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Author: Crusadah Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 27416  
Subject: Brand New Date: 8/1/2005 12:34 AM
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I'm a recent college grad and want to start building some wealth and invest what money I do have (before it's too late). I've done some initial research, but I was curious if anybody has any advice. I'm starting with about $500. Is that enough, or should I just save some more? And what is the best initial investment. Any advice would be great. Thanks.
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Author: lilbrownjon One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10666 of 27416
Subject: Re: Brand New Date: 8/1/2005 3:43 AM
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Hi Crusadah,

I'm pretty much in the same boat as you are - recent college grad (well somewhat; I've been out of school for 1.5 years), and getting into investing for the first time. What got me started is the very book that led me to these boards. It's called "You Have More Than You Think" by the Gardners. It covers the absolute basics, and a great stock market primer.

-Jon

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Author: SarahGiani One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10668 of 27416
Subject: Re: Brand New Date: 8/1/2005 4:51 AM
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While reading and soaking in all the new knowledge, I suggest putting away your money in SOMETHING to start getting some for of return. You could do an ING direct for 3.15% or maybe even an index fund for a little more.

Good luck,
SarahGiani

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Author: jbking Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10670 of 27416
Subject: Re: Brand New Date: 8/1/2005 12:19 PM
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Greetings,

I'm a recent college grad and want to start building some wealth and invest what money I do have (before it's too late). I've done some initial research, but I was curious if anybody has any advice. I'm starting with about $500. Is that enough, or should I just save some more?

I think it worth noting a few side notes first before we go over to see if that is "enough":

1) Emergency fund -> Do you have some other money stashed away should you have something happen, e.g. car repairs, unforeseen medical bills, unexpected unemployment, etc. Basically if something bad happens and you had to live on your savings could you do it for a little while, e.g. 3-6 months? This is the question.

2) Student Loans and credit card debt -> Do you have any of this to deal with first? This isn't mentioned so I thought I'd ask.

3) The "you" side of the investing equation here:
i) Goal -> Is this for retirement, a house downpayment, a vacation, some neato gizmo you'll get in a year or something else? This can play a role in terms of what type of account you want to set up, e.g. Traditional IRA, Roth IRA, taxable account, etc.
ii) Risk -> If it went from $500 to $5 would this freak you out? How about down 50% in a few months? This is something to consider is how much change in the value are you prepared to accept both on the upside and downside.
iii) Strategy -> Arguably one of the biggest parts here but it is something worthwhile as you don't seem to mention just how you'd invest whether it be through actively managed mutual funds, index funds, ETFs, individual stocks, DRiPs, or something else. This is where I'd highly suggest taking some time, at least a few months minimum, to read up on some of these enough to know which route or combination of route you want to take.
iv) Additional monies -> In all likelihood you will add to this over time and so it may be worth looking at how often would you add to it and how much is that since for some mutual fund cases they may waive the minimum if you agree to invest every month a certain amount of money.

HTH,
JB

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Author: wcfenton Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10671 of 27416
Subject: Re: Brand New Date: 8/1/2005 2:16 PM
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I'm a recent college grad and want to start building some wealth and invest what money I do have (before it's too late). I've done some initial research, but I was curious if anybody has any advice. I'm starting with about $500. Is that enough, or should I just save some more? And what is the best initial investment. Any advice would be great. Thanks.
-------------

One possibility would be a fund of funds that is diversified, relatively conservative, and that requires very little of the investor's time to manage. Something like a "Target Retirement" Fund:

http://flagship4.vanguard.com/VGApp/hnw/content/Funds/FundsVanguardFundsTargetOverviewJSP.jsp?Entry=fndspoton82962

You would need to save $1,000 to meet Vanguard's minimum for starting a Roth IRA.

http://www.fairmark.com/rothira/index.htm

Regards,
Bill


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Author: Crusadah Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10672 of 27416
Subject: Re: Brand New Date: 8/1/2005 3:04 PM
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Thanks to everyone for their advice. To answer JB's questions:

1) My first goal is to set up an emergency fund. I'm leaning toward placing what cash I do have saved into the ING 3.15% savings account. So far, this seems like the best option.

