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Investing Tips for College Students?
GenKreton asks: "I am a rising junior in college and decided to take out loans to cover all my costs so I could graduate with money in the bank. My tuition bill is minimal as I have a nearly full ride, but living is always expensive. With that said, I feel like my thousands sitting in the bank could be doing work for me instead of collecting dust till the day I graduate. I have been researching how I could best invest my money so I have immediate access to it if needed, but still do better than a mere savings account. There seems to be a lot of mixed advice and some obvious scams out there. So I ask Slashdot, what is the best plan for a college student to do with his money?"
The *first* thing I would encourage you to do is live frugally. You don't need a car for many places in the country you would go to college. You don't need the latest and greatest computers or TVs or goodies and the more money you can save now, the more it will help you out. It was tough while I was an undergrad, but everything I could was saved and invested in some stocks which over time have paid off.
For most folks, I'd have to say mutual funds or real estate right now although the stock market usually performs at about 10% or better depending....
Visit Jonesblog and say hello.
Don't ask slashdot. Or any other IT geeks.
Go ask a financial professional. There are tons that give free first time consultations.
Some of the online ones like ING Direct are paying close to 5% interest now, and if you got your loans when they were at super low rates, it might be a fairly safe and convenient way to make some money.
buy Euros
invest in oil, gas, commodities, think long term NOT short term
and not in property
It's a sure thing.
What changed under Obama? Nothing Good
Try bankrate.com
Your best bets if you want no-risk are probably money market accounts and CDs.
CDs will give you a higher interest rate, but will not allow you to take the money out early without forfeiting some or all of the interest you've gained.
--The Rizz
"Money is just something to make bookkeeping convenient." --H.L. Hunt
Walk into your bank and invest in a mutual fund. It's easy and free to do, you will get plenty of advice, and there is someone managing your investment for you. Best of all, you can pick a mutual fund that is more aggressive or steady depending on your willingless to possibly lose some to gain more.
And to boot, you can withdraw your investment at any time. Usually takes 1-2 business days to take effect.
For he today that sheds his blood with me shall be my brother.
There is no future - drink all the beer you can now!!
Right now the stock market is not good because we are pobably at a market maximum. Plus you will probably want that money in a few years for a car or downpayment on a house. I'd suggest a good money market fund such as those offered by Vangaurd. They will pay a bit more interest than other cash investments plus your money will be liquid.
Once you graduate and get a job your priorities should be starting a 401K, paying off loans and building a rainy day fund (6 months income) as a cusion in case of unemployment.
It'll be a long time before it gets paid off.
A decibel - a RELATIONSHIP between two values of POWER http://arts.ucsc.edu/EMS/Music/tech_background/TE-
Thousands in the bank.... why aren't you paying for college then?
:P
With that said, RothIRA. Combine that with about 15k (50% matching) I put into a 401k I will be done saving for retirement before I lose my hair.
Short term: beer and strippers - if you are computer-anything (CS/CE) at a tech school you'll need the amusement
Why pay intrest when you dont have to and realize that you do not neet to buy all the toys now.
Undetectable Steganography? Yep, there's an app fo
I would recommend opening a Money Market account along with a Checking account at your local bank, or even better, an online bank such as NetBank. An online bank offers the flexibility of moving around (as you'll probably be doing quite a bit of this in the next 5+ years), and as they don't have the overhead of maintaining branch locations, they usually can pass those savings along in higher interest rates. This way, your money can earn around 4% in the Money Market, but still be a liquid asset that you have full access to at any time.
Best of luck!
You don't provide enough information about the kind of loans you have taken out. Do you really need to have "thousands in the bank" to live? Perhaps you could try to reduce your cost of living instead.
The biggest issue in my mind is that by taking out loans, you now owe interest. Depending on what kind of loans they are, the interest rates, and the repayment schedules, this may not be the best thing to do. In the long term, unless you're able to achieve a higher rate of return on any investment you find, you'll be losing money.
If you financial situation is stable, and you have some sort of fallback plan (i.e. family), or you can look forward to finding a good job when you graduate, the best thing to do may be to just pay off those loans right now.
