I'm 23 & I want to start investing with the money that I've saved so far. But I don't know how...?

Question

So I have some money saved (around 40k) and right now I have it sitting in a Certificate of Deposit--- it will become available in a few weeks and I want to invest at least 50% of that money. However, I am confused. Where do I go? I want a reputable company (person) to handle my money --- I worked very hard for it and sacrificed a lot in the process of saving and I want it to grow not deplete. What sort of investments should I look at? What are the fees and taxes involved in investing? i am kinda clueless when it comes to this but I understand the concept as a whole (I took a few finance classes).

Answer 1

Here should be your priorities:

1. Contribute enough to your 401k to get the company match (if you're employed and if they offer one).

2. Max a Roth IRA. You can put in $4000 this year and $5000 next year. Roth's are such a great deal (because you NEVER pay taxes on them and they're super flexible) that the govn actually limits the amount of money you can put it. DO IT. You have to have earned income to do this though (research IRAs at www.fool.com--too much to explain here). Put the money in a target retirement date fund and forget it. I use Vanguard--Fidelity is a good choice too. No fees, low expense ratios, great reputations, great performance history.

3. Put enough aside in a high yield savings/money market for emergencies plus any big unusual expenses you anticipate making in the next 2 years. For instance, if you're going to buy a $30000 car in a year, keep $30000 plus emergency money in cash--don't put it in stocks. Make sure you're getting over 5%--savings accounts and money markets are paying more than CDs right now in many places. I use Vanguard Prime Money Market (5.22% in May).

4. Now that you've done the above things, you can invest outside your retirement accounts! If your goals are short term, stick with cash. For longer term goals, stick to index funds. Boring, but your BEST bet. They minimize taxes and fees, have no commissions to pay, and parallel the market returns (which most mutual funds lag even before fees are paid).

Answer 2

There are several good answers here, so I don't have much new to add. I would just second the answers that recommend Vanguard.com and investing in index funds. The principal behind an index fund is that you will do as well as the market overall is doing without gambling that you can pick a fund that will beat the market. Trying to beat the market carries quite a lot more risk. There is also some risk in being too conservative, so your idea to move some money out of the CD is wise. Index funds are also the least expensive way to invest in the stock market.
There are reputable people at reputable companies who can help you with investing, but the commissions are expensive and the funds recommended by professionals often carry higher on-going expenses. The fact that you've taken some finance classes and saved a substantial amount of money already is a good indication that you have the ability to direct your own investments. Park the portion of your money that you want to invest in a very simple, broad index fund - like Vanguard's Total Stock Market - and keep studying. If you read John Bogle's book, chances are you'll decide to leave your money in an index fund even after you've learned quite a lot.

Answer 3

Watch out. There are lots of scammers in here who want your money. There will be people answering giving you links to their wonderful "business" ideas.

Ok, first off. Congrats on saving that much money by the age of 23. That shows that you have some financial skills. Not many people are able to do that these days.

Do you have an emergency savings plan? Lets say that your car broke down tomorrow right after you got so sick you could not go to work right after you found out that you needed a surgery right after you found out you had lost your job. Can you pay the bills for a few months and take care of some of these expenses. The general idea is to have about 3-4 months of your net monthly salary put aside. That way, if something did happen, you could go 3-4 months without working, maybe longer if you became frugal. Set that aside first. Do not invest that money in something that will be hard to get to or that could lose investment. CDs are fine for that. You may take a bit of a hit if you need the money early but it is not too bad. If everything goes well, you will never need to touch this money. If something goes bad, then it is there. Do you want to sleep at night? Then don't put yourself into a situation where you wonder what you would do if something bad happened.

Ok. Do you have a retirement plan at work like a 401k or a 403b? Make sure you are contributing to that. If you start now, by the time you retire you will be loaded. This is without considering your $40k. Making small contributions over the next 40 years or so will make you lots of money in there. These accounts grow tax-deferred, meaning that no taxes come out until you withdraw the money.

Now, you say you want to put your money into something that will grow but protect your investment. Not too many things can do that. Those that do generally pay back at a lot lower interest rate. Normal savings, government bonds, and CDs are the main ones here. A money market fund is going to pay around 4-5% but there is a chance that your money can go down instead of up. Plus the interest rate can change as well.

