Am I investing smart? Where could I better place my money?

Question

Im 19 years old. I work for Verizon Wireless, i make $4,100/mo. 25% goes to 401K, $500 goes to HSBC online savings, $100 goes to E*Trade (just started). The $100 every two weeks in the e*trade account I would like to buy $100 worth of stock with and let sit. My goal is to find a stock like google, or msft.

Where could I better be investing the money that im saving? My goals are mostly long term. The $500 in HSBC is liquid and movable.

Basically, all of this money going away, other than the 401K is movable and liquid. Where should I be putting this for maximum long term return?

Answer 1

Before you worry about getting maximum long term returns, pay off all your debts, and create a cash reserve of 10K to handle unexpected expenses or loss of income. That way you will stay out of debt. Getting out of debt and staying out of debt is the best long term investment you can make.

Next, open a ROTH IRA at E*trade and start contributing to it. You can invest in all the same things as a regular E*trade account, but with a ROTH you pay no taxes. No taxes is a very good thing.

If you can identify the next google or msft, more power to you. I can't. So, I would suggest you invest in a good asset allocation mutual fund that invest sin a balanced portfolio of stocks and bonds. Look for a no load fund with a low expense ratio. E*trade has fund screening tools you can use to create a short list of funds like that. See for example Vanguard Life Strategy funds.

Also, I recommend putting at least 10% of your portfolio in Gold and Silver. There are ETFs you can use to invest in those. See for example CEF.

Good luck.

Answer 2

You are making decent money for someone your age and you are doing the right thing by investing it. At 19, there are very few ways to go "wrong" because you are getting such a big leg up on everyone else in your demographic. Here is what I did (when I started investing at age 16)... Have a regular monthly investment schedule into a large, blue chip, well-diversified mutual fund-- American Investors is a good one (AIVSX). Invest a smaller amount into a more agressive small-cap fund that gives you Euro-pacific and emerging market exposure. Then, allot another amount of money to go into "savings"--- this can simply be cash in a brokerage account. Spend your time researching companies and looking for buying opportunities. That way, when something hits you and you see an opportunity for growth, you have the cash available to pull the trigger. Try to invest in a few companies per year, but limit it to 3 or 4 so you can do the necessary research. I used this method to build up a decent sum of money in my mutual funds (for relative stability) and put together a nice basket of stocks (some big winners, some losers, some that are in between). Once you have a defined path to follow, stick with it... Everyone preaches about diversification, which is a legitimate bit of advice. You can make consistently good returns on a well diversified portfolio. Don't discount your own intuition or brilliance, though... if you see an opportunity, take it. Who cares if you are overweight on tech or energy or financials. But be prepared to suffer more acutely if something happens to that sector or stock. Andrew Carnegie said "Put all your eggs in one basket, and then watch that basket."

Also, feel free to be more agressive in your individual brokerage accounts. There are tax benefits for losses. Be conservative in your 401k, that is going to be the bulk of your future wealth.

Look at things that people complain about the price... I bought Chevron at 55 when people were bitching about the "obscene" profits of oil companies... Now that it is at 91, I am the one making obscene profits.

Good luck, and weather the downturns. Buy on a continuing down market just the same as any other time. You will dollar cost average down and accumulate more shares. It will take less of a recovery for you to make more money.

Answer 3

Why don't you open a stock acct with E-Trade? Rather than look for a stock like google, why not buy google? With your money, you wan't to be making larger $$ transactions. At your age, you don't need more than about 15 K in savings; once you reach that level you can shunt your money into stocks.

Judging from what you write, you might be better with a good mutual fund. They are purchased and sold just like stocks. Good for you for putting bucks in the 401K. Let me know when you are 59.

Answer 4

Well I would start dollar cost averaging some sort of mutual fund with a portion of that money; some sort of balanced fund would be good, like Franklin or Principal Sam portfolios. Also, I would start investing in a ROTH Ira with a portion. At some point you'll probably make enough that you won't be able to invest in a roth, might as well max it out while your young and let it grow tax free. starting when your 19 in an aggressive stock with a Roth can have huge growth potential.

Answer 5

You are doing great with the 401K. Keep it up. I like the on-line saving accounts. It's nice not to have all of your money tied up in case you need it, and yet it's still working for you be earning decent interest. I'm using Emigrant Direct. As far as stocks go you might look into mutual funds that have a good historical track record. That way you aren't keeping all of your eggs in one basket.

Answer 6

I am a professional investment advisor. I have found that there is a recurring problem with the questions that are asked on this site. There is usually not enough information being supplied by the asker to accurately answer your question.

What we can try if you seriously would like a professional answer would be for you to email or Yahoo Messenger me. Re ask your question and answer mine. We could then have more meaningful dialog and help you more efficiently. It now becomes one on one personal help. You can now compare my answer to the other ones you got on Yahoo Answers and make the right decision.

By the way for the others of you who are reading this response you can email or Yahoo Messenger me with any comments or questions you have and we can also have private dialog.

I will be happy to email you my full credentials when we connect.