I browse Slashdot at +3, Funny
Really you are stuck as you wont make a lot of monies no matter what you do. I recommend against any high risk investments; they are 15-20% return for a reason and it's a simple one: you may not get your money back. Also compounding is out of the question as you need access to it. So out right I'd suggest finding a short term investment (with a bank is best) of six to twelve months and put 80% of what you have into that. In Australia, where all of my advise is customised too - I believe the UK should be almost the same though the US may differ (do you guys trust your banks?), at the moment you can get a very nice deal around the 5 to 20k deposit for six months to a year for 6 to 8.5% interest depending on who you go with and the term. Note that the penalties for withdrawing money within the time frame are huge which is why you keep 10 to 20% of your capital out of it for that Just In Case situation.
:)
Hope the above helps and I can provide more accurate advice if you need. Also time for a new acronym...I Am A Investment Geek Though My Advice Has No Warranty So Don't Sue Me If You Fuck Up...IAAIGTMAHNWSDSMIYFU
I ate your fish.
I'm in a similar situation. Best thing I've found, ING Direct. 4.35% interest, with no fee's, no catches, nothing except for good interest. It takes a few days for money to go in or out of your account, but other then that you can access your money rather easily. Even have a good referral system and is FDIC insured. www.ingdirect.com ask if you want a referral, i get 10$ and you get, i think, 25$
Why do you want to have money in the bank and a loan?
I can understand having some 'petty cash' to cover emergencies, but I think you'd be hard pressed to find any sort of saving (especially one that gives near instant access) that will pay greater interest then the interest charged on any loan.
You'd be better off (as in save more money) using your free cash to cover your living and take out a smaller loan.
Are you really going to need immediate access to all your money? Normally I'd recommend you keep about 1/2 your money in a high yield saving account and/or short term cd, you'll be able to get 5% or higher right now, and the other 1/2 in mutual funds. The problem though is if you need immediate access to your money you might end up losing some money that you have in the mutual funds depending on the current market.
1. Go to your bank (where you have a checking account).
2. Ask to see a financial advisor. Every bank I know of provides this service for free, but maybe I don't get out much.
3. Listen to their advice, which will likely involve putting regular amounts of money into a reasonably long-term investment that the bank will be happy to provide for you.
You could also buy real estate, which isn't a bad investment long-term (they aren't making more land). Such an investment could be more difficult to liquidate should you suddenly need the money.
For my money, which isn't as much as I'd like, I'd research mutual funds. Find one that's performing well, and put your money there. It's a little riskier than a CD or government bond, but it's not as risky as investing in only a few companies.
The big thing is to get that money working for you. The earlier you start, the more money you'll have later - if only because you saved it longer.
You borrowed money to invest. Think about that for a minute.
Then you borrowed money to invest and you don't even know how to invest. Think about that for another minute.
Give the money back to the bank, pay your stupid tax, and go to DaveRamsey.com and get My Total Money Makeover and learn how to use money.
Or, continue to be financially brainless and wander around borrowing money for no good reason and wonder why you retire broke and bitch about Social Insecurity.
Linux - Because Mommy taught me to Share.
good article here, it generalizes alot but should get you on the right track: Start on your first $1 million at age 16 (Yes, I know you're not 16, but if you have a couple thousand just laying around it is good to use this as a guide) You could also go get a CD. I have seen 7 month CDs for 5.45 % and 12 mo CDs for 5.25 % or more. Like another poster said, go talk to UBS or another firm, not Slashdot.
One concept I've heard of that I liked combines liquidity (access to money) with a high return. Say you've got $5000 you can put away. Divide it by five and put $1000 each into a 1-, 2-, 3-, 4- and 5-year Certificate of Deposit (CD). At the end of the first year, when the first CD matures, roll that into a 5-year CD. (The longer the time, the higher the interest rate is you earn, usually). Lather, rinse, repeat. Every year, 20% of your investment becomes available without penalty and you're earning a high rate of return on your money due to the longer term and interest rate averaging over the time period.
That, or find a financial advisor you can trust. A good one will value your relationship and look forward to making you money for many years. A bad one will want you to trade stuff in your account often (earning them high commissions) and leaving you in the poorhouse.
