraw the money from the IRA upon your retirement, you DON'T HAVE TO PAY MORE TAXES ON IT!!

There are maximum annual contributions that can be made to a Roth IRA; this year you can put in $4,000. Many companies like Fidelity, Vanguard, TIAA-CREF, etc... sell a variety of funds that you will buy into with your Roth money. The simplest way to go is to find a company you trust - look at Clark Howard's website too - and pick something like Fidelity's "Freedom Fund," which adjusts its risk/growth potential based on the number of years that you expect to keep the fund. Even at a conservative estimate of Stock Market growth, you'll be a multi-millionaire if you diligently fully fund the Roth every year from college to retirement.

Hope this helps a little bit. Good luck and enjoy being RICH!

Jared

Answer 5

I'd suggest a single mutual fund if you already have some savings set aside.
Fidelity and Vanguard are places to start. They have good funds to choose from.
With only $2000 you may not be able to invest with them; I believe they have a min. initial investment amount of $2500.
Scottrade is a good brokerage to buy mutual funds through. They offer many and they only require the amount that the mutual fund that you are purchasing requires.
I once had only $500 to invest for my daughter and invested with Scottrade in Excelsiors Value and Restructuring fund(UMBIX). It has doubled every 5 yrs.
The reason I suggest Scottrade because it leaves the door open for other endeavors other than mutual funds.
Stock purchases are cheap, $7 a trade.
You may want to get involved with stock options.
You can apply for a margin account where you can borrow against your investments to buy more stocks or mutual funds or even get cash(I wouldn't suggest this. I've only done it give me a little time of about 2-5 wks. before I got anticipated cash. Its good to have if you need it).
Be diversified in you choice.
Good luck.

Answer 6

Hey there,
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I definitely recommend subscribing to this site in particular. Very good research, quality stocks. I was a bit weary of penny stocks from all the bad hype they receive but this guy is pretty legit. He's put my mind at ease with a lot of the fears I've had. I especially like that he doesn't send out announcements left and right. I've signed up for other websites that fill my in-box with one company after the other. I don't know where to even start with so many choices in front of me! Nathan sends me one idea a week and that's all I need. Working so many hours during the week leaves me with very little time when I get home to start doing tons of penny stock research. I'm always eager to see what Nathan's next suggestion is each Friday and I love having time on the weekend to do my research.

As said above if you want to make money with penny stocks you have to follow some proven methods. This one in my opinion is the best: http://pennystocks.toptips.org
Hope it helps.

Answer 7

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Answer 8

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Answer 9

If you are still amateur in investing world, i think you better invest your money in mutual fund like unitlink with about 50%growth / year. Then if you are begin advance you can try at option market. Why ? Because option works like insurance, it will make you loss LIMITED money but can give you UNLIMITED profit. Try to find mentor first before enter option world. Good Luck.

Answer 10

Go with the highest interst rate based on yearly apr. Some internet banks have savings accounts with higher interest rates than some traditional banks mutal funds/cds.