2) I consolidated my student loans in time to take advantage of the low interest rate. This is a monthly payment I can't shake off since I don't have the means to pay it off. I assume it would be best to factor the cost into my monthly budget and then invest accordingly. And I have no credit card debt.

3) My motivation for this is to save for retirement (waaay down the road) and to also create some wealth in order to have a more flexible lifestyle in the future (i.e. traveling, etc.). I'm an editor at a magazine so my salares won't be skyrocketing anytime soon.

Taking investment risks won't be so bad as long as I adhere to a plan.
It'll take some time to wade through the muck and find how I want to invest, but every piece of advice helps.

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Author: mikeyboy714 Two stars, 250 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10674 of 27416
Subject: Re: Brand New Date: 8/1/2005 6:00 PM
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2) I consolidated my student loans in time to take advantage of the low interest rate. This is a monthly payment I can't shake off since I don't have the means to pay it off.

Being in massive student loan debt as well (and still growing...) I have heard that if you have your loans fixed at the very low rate then it's likely more advantageous for you not to pay off your loans for as long as possible. If the interest on your loan is 3%, but you get 3.15% from ING, then it's clearly better to pay the minimum and just carry the debt with you. Just keep up with the required payments, earn any incentives that you might get.

A friend and recent graduate from medical school recently bought a house. He said he spent 3 years living as cheaply as possible to pay off all his student loans, then took out a loan for his house at a much higher interest rate. If he had put off paying his student loans and put it toward his house, he would save many percent of interest on that money.

Of course I am no expert in finances but my point is to make sure you look into your options before rushing to pay off your student loans. They are likely the best loans you will ever get, and at 3% it basically is interest-free when taking into account inflation.

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Author: jrr7 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10676 of 27416
Subject: Re: Brand New Date: 8/1/2005 7:37 PM
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If the interest on your loan is 3%, but you get 3.15% from ING, then it's clearly better to pay the minimum and just carry the debt with you. Just keep up with the required payments, earn any incentives that you might get.

No, it's not.

You pay tax on that ING interest at your marginal rate. And it's very unlikely you'll be able to deduct much of that student loan interest.

You have to compare the after-tax rates of the debt and asset.

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Author: bogwan Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10700 of 27416
Subject: Re: Brand New Date: 8/5/2005 11:44 AM
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Danger preaching ahead:

Your $500 will not get you much in terms of absolute investment return. At your age earned not unearned income is much more important.

If you do not have a library near you that stocks the trade publications of any professions you are thinking of getting involved in you should use the money to subscribe to them.

You should make a point of attending trade shows.

You need to determine what your weaknesses are and do not be afraid to invest in yourself by hiring career consulers and psychiatrists to diagnos reasons for your lack of success, assuming you are not succeeding.

I personally think that once you have an emergency fund you should spend 100% on improving your job prospects.

You shuold also investigate government jobs. Based on past performance, people who worked for the government are the ones that have done the best. Bad news, the pattern may not repeat itself.

For amounts less that $5000 I would say a high interest bank account is the way to go. Until you have $50,000 I suggest an asset allocation fund from vanguard.com.

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Author: foolazis Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10701 of 27416
Subject: Re: Brand New Date: 8/5/2005 11:48 AM
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You shuold also investigate government jobs. Based on past performance, people who worked for the government are the ones that have done the best.

With the rate that corporations are abandoning traditional pensions, government jobs will continue to become more appealing. In the not to distant future, I see government jobs as being the only ones which offer any sort of guaranteed pension.

foolazis

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Author: ziggy29 Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10702 of 27416
Subject: Re: Brand New Date: 8/5/2005 12:57 PM
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>> With the rate that corporations are abandoning traditional pensions, government jobs will continue to become more appealing. In the not to distant future, I see government jobs as being the only ones which offer any sort of guaranteed pension. <<

But on the other hand, the increasing burden on government will keep salaries considerably lower than in the private sector. (And if pension costs keep increasing, that gap will grow.) And if that difference in salary is saved and invested over a 30-40 year career, the chances are pretty good that the private sector employee will have enough of a nest egg to purchase an annuity that is considerably higher than the government pension.