Tell you what, there is no answer here. You are going to need to do some serious research before you can proceed. Leave the money in the CDs for awhile and do some learning. What you need to do is go to the book store and spend some money on either The Idiots Guide to Personal Finance or Personal Finance for Dummies or both. These books are pretty good at laying down the basics. From these you can find other books to read. Also, Yahoo, MSN Money, Motley Fool, and Bankrate have lots of articles on all sorts of different areas of personal finance.

Answer 4

Hello, You have received some fairly good advice thus far but none really answered your question as most were generic. I am a retired banker and personally I invest through an investment club for a monthly income. In your case I suggest first get in contact with an investment club and invest $10,000.00. With the club I am in you would earn $530.00 per month profit. Next I would contact a financial advisor/planner and let him/her know that you have x amount of money that you want to start a Roth IRA and also you want VUL insurance and disability Insurance.

The reason for the investment club is obvious and that is to generate immediate monthly income to enhance what you currently earn. The VUL is a Life insurance plan that at your age if you maxed out a policy say for $250,000.00, you could eaisly be worth over a million by the time you are ready to retire especialy if you max the Roth too. These two investments could and have the potential to make you very comfortable as in the millons in the 30 years when you may want to retire.

The Disability insurance would be there for you in case of injury or severe illness. A lot of people over look this insurance and do not realize how important it is.

I would also keep at least twice your monthly expenses in a regular savings account for emergencies and any funds left after investing in the above put back into a CD. hope this helps if I can be of any further help write me at [e-mail] Have a great day!
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Answer 5

Evelinka,

I'm 26, and am in a pretty similar situation financially.

I opened up a brokerage account with schwab and put all my money in there (though any of the other companies, like fidelity or smith barney, would be the same type of thing).

I put some of it into bonds, some of it into mutual funds, and some into a money market. Most of them have fees around 1-1.5%. You don't pay any taxes (except on dividends) unless you sell things, and then the tax rate is anywhere from 15%-35% depending on how long you held the stock/fund for, and your income bracket.

In 6 months I've self-taught myself a lot about it, so I've tailored my portfolio around what I've learned. But if you don't have the time to do that, there are templates which basically tell you how to distribute your money effectively. Or you can also talk to reps once you open an account.

Since you're young like me, I'd guess you're fairly computer literate. I did all of my investing through the schwab website -- transferring money in, buying/selling, etc. It was quite easy.

Answer 6

It all depends on your time horizon (how long you want to invest your money for), your capacity for risk, your goals, when will you need the money, etc.

www.vanguard.com has a great resource for first-time investors. There is a survey where they ask you questions such as the ones above, and then they offer you recommendations about how to invest your money to personally meet your goals/needs.

Also, right here on Yahoo!, the Finance section, click on Investing. - Check out the education pages, there is a quick brief of many basic investing strategies. I would read these just to get a working knowledge of investing, so if you do decide to seek professional help, you would not be easily confused.

From what I can tell, you have a decent chunk of money, and you are young. If you are looking to invest for the long haul - (retirement), I would put most of the money into stocks. Probably an Index fund, which you may find will be exactly what you are looking for. They historically have offered great returns, they require little to no effort/research on your part, and they are excellent long-term investments.

Should you seek financial assistance, be careful, as people in the finance profession are quick to take your money in the form of fees/commissions/etc.

A high yield (4-5%) internet savings account is a good short term solution, if you still haven't decided how to invest. Most banks now have them, but I have mine in ING Direct. Then read up a bit about the basics of investing on Yahoo, and take the vanguard survey. There are also a bunch of free advice sites on the web now. I also recommend the book - "Common sense on mutual funds", by John C. Bogle. It is not too difficult of a read, especially if you have taken some finance classes, and it will provide you with a plethora of information that will allow you to make a lot of your own decisions (and avoid having to pay a "professional" to manage (take) your money.)

I personally like Vanguard.com. They are an established, reputable company, and they offer a large amount of investing options. You can open an account with them (IRA, or Roth IRA) and put money away monthly, or yearly, or simply let your money sit and gain the interest (the vanguard 500 is a great fund).

