Investment Questions for College Student?

Question

I am a college student with 5,000 in CD's as of today. The rate I am getting is 5.00% for a 12 month term. As I work each summer I am able to put some more money into the account. I am wondering if it is advisable to invest the money in a mutual fund (or stocks) in order to get a better return (if so any recommendations of mutual funds) or keep the money in CD's. I would prob need the money within 3-5 years. thanks for your help!

Answer 1

The choice of your investment is greatly influenced by the amount of risk you are willing to take on vs. the return that you expect as well as the holding period of the security. Equity securities (i.e. stock, preferred stock, etc...) is by nature riskier than other securities. Equity holders, including participants through mutual funds, are at the bottom rung of the collections ladder in the case that the business goes under. If you have short to near term horizon (based on your 3-5 years), my recommendation is to invest in a bond fund that has a 3-5 year duration. Bonds are less risky and if you are not looking to buy and sell a lot, but instead keep the money parked in the single investment, you can earn 6-8% sometimes without taking on a significant level of risk. As your financial advisor about some of the best picks, but this is a tried and true strategy.

Other ideas would be to go into the mutual fund or ETF markets. However, watchout for the expense ratios...they will eat up a lot of your gains. Money markets and CDs typically perform at very low levels. I am impressed that you have 5% on a $5k CD.

Answer 2

If you were investing for the long term, then I would suggest an equity mutual fund. It is a riskier strategy -- but the average return is higher. If you were investing for the long-term, then you can absorb the risk of losing money now -- knowing that you will also get large gains at some point in the future that will offset it.

On the other hand, since you need that money sometime in the near future, you shouldn't take the risk of losing capital, and should stick with safer investments. There are safer mutual funds that invest in money markets or safe securities. You might be able to do better in these than in CDs.

Answer 3

All of your money should be in stocks since you are very young and will have many chances to try again if the stock market fails. Bank accounts, Money Market and CDs are paying next to nothing at this time. Best you invest with a mutual fund and let the fund manager do the picking of stocks since he has the expertise. If you are working make sure you use the companies 401K with some matching amount. If not then use a Roth IRA with your investments into a mutual fund. A few large fund companies are, Vanguard, Fidelity and American Century. A company representative will be glad to get you started.

Answer 4

Do the mutual fund. It is much less risky than Stocks (where you could lose your $)
and MF are made up of many stocks.

American Funds is a highly recommended fund company, with resonable fees.

and Edward Jones investments is a great place to go to get started J D Powers and assoc rated them no. 1 for customer service (you will never
get a recording when you call that asks you to press 1 or 2 etc)

and they don't charge you fees to get advice, or work with them. They also have advisors who really care about their clients.

Good luck you are on the right path

Answer 5

financial planners will tell you that if your date that you want to use the money within is in 5 years or less than do not put it into stocks
its more advisable to put it in cds and money markets
so i think you should keep it in cds!! put make them long terms cd's like for 3 or 5 years because rates might lower i coming years... and you don't want to be earning less than 5% if you have that now!
good luck!