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Old 05-07-2014, 09:30 AM
 
2 posts, read 3,322 times
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Hey all,

Through inheritance and personal saving, I have found myself to be in the fortunate position of having a relatively sizable sum of money saved (about $23k). I am currently in college, so I work part time. I don't have very much income coming in, but I still try to save what I can from my checks. I save about $50 a month. College is also mostly taken care of, so I don't have many expenses associated with it.

I am about 20, and I would like advice as to how I should invest. I had met with an adviser once, and he suggested that I open an IRA and put a percentage of my income towards funding it. He suggested that I buy American funds (I believe?) as an investment.

Do you have any suggestions what to do? I have tried to research this myself, and there just seems to be too much information to even know where to begin. I have been keeping almost all of my money in a savings account at a local credit union, but I feel like there are better opportunities.

Thanks!
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Old 05-07-2014, 12:19 PM
 
406 posts, read 617,915 times
Reputation: 265
Congrats on the good work so far. I think you are on the right track. A few thoughts:
-I would keep a good chunk of money in regular savings account as you finish school and move on to paying living expenses while job hunting, buying a car, relocating, setting up an apartment etc
-It sounds like you have some earned income, so you are a poster child for a roth IRA. You are allowed to contribute up to the total of your income for the year (max $5500) and you should contribute as much as you can, even if you dip into the $23k a bit to do so
-The roth IRA is the type of account, but you can of course choose from any manner of stocks, bonds, mutual funds, ETFs to actually invest your money in. American Funds is a mutual fund company, and investing with them could be any number of different types of funds. You aren't getting terrible advice, but it probably isn't the best choice for you either.
-I would go with a low-cost mutual fund/ETF company like Fidelity, Vanguard, etc or a discount brokerage that offers free ETF investing (they basically all do, including Schwab, Fidelity, Etrade, TDAmeritrade, etc). Make sure the account size you'll have an the size of the ongoing contributions won't be so small as to trigger fees at the company you choose.
-Pick a handful of broadly diversified ETFs of mutual funds such that you end up with a portfolio of mostly stocks (based on your age) that represents US and foreign, emerging markets, large and small caps as well as some fixed income exposure. Maybe 80% stocks? Some here might argue for even higher than that.
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Old 05-07-2014, 10:00 PM
 
Location: US Empire, Pac NW
5,003 posts, read 12,336,223 times
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If college is "pretty much taken care of" and you don't have any revolving (i.e. credit card) debt ... congrats! You're in much better shape than many people.

... if you do have student debt try taking care of that first, so long as you are going for a STEM degree or some career path that will get you 70k+ a year or so within 5 years. The money you pay towards your education is a multiplier of what you would get without a degree.

But assuming you can really save / have surplus every month ...

Invest first in a Roth IRA. This year you can contribute max 5500 bucks. Invest in a fund that has low expenses (less than 1%) or an ETF (less than 0.75%) and has no load.

Then open a traditional IRA and put the max into that as well.

Both will give you benefits and dividends down the road. The traditional IRA has tax benefits today and the roth has tax free growth until you retire.

With the remainder, which would be around 15000, I would get a nice suit, dress pants, shirt, shoes, and tie, total should be around $500 or so.

Then with the remainder do as you see fit. Keep it till next year if you want and invest in the roth and traditional IRAs again.

What I would do is not invest anything, quit my job / pare down the hours and focus as best I could to get the best GPA I could.
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Old 05-08-2014, 08:40 PM
 
2,634 posts, read 2,662,759 times
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If I were in the same situation, I would put $5,500 into a Roth IRA, Vanguard 500 at 0.17% EXP Ratio. I'd keep about $5000 in a high yield savings account, like GE Capital Retail Bank offers at 0.95%. Assuming you don't need the the rest of the money ($12,500) for a few years, I would keep it in a Vanguard Brokerage account and place it into the Vanguard 500 mutual fund. Fidelity offers a Spartan 500 index for the same fees as the Vanguard. Assuming you don't need a new car, the next year I would put another $5,500 in the Roth IRA and convert them to Admiral which will lower the fees to 0.05%. If you have debts, or you truly need a car, I would pay that first though to avoid interest fees.
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Old 05-10-2014, 11:10 PM
 
Location: Arizona
3,148 posts, read 2,717,674 times
Reputation: 6061
American Funds have one of the largest sales charges of all mutual funds. It's why they're recommended by advisors. Those fees will eat you up.

Go no-load. Fidelity, Vanguard, Invesco, there are lot's of no-load companies out there.

Go no-load and cut out the "Wall Street Marketing Machine".
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Old 05-10-2014, 11:33 PM
 
87 posts, read 106,792 times
Reputation: 182
Open up a Roth IRA.

Contribute the max you can every year ($5500 for 2014).

Invest that money in a low cost S&P500 index fund (IVV, SPY, or VOO).

Sit back and relax. You're in great shape for the next 10 years. Once you start getting older, start shifting your money into investment grade corporate bond funds.
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