That, or invest in mutual funds that cover a lot of type of investments: some index funds, some international/European funds, a few bonds here and there. It's very easy to avoid scams and beat your savings account rate. Optimizing that is what is a bit trickier.
Small potatoes make the steak look bigger.
The posession laws make it so that most people own the same things. Although programmers get 3 year old cars, and bricklayers get 10 year old cars, it doesn't actually matter what you do with your money, you'll get a TV, Internet, a car, a house, clothes, and...am I forgetting anything? as long as your work your 40 hours per week. You even get to go somewhere and hang out in a hotel every year. Don't expect to purchase anything fun, such as a private aircraft or blowtorch, or even some TNT to dig a big cave in your backyard...or anything that could be built with these technologies and no longer exists. I still remember when I had a job, I'm pretty sure the boss based my pay increases on personal need, (and not ability, benefit to the company, or anything relevant) so there might be a small personal advantage to wasting money. I'd suggest investing in strippers and beer, personally, you'll have a good time and you'll still get the same things. Or invest in some cages and reproducing animals, and get eschewed by the neighbors instead. Althouth your food bill will get smaller. :)
Why take loans when you could have just opted for a FREE ONLINE DIPLOMA!!!! like me... Didn't you get the offering by electronic mail? It wasn't _totaly_ free though... :|
If you've got any loans that aren't deferred, they're probably charging you a higher interest rate than the bank is paying you for your deposit. If you don't find an investment that grows your money faster than the loans' interest rate is growing your debt, you're better off paying off the loan rather than investing the money.
The stock market hasn't been the sure thing it used to be of late.
Use this advice at your own risk; I'm not qualified to give it, and when your lawyer sees my net worth he'll laugh at the idea of suing me.
Sheesh, evil *and* a jerk. -- Jade
...there are some really amazing oppurtunities for investing in Africa. I just sent a cashier's check for $12000 to Prince Oolando Bothsqanta to pay the minimal fees needed to free up his vast fortune from Swiss banks. In return, I will earn approximately $4 million dollars in the course of the next 12 months.
I'll let you know how it turns out!
Cloud City Digital: DVD Production at its cheapest/finest
First off, get over yourself. Brandishing about the fact that you have a full ride and that your tuition bill is minimal is load of self-important horseshit.
Secondly, get in touch with reality. College is hard work... I have learned that you don't go to college for money. You go to college to learn. With that learning (not just academically, but about life in general) you learn that life does not come delivered to you on a silver plate. *Most* college students have loans. Unless you're some rich trouser stain who doesn't have you be bothered by reality (i.e. the submitter) you'll probably be working shit jobs at a shit wage living in a shit apartment trying to get your degree.
This sense of entitlement is beyond infuriating. I experienced this kind of crap in college all the time. Life does not owe you anything and there is a high likelihood you'll be in debt. Just be happy that it is another day and leave it at that.
Yes! I listen to NYC Speedcore and do math at 3AM. I suggest you try it too.
To invest your student loan proceeds until you can use them.
If you want access to pull out your money at any time, take a look at some online savings accounts. There are several banks that give 5% interest which beat the 1% interest of most brick and mortar banks. Fatwallet's finance forums are a great place to learn about all the options out there.
Look very carefully at how much interest you're paying on your loan and how much you're making on your investment. If you can't make enough to cover the loan interest, paying off the loan is the "best investment" - it's not a sexy answer but it's the truth. Oh & for deity's sake don't run up credit card debt.
What are you listening to? (http://megamanic.blogetery.com/)
and drink it all.
Seriously, the lifelong bonds you will create with your beer drinking buddies will turn into lots of money when you are older and have the power to direct business to each others company's. I know in my case, many of the people I do business with now shared more than a few beers with me in college. Well worth the investment.
No. The stock market performs around 10% on a rolling average of several decades...In the short term your returns can be anything from 300% to losing all of your money. Even a diversified fund in low risks stocks can lose you money rather quickly. For example a close friend currently has several hundred thousand dollars in a spread fund and last month was upto 22% return but this month is all the way down to 6% return on his rolling average. This is not the sort of worry a uni student really needs...Secure low risk returns are always good and I do agree with you about real estate - well chosen investments there always return good rewards.
