Skip to main content
No. of Recommendations: 0
Hey. I am 24 and am in grad. school and have $7,500 saved back. I have considered taking $5,000 of it and invest it. And use the remaining amount toward my school loans that are currently on differment. Should I use the total amount on school loans or use $5,000 for investments?
Also should I begin an IRA with the $5,000 or should I do Drip or Foolish Four approaches? Any IRA recommendations? Thank you. - jmac
Print the post Back To Top
No. of Recommendations: 1
Some of the questions you ask (drip vs foolish four) are personal preferences. But I would suggest you definitely invest in a ROTH IRA and hold it until you retire. The tax benefits are just phenomenal in the long run.

As far as investing vs payoff school loans, that depends upon the expected rate of return on your investment vs the interest rate on your loans. When you pay off a loan you are basically earning the interest rate of that loan. So if your loan is 8%, you are earning 8% by paying it off. If you think you can beat 8% in the market then you can earn more by doing that. Of course this gets into the whole risk reward decision. Is a definite 8% return better than investing in the market. It depends on how the market does.
Print the post Back To Top
No. of Recommendations: 0
Hey. I am 24 and am in grad. school and have $7,500 saved back. I have considered taking $5,000 of it and invest it. And use the remaining amount toward my school loans that are currently on differment. Should I use the total amount on school loans or use $5,000 for investments?
Also should I begin an IRA with the $5,000 or should I do Drip or Foolish Four approaches? Any IRA recommendations? Thank you. - jmac


Dear jmacn22,

To begin, you can only deposit $2000 per year in an IRA and you have to have earned income in order to qualify. I'd suggest you head over to the IRA to read up about how they work. You'll also find some suggestions about what to put into them. http://www.fool.com/taxes/faqs/pensions.htm?ref=TXSpnsn

DRIPs are a fine idea inside of a ROTH, but one drawback is that not every company has retirement option. If you head over to the DRIP discussion board, you can some feedback about companies that do allow this. Some of the newer service, i.e. BuyandHold.com don't yet have IRA accounts available just yet, so you wouldn't be able to go that route.

As for paying back your school loan, my first reaction is to advise you to pay it off and get it out of the way. Of course, alternatively, you can open the IRA and use the balance for the loan, if you like that option. You can get other responses if you go to the Paying for College board or even the Credit Card board. (They discuss much more than only credit cards there.)
You can get to any board by typing the board name in the center space of the navigational bar below and pressing 'enter.'

Be sure to read the reply from the previous poster.

Good luck to you. Fool on!

Karen Kosoy
TMF Karen
Print the post Back To Top
No. of Recommendations: 0
Thanks FractalWalk. My wife and I are leaning toward investing but have received mix messages from the Motley Fool books concerning the Foolish Four(FF). They suggest investing at least $1,000 into each FF company but also suggested that the IRA's are a good way to do FF. So do you start two IRA's and put two companies in one and two in another? Or do you just do an FF outside IRA's and use IRA's for DRiPs or other investment strategies? Any suggestions would be of great help. Thanks.

jmac
Print the post Back To Top