Having said that, some people aren't good at saving money like that, so if they want the security of a government pension (which aren't guaranteed either, but are going to be harder to eliminate than they are in the private sector), so be it -- but it's not like they are *necessarily* making out much better than those in the private sector.

#29

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Author: foolazis Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10704 of 27416
Subject: Re: Brand New Date: 8/5/2005 4:06 PM
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Having said that, some people aren't good at saving money like that, so if they want the security of a government pension (which aren't guaranteed either, but are going to be harder to eliminate than they are in the private sector), so be it -- but it's not like they are *necessarily* making out much better than those in the private sector.

I agree. It is only partial compensation for the considerably lower salaries. My first job out of school was with the State of Ohio, so I am aware of this. Some people will always be attracted to the security of government jobs vs. the uncertainty of the (potentially) more rewarding private sector jobs. (Unless you can get elected to Congress, in which case you can make out like a bandit - which most Congresscritters are).

foolazis

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Author: success2be One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10741 of 27416
Subject: Re: Brand New Date: 8/11/2005 2:24 PM
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The best investment for a new grad is buy "The Money Book for the Young, Fabulous & Broke" By Suze Orman. It is about $13 on Amazon. She shows how to pay down credit cards, improve credit score, pay off student loan, invest for retirement, buy a new home, and getting married.

A lot of people emphasize paying down debt the most important goal. I agree as I have recently paid off my credit card debt of $9k after two years. Even as I was paying off big chunks of the debt every month I still was not happy. Once I started contributing small amounts to my retirement was when I finally felt I was doing something important for my future.

Goals by priority:

1. Pay off credit card debt if you have any every two weeks. Pay as much off from you paycheck when you get paid. Can't spend money on new things if you don't have the cash in the bank. Check your bank account daily to remind your self not to indulge in extravagant things.

2. Put $50 of every paycheck into a retirement account. Pat your self on the back and watch it grow every week.

3. Keep 1 credit card for emergency spending ONLY!!! Emergency as car repair, accident, lose your job ... basically rainy day fund.

4. Once the debt is paid, max out contribution to your Roth IRA and your 401k.

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Author: GoldenThumb Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 10890 of 27416
Subject: Re: Brand New Date: 9/1/2005 12:55 AM
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In my personal experience I have found using a credit card for emergencies to be a bad idea, unless you have the funds to pay it back immediatly. I had at one time decided to use my only credit card to cover unforeseen emergencies that I did not have the funds for. Soon enough my car broke down and needed a very expensive repair. I ended up having to work a day job and a night job to pay it off. In my opinion you should save up an emergency fund for such troubles instead of the credit card. I am using a Money Market Fund: Vanguard's Money Market Reserves for my e-fund and for additional savings. It is currently getting 3.22% (and has been rising steadly, yeah!) and I am able to withdrawel monies over $500 dollars at anytime. You have to have $3000 to open it though.

I am also in the same boat as you. That is why I have joined up in this community myself, to learn ways to become finacially secure. I have been doing a lot of reading and studying about it here and through some great books. I recommend you read up too. Some of the books I have been reading that I have found helpful were: Girls Just Want to Have Funds by Susannah Blake Goodman (you don't have to be a girl to learn from this awesome book either!), 401(k)s For Dummies by Ted Benna and of course You Have More Than You Think by David and Tom Gardner. I got these through my public library.

Through reading these I have decided that my first investment is to take advantage of the tax deferrment of a 401K and/or IRA. In my opinion that should be everyones first investment. I plan to pay off my student loan before doing anymore investments and while doing so study up on stocks and when it is paid off I will be seriously ready to do more investing directly into stocks.

Good luck with whatever you decide on!

-GoldenThumb

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