I ate your fish.
But total networth. If you have money in the bank, and a student loan, then you are donig something wrong. The first, and best investment is paying off loans (or having smaller ones).
rent out one side, live in the other - graduate or start your software business, move out, rent out both sides.
I jsut finished paying off all my student loans a year ago, along with a car payment. in retrospect, i would have gotten a crappier car. its amazing what a diference another 500 bucks a month in you pocket make for your life.
All Troll + "offtopic" mods are meta moderated as "Unfair", because you abused the system.
Financial advisors are there for a reason. You wouldn't ask one of them for advice on buying a computer, why are you asking slashdot for financial advice?
There's a few obvious answers of course. You shouldn't be putting your money in anything where you're risking losing it. You're a poor college student right now, and risk is not something you can afford. That rules out things like mutual funds and stocks. You also need to make decisions about what portion of your money you need immediate access to. All of it? Half of it? Figure out what you really need in terms of money, and then go to a financial advisor and work out a plan. Stop asking for advice from people who don't know your current sitation and don't know all the options available to you.
AccountKiller
... the simplest is to buy a house and rent it out to your fellow students. You take advantage of your social connections and don't pay rent.
However, unless you can get a small business loan, you're going to need a hand from somebody who can back the mortgage. The banks don't consider potential rental income when calcuating what you can afford.
If the local real-estate market is too high for you to enter, and you're not entreprenural in nature, then I'd say there's not much you can do with your money which will be secure and liquid. If anyone tells you anything else, IMHO, they're ignoring how the marketplace self-corrects for any "sure thing".
Your college probably provides some sort of financial planning service (probably right next door to the sex health adviser).
Engineering is the art of compromise.
Spend it on merry girls, hearty wittles, and fine wine.
Get rid of the savings account and do not invest: this way you can file 1040EZ instead of 1040 to the INS; as a college student this will save you money.
Start your own business and become a consultant. Claim beer etc. as a business expense.
Buy gold. That keeps going up, plus will keep its value when the Revolution comes.
Get a PhD in chemical engineering; you will be raking in 250k+/year if you are any good.
Become a Canadian citizen; with your IQ you will qualify for disability payments.
Obama likes poor people so much, he wants to make more of them.
Spend it on getting laid. You will NEVER have as good of an opportunity to lay college girls again. A few thousand may seem like a lot now but it's nothing once you start working.
Invest in beer. Stay away from the name-brand American beers. You can afford good beer.
ARE YOU INSANE? You have a loan and now want to invest it? That makes no sense because you WILL NEVER MAKE A RATE OF RETURN = TO THE RATE OF THE LOAN. You are a bankers wet dream.
OMG Ponies!!! with Glitter!!!! I miss Pink
ING Direct,
Not only do they provide a 4.30% APY, but they have IMHO the best security measures on the internet. As well they just recently upgraded their login procedures to be even better.
http://www.ingdirect.com/
The other thing you could do is called pyramiding your money. In otherwords you have say 1/4 of your money in a savings account (ING Direct), 1/4 of your money in a 3-6 month CD, 1/4 of your money in a 6-12 month CD, and 1/4 in a 12-24 month CD. When the 3-6 runs out you roll it back into a 3-6 possibly with any extra money you received from your savings account. When the 6-12 runs out you roll in the money (that should expire from the 3-6) into the 6-12. So on and so forth.
It's a great example of how to keep money accessible and take advantage of compounding interest.
Sounds oxymoronic to me....
Most college students can't even afford dog poop...even if it came with a free car wash (and the dog)....
What about investing in a startup? It's high-risk...but hey....
Or invest in something that's bound to do well....oil stocks for one (unless they pull an "enron")
It sounds like you've borrowed money you don't need for a year or two, and now you want to invest it. That can be risky. Some conservative principles:
Risk. Don't invest more than you can afford to lose.
Time horizon. If you really need the money within a year or two, do not invest them in anything riskier than a money market fund, a bank CD, etc. The market can fluctuate abruptly. Over the long run, you can get good returns, but in the short run you can lose a lot.
Diversify. If you want to be in the stock market with a part of your funds, consider a low cost mutual fund, such as one of the Vanguard funds.
If you're just starting out, get into investments slowly, and plan to take some time watching the markets, reading, seeking good opinion, etc. There's a lot to learn.
Good luck!
Fiat Lux.
HELLO. MY NAME IS XABBU UGABE. I HAVE RECENTLY COME INTO POSSESSION OF A LARGE MONEYS LEFT TO ME BY LATE RELATIVE. I DO NOT KNOW FOR SURE HOW MUCH IT IS BUT I DO KNOW THAT IT IS A LOT PERHAPS 30 OR 40 MILLION. I AM IN NEED OF ASSISTANCE TO OBTAIN THIS MONEYS.
THE MONEY IS IN A BANK IN RUSSIA. UNFORTUNATELY, MY COUNTRY IS CURRENTLY FIGHTING WITH RUSSIA SO I CAN DO NO BUSINESS WITH THEM UNLESS I PUT SOME MONEY DOWN FIRST. I AM WRITING TO YOU HOPING YOU WILL HELP ME OUT. I NEED FOUR THOUSANDS DOLLARS TO PAY BEFORE I GET THE 30 OR 40 MILLION. I AM A HONORABLE MAN YOU HAVE MY WORD THAT I WILL PAY YOU BACK VERY HANDSOMELY. IN ABOUT A MONTH A LARGE CUT WILL BE WIRED TO YOUR PERSONAL ACCOUNT. PLEASE INCLUDE YOUR BANK ACCOUNT NUMBER SO I CAN DO THIS. PLEASE SEND MONEY AND INFORMATION RIGHT AWAY AS CONDITIONS IN OUR COUNTRY ARE WORSEN.
THANK YOU VERY MUCH FOR YOUR KINDNESS IT WILL BE REPAID.
YOUR TRULY
XABBU UGABE
Invest you money on a wife. You could make a return by charging slashdotters money for relationship advice. It would also keep you from spending a freaking insane amount of money on dinner and movies.
You're in luck, asking this today! Coincidentally, I just received in my email information about an unusual investment opportunity. It is a company called RWGI which is "an explosive pick for our members", according to the email. The email says the stock is selling for $0.32 but I did some research and it is actually only about $0.20, so it is an even better deal now! Imagine if this stock went up to $20 a share, which isn't all that much for a stock, and you put $1,000 into it, you would be worth $100,000! Not a bad financial position for your graduation.
I'll let you know if I get any more investment ideas. Apparently these are all around if you just keep your eyes open. Good luck!
I'll give you the standard advice of at least two months expenses very liquid. It's better to have 6 to 12 months, but I'll leave that to you to decide. Think money market account for that. The rest... Well, you're a junior so, you're not looking real long term. I think CD's would be best. Figure out when you'll need the money and get maturities for then. Don't bother with the stock market, it's for LONG TERM; think years and yearsm and years.
Using the Freedom of Speech while I still have it.
Better interest rate than a typical savings plan, and you still have access to your cash.
I got mine thru CitiGroup.
Bad User. No biscuit!
Go to the bank and get a CD. The longer you have it, the better the interest. The more money you put in, the better the interest.
http://banking.about.com/od/cds/a/cdbasics.htm
....go to a Casino and put it all on Red!
:-)
Hey, it's as good advise as any thing else your likely to get here
I wish I could think of a witty Sig. Sigh!
If you can afford the down payment and the monthly payments buy a house. You will make money when you sell it on the appreciation and you will get some ok tax benefits from it if you have income.
Don't bother investing properly (i.e. shares, business, resources, property) unless you are prepared to do so actively (i.e. constant research and monitoring of the financial page) and be prepared for the long haul. Otherwise you are just likely to get burnt.
:)
A term deposit on fixed interest or a high interest savings account is the best for the shorter term and lazy investor. Be sure to have a regular deposit plan (i.e. $X per month). The returns may seem modest (and they are), but the biggest advantage is that of having a savings plan you stick to.
Of course the best investment is almost always to pay off any loans you have IMHO, but I gather interest rates in the US aren't as high as over here in AU (~7% on a home loan)
L.
Pretty simple: think like an industrial engineer. Attack your biggest expense because that is where the most potential savings is. For most people this is housing. When I was in school I happened upon a foreclosure that was in a state of disrepair. I got it into an acceptable condition by myself (paint, wallpaper, carpet cleaning) for me to move in. Not only did I not have to spend money on rent every month, but I fixed it up over the years I was in school then sold it for 90% profit when I graduated. Look around for such properties around where you live. You should be able to find a place that the bank loan note, taxes and maintenance are less than many if not most of the rents in the area. Buy it, then do the fix up yourself in your spare time. It isn't rocket science.
-- IV
http://www.LinuxMedNews.com Revolutionizing Medical Education and Practice.
You should consider opening a Roth IRA Roth IRA. You can invest $4000/yr this way. You could open your account with a discount brokerage, so that you could choose any selection of public stocks/mutual funds/ETFs. The nice thing about the Roth IRA is that your initial investment is taxed at your current rate (which presumably is at an all-time low). Once you graduate, your income and tax rate will likely increase as you gain skill and experience. As you approach your maximum income you will be better off investing in a 401(k), but in the meantime you should fill your Roth first. As for investing, I suggest Buffet's letters, The Intelligent Investor, and Toward Rational Exuberance: The Evolution of the Modern Stock Market. Good luck.
Seriously, how can you even consider investing borrowed money if that wasn't your initial purpose behind the loan? You took a loan for business? Ok, you've thought about it, you have a plan, gl with it. You took a mortgage? Ok, you've obviously decided it's time to buy a house, hope it's a nice one.
...but come the fuck on. You took a loan for school, you're in debt, and you want to INVEST it? What if anouther 9/11 happens? What if a major economical crisis hits? What if RE price bubble busts?(I'm not saying ANYTHING like this would happen, but yes, it could). Will you be able to slip when it happens? If the answer is no, just don't do it. NEVER gamble with money you're not prepared to lose. And yes, investement IS a form of gambling and vice versa.
1. No sig. 2. ???? 3. Profit!!!
Here's a better plan...
Figure out your monthly nut (living expenses, ie. food, rent, medicine) and then set yourself up a salary from your cash. Invest in something liquid and safer... A large portion cash (ie. Money Market,) maybe as much as 33%; some in a stock index mutual fund, maybe a third, and the other third in high-quality bonds. This is a fairly conservative investment strategy, and you probably won't be a millionaire at graduation, but you'll spend less of your original capital by having steady income streams from your conservative investments, and some protection against inflation from your stock-based mutual fund.
The bottom line is you might be able to get ahead by buying stocks and taking loans out for school... But US Dept. of Ed. loans have gone up drastically in the last couple years--into the 6% range. This means you'd have to have a pretty good year on your stocks--every single year you're in school--or you'd end up paying more in student loan interest than you would earn from your stock investments, especially after you adjust for inflation... That 10% avergage on Large-Cap stocks over time is fine, but after inflation is factored in your margin gets pretty thin before you're upside down.
Who did what now?
Okay, so it's actually 4 steps to becoming rich. (See below.) Here are basic guidelines to how you should save or invest your money. As always, your own life situation will affect how you save money. Pulling money out early completely destroys the purpose of saving it. If you pull out money early you will also probably get hit with penalty fees and taxes as well. For example, pulling money out of a 401k early will cost you 10%(!) of your funds, and that doesn't even include the taxes you will have to pay.
You could go balls out and try to make millions starting a company, playing poker, or saving beanie babies... But follow these steps (listed in order from most important to least) and you will easily be a millionare, if not multi-millionare, by the time you retire. These steps apply to everyone.
That's it. If you start following these 4 steps in college, you will have a millionare by the time you are 60.
For anyone who wants to know more about investing, actually picking individual stocks, or just how to become richer in general (there are no quick and easy ways to become rich), I suggest reading the Motley Fool. Good luck!
1) Credit card debt? Pay it back.
2) How much is your loan interest? If it is more than 4.something percent, just give the bank some of their money back. You can always borrow it again if you need it down the road. Why did you borrow more money than you need anyway? The bank does charge you for this money.
