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Old 02-18-2014, 05:07 PM
 
Location: MidWest
8 posts, read 11,027 times
Reputation: 17

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Hello! I am a part of a group of 7 close male friends and we are all about 21 years old. We want to start putting money away together to invest in a vacation home in the future. Right now we are going to each put in 10 bucks a month for a total of 840 a year. Most likely in a couple years when we are all graduated and have steady income we will raise that amount. My question is what is the best option for us to have a secure investment that grows the best interest. None of us are too knowledgeable in economics so i am looking for an outside perspective. Trust funds? Stocks? CDs? We wont be touching this money for 5-10 years I presume. Thanks in advance for any input!
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Old 02-18-2014, 06:54 PM
 
Location: Spartanburg, SC
4,906 posts, read 7,502,606 times
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Talk to a broker like T Rowe Price and set up an investment club. Most importantly, you can learn about, investing, how to select stocks, which ones pay dividends etc. You will each own a percentage so if there is a disagreement and someone wants out, it's easy to send them a check. I'm in a group of 15 ladies that meet for about an hour once a month. $50 a month started about 8 years ago now worth over $100,000. (As a group; some members have as much as 10%, some as little as 2% depending on when they joined.) Members have come and gone and T Rowe Price handles a lot of the details.

Best of luck and congratulations for thinking of your future!
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Old 02-18-2014, 06:58 PM
 
Location: NJ
31,769 posts, read 40,918,299 times
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you guys are going to pool your money in one account or you are all agreeing together to open your own accounts and everyone puts x dollars into their own accounts? you starting with zero? its tough when you start out with so little. if you are willing to have some risk, you can do an s&p index etf and just buy more shares as you add more money. you are gonna have an issue with transaction costs so you would want to open up an account with someone that allows you free trades. I know fidelity lets you buy some etf's without a transaction fee. you still may have issues of minimum balances. if you want less risk, there are less risk etf's.

also, a lot will happen in 7 years. some of your friends will get married and some will knock up girls. the chances of you 7 guys being able to get a vacation home together isn't very high. so make sure you can easily separate your investment from everyone else's.
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Old 02-18-2014, 07:10 PM
 
1,855 posts, read 3,623,632 times
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Quote:
Originally Posted by LynchburgLover View Post
Talk to a broker like T Rowe Price and set up an investment club. Most importantly, you can learn about, investing, how to select stocks, which ones pay dividends etc. You will each own a percentage so if there is a disagreement and someone wants out, it's easy to send them a check. I'm in a group of 15 ladies that meet for about an hour once a month. $50 a month started about 8 years ago now worth over $100,000. (As a group; some members have as much as 10%, some as little as 2% depending on when they joined.) Members have come and gone and T Rowe Price handles a lot of the details.

Best of luck and congratulations for thinking of your future!
$50 a month per person?
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Old 02-18-2014, 07:28 PM
 
Location: Spartanburg, SC
4,906 posts, read 7,502,606 times
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Yes, $50 per person per month. And I looked it up -- actually started 12 years ago -- I only joined in about 3 years ago. When you join, there was a one time $100 contribution.

The nice thing is the investment club thru T Rowe Price/My I Club keeps track of transactions (of course, for a fee) and the percentage of membership each member owns. Then if someone wants to drop out, (as mentioned above--life changes) the calculation is easy. Not sure how all clubs are set up, but we do not allow partial withdrawals unless you are quitting the club completely and all dividends are reinvested. So, the account has grown significantly.

There are also classes, tutorials and a magazine to teach about investing included in the My I Club stuff. It's been a great way to learn about investing.
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Old 02-18-2014, 10:03 PM
 
Location: MidWest
8 posts, read 11,027 times
Reputation: 17
Thanks for the input! And yes we do understand that things could and will happen with all of our personal lives. We have discussed being able to leave the investment for a certain amount back. What types of bank accounts would be an option for us? Something with a long term where we cant take money out for lets say 10 years, and where the interest would be worth it to do so
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Old 02-19-2014, 05:33 AM
 
4,006 posts, read 6,064,012 times
Reputation: 3897
Sounds like a plan hatched over several beers between fraternity brothers with some Buffett playing in the background.....I LOVE IT!
Either way, yes, life changes are going to cause a lot of changes in your club.
With your age, timeline and investment amount, go very aggressive with your investment choices. With so little invested, you're not risking much but the risk/reward ratio will be greater with more aggressive choices.
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Old 02-19-2014, 10:19 AM
Guest
 
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Dividend paying stocks. Reinvest dividend into stock for 10 years, buying more, with your own money as well. You make money by virtue of those who didn't reinvest...essentially buying their stocks. Pick a stable company, or five, and aim to grow your share. Cash out in 10 years.

No bank is going to pay you to keep your monthly pocket change. CDs are for growing large sums of money. It's basically a savings account. You need to be investing.

Look into investment accounts.

Last edited by Guest; 02-19-2014 at 10:31 AM..
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Old 02-19-2014, 10:25 AM
 
Location: NJ
31,769 posts, read 40,918,299 times
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id stay away from dividends. that's just income that gets taxed when you only want growth.
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Old 02-19-2014, 10:52 AM
 
420 posts, read 771,368 times
Reputation: 411
This sounds like a phenomenally poor decision (the pooling money part). But if you really want a 1/7th part ownership on a property, then go for it. Plus you're assuming all of you will have a steady income after graduation and that 6 other people will stake their money for the next 5 years and not sell their portion to someone you don't know/like. I wouldn't do this unless I was storing the money in my own private account... wait, scratch that, I wouldn't do this at all. Now all your financial decisions on this investment are a group decision, with 6 other opinions. Sounds like a nightmare and all for the tiny sum of 6K a year to accumulate... In 10 years you most likely wont even be close friends with half these people.
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