Overall, I recommend you do a little bit of research - for someone with your penchant for saving and self-discipline, it will be in your best interests to learn a bit about investing, in order to begin to make your own decisions and choices. As aforementioned, in today's world, there are many free online sites that are wonderful resources for a young investor.

Answer 7

I would strongly suggest going in to an investment firm, or something like that. Go somewhere you know and trust someone, and they will help you out with whatever you want to do - low or high risk. What my wife and I did, is put a bunch of money into a CD at a bank which is what you already have yours in. With the amount you have, you could make a lot more. Just leave it in there, shop around for some of the better interest rates. That's probably the best way to ensure you don't LOSE money in the process. Anything else you do could potentially cost you money. But if you are looking for higher risk stuff, then go to an Edward Jones investment bank, or some place similar, and let them know your scenario. They'll be more than happy to help.

Answer 8

You're young, so I suggest investing in an international mutual fund, who, in turn, invests in companies all over the world, ie: China , Europe, So. America.
Open an account with either Chas Schwab, Vanguard, or Fidelity. They are all top notch and will guide you. Rely on their professional management to select the stocks within their respective mutual funds.
If you have a retirement plan such as an IRA or Keogh, there are no taxes until you retire and start to take money out of the fund. Expenses are minimal with these companies and your money is secure as can be. If you don't have a retirement plan, do IT FIRST!

Answer 9

First you need to figure out what are your long term goals. An investment is a vehicle that will take you where you want to go. So first you must figure out where you want to go. Why are you investing? How much money do you want to have? By what age? Are you saving for a down payment on a house? Are you investing you get enough money to start your own business? Are you investing for an early retirement? These are the kinds of questions you must sit down and ask yourself. Once you answer your own questions, you will easily find the type of investment that will take you where you want to go.

Answer 10

Well I am going to provide you an reply that's a bit of distinctive. Though first I will agree, with $one hundred you must wait and retailer a bit of extra. Now, it relies on what you're watching to do... one million) Are you watching to play within the inventory marketplace (i.e. exchange?) or two) Are you watching to noticeably make investments and stroll away for years? I constantly desired to exchange, I determined the complete inspiration splendidly intriguing. I first establishing gambling round with buying and selling approximately four years in the past, I opened a Scottrade account due to the fact that they'd the most cost effective commision. I opened the account with $a thousand. Now, I remember that cash ... university and inside a yr I became that $a thousand into $212 and the account simply kinda sat there. I afterward got here into a few gigantic budget and opened one other account with one other dealer and feature performed a lot greater with what I discovered prior. However, over this yr, I became again to that historical account with much less then $250 in it, and feature became it again to $650 within the final four months. Now its just a $four hundred achieve however I have extra then doubled it. Anyway, I ramble. If you're watching to absolutely make investments, avoid wasting extra money up and seek round for an IRA that you'll be able to open and upload per month contributions. If you're watching to play the marketplace, get a minimum of $a thousand that you do not brain wasting and play the penny shares. Basically shares below $two, and seem for top quantity shares a minimum of 500K day-to-day natural. In reality, certainly one of my favourite play (and the only I can so much credit score for my Scottrade account resurrection) is known as CYBL. The inventory is presently buying and selling for $zero.024, sure that is correct approximately two.five cents. I would not purchase it particularly but, seem for a dip to or below $zero.02 however at two cents you might purchase 50,000 stocks (much less commision) if it (and it'll ultimately) runs once more again to three cents (you might on the whole exchange out at zero.028) you've nearly a penny achieve... however thats $four hundred. Rinse and repeat. I can nearly assurance, you are going to lose cash however do not be disheartened, books are exceptional and the are a couple of web pages that experience well expertise on buying and selling however NOTHING teaches greater then enjoy. Also use the Yahoo inventory message forums, they may be able to be a exceptional useful resource, however do not fall into he hype. As a rookie, you are going to be bombarded with 'longs' calling out persons as bashers left and correct, and it is vitally handy to staff up with those 'pumpers'. The soiled little secret's, the pumpers are a greater enemy then the bashers. You might additionally 'paper exchange' for awhile, however looking a soccer sport is a laugh, however when you've got truly cash on it method extra. Besides, you are going to in no way enjoy precise worry or irrational wish, whilst it's not fairly... truly. Good good fortune whichever you move, and if I can aid additional permit me understand.