3) If the loan interest is practically free money, then invest in a savings account. For somebody with no actual post-graduation job yet, you really don't want to invest it in anything with the slightest amount of risk, just in case the job market sucks when you graduate. You REALLY don't want to dump it in some high-cost, high-risk mutual fund. The most risk I would personally take on at this point (if we are just talking a few thousand $ cushion here) would be a Prime Money Market (losses are unlikely, but theoretically possible). This returns about 5% or so right now from Vanguard. (Vanguard is about the least expensive and most honest provider of mutual funds in existence.)
Once you have a decent financial cushion, $20K or so, THEN you can think about doing some real investing. Personally, I am a Geek, not a financial expert. I have no particular reason to think that I will earn anything better then average returns. Since I have no rational reason to expect I can earn better then the average, I content myself with earning the average. I put my money in an Index fund from Vanguard. They charge me $2.20 per year per $1k invested. Can't beat it with a stick.
SirWired
I've been a university student for ~11 years (bachelor's, master's, and finishing up my PhD). As university students, we tend to have little income and fairly regular (tuition) payments. (Although, scholarships and occasional co-op work terms/internships can produce "spikes" of surplus cash, and the question then becomes how to manage this influx optimally.)
Here's some brief advice based on my own experiences... I don't have the willpower to go into lengthy explanations for each point, so the first thing that I can recommend is that you start by doing some background reading. (Also, I'm skipping all of the mundane advice like "live frugally" because you've probably heard most of it before, and you want a non-bullshit answer.)
0) Pick up the "Intelligent Investor" by Graham, revised edition with commentary by Zweig. Then, read everything at: http://www.bylo.org./ When done, read everything at: http://www.ndir.com./ Once you have established this basis, you will probably understand & agree with my following comments more closely.
1) Pay off your debts first. Do not invest money while you still have debt -- paying off a 19.75% credit card balance will reap you more money than any average investment. Let me repeat that, because most people are retards and don't get this point. Do not put a cent of money into a mutual fund or stock until your debt level equals $0.00. Capiche?
2) Open an ING Direct savings account. It's free, it pays high interest, and it's secure. (I've been a customer with the Canadian version of ING Direct for more than 7 years.) Keep your spare cash there. This includes any money that you make on co-op work terms (or summer jobs, etc.).
3) Build up a sufficient supply of cash in your ING account -- enough to pay for the next 2-4 terms (or whatever you feel comfortable with). This is your "margin of safety" cash -- don't touch it. It's used in the event that you lose your job, crash your car, etc.
4) At this point, you have no debt, and you have reached your "margin of safety" amount. Once you have built up an additional $3k to $5k on top of your margin of safety, open up a discount brokerage account (e.g., E-Trade).
5) Now, start to build a "couch potato portfolio". Buy an S&P500 ETF (called a "SPY"der, in the States) from iUnits/iShares. (I recommend waiting until you have $3k to $5k to minimize the effect of brokerage commissions, as a percentage of the amount invested.)
6) Every subsequent $3k to $5k that you save is then used to build up a diversified portfolio of (a total of) 3 or 4 ETFs covering the S&P500, the NASDAQ, MSCI EAFE, and possibly a Japaense/European/Canadian index. Over time (as the evidence suggested at http://www.bylo.org/ would suggest), your low-cost ETF portfolio will outperform a vast majority of actively-managed mutual funds, and it requires relatively little maintenance on your part. This is exactly the kind of portfolio you want to build as a student -- you want an investment platform that you can put on "cruise control" while you focus on more important things (like studying, partying, getting a girlfriend/boyfriend, etc.).
By the time you're ready to move on to more advanced stock/bond investing, you will probably know that there are better forums for these kinds of questions, and you will go there. Good luck.
In terms of investing, contributing $1,000 a year (less than $100 a month) into a Roth IRA will leave you with nearly $575,000 when you retire (depending on interest rates, inflation, etc.). Unless you are planning on investing more than $10,000, I wouldn't bother with the stock market, because maintenance fees will just eat away at your account, and you should be focusing on your studies, not reviewing companies' balance sheets. Wait until you are employed and try to invest in a 401(k) or 403(b) with a 70/30 stock-bond split.
As a student, get that money far away from yourself as possible, but not too far. Short term (3 month) government bond should do the trick. You will make absolutely no worth while money off whatever cash you might have... so just make it so you won't spend a chunk of it on the next 'emergency'.
As far as generic investment advice, just do this:
1) keep your visa card perpetually paid off --- 18% investment right there, guaranteed
2) when you buy a house, every year scrimp up an extra 5k or more to put back down (just after you pay your taxes / receive refund) --- 5-7% investment right there, guaranteed
cheap ass geezer advice:
3) when working, find yourself a daily treat. maybe a fancy coffee. this will help to save you from buying big toys and blowing your money for short term fun.
4) eat light before going out drinking, you'll get your buzz that much faster and for less
5) when ordering drinks order your limit up front (?4 drinks? hard to gauge with your weak American beer) and tip the waitress while sober
If ur currently renting the number 1 place to start is to buy a place.
Find a house...a fixer upper in a neighborhood that is gentrifying and hopefully a short commute to the local big business offices. Buy that house, stop paying rent, fix it up, and almost certainly you will see your equity in the house appreciate better than anything else you could do like stocks, funds, or CDs. Plus, the mortgage interest is a great write off. I cleared more than 50% over my original purchase price on my first house and more than doubled my money on my second. I'm completely debt free and temporarily living in a rental while my next house is being built. The development is already asking $30k more for the same house in the same development than when I signed my contract. And, in the next five years this location will become more and more desirable. Remember though...location, location, location.
I reserve the right to think for myself. Others' opinions are optional. Puppy on lap = typos...not illiteracy.
Help them unblock their secret stash of public funds, you can make a nice chunk of change. Hey, it worked for Larry Ellison.
Lemme 'splain something.
If you take out a loan, at first there is net zero change to your finances. You owe $X but you have $X in your pocket. However, as time goes on, you also owe the interest. You are almost certainly getting charged interest that is HIGHER than any bank account or fluid street investment can accrue, so you are HURTING yourself by taking out a loan to "have money in the bank."
The standard advice to anyone, and Alan Greenspan constantly had to explain this to Congress too, is a three-pronged attack:
If you live austerely, putting most of your disposable income into investments instead of luxuries, you will accelerate this process. Once it is appropriate, invest in a mix of low, medium and high risk funds, per your investment goals. Get in the habit of putting money into a retirement fund (401k, Roth IRA, etc.) on a regular basis, such as direct deposit. This will build up a faster-than-market curve on your investments in fat times, and will continue to rise at market rates in lean times (e.g. again, if you're out of a job).
Put simply, pay back that foolish loan as fast as possible!
[
There is a very simple, risk-free and tax-free way to invest the money: pay off your student loan.
Typically you get taxed on interest from investments, but you don't get taxed on the interest you no longer have to pay on your loan.
The risk is as close to zero as you can get. I suppose if the loan intrest rate is fixed, hyper-inflation could make your repayments irrelevant.
Normally loans have higher interest rates than low-risk investments, so you get a better effective interest rate than putting it in term deposit.
If you have some special subsidised low interest loan, the final point may not apply to you.
Quattuor res in hoc mundo sanctae sunt: libri, liberi, libertas et liberalitas.
So I got the normal federal subsidized student loans when I went to college. But in between my junior and senior year I decided to take classes during the summer session. This cost extra, and my school recommended suplimental loans from Sallie Mae. Not fully understanding the whole loan system I went ahead and took this extra loan. Well this loan was not federally subsidized, used a variable interest rate based on prime, and is not eligible for consolidation after graduation. This was a big mistake.
At this point, interest rates were pretty low, and my interest rate on this loan was around 4% when I graduated in 2004. This was just a little more than what I could consolidate my federal loans for, so I wasn't too worried. But in the past 2 years the prime rate has doubled, my interest rate is now 8% on this loan. A little while ago I was thinking about the whole savings stuff and amongst other things I opened a CD at my bank at 5% apr. Which historically, isn't too bad for 0 risk (you could probably do even better now that interest rates have gone up again).
But at this point it would make more sense to use that money in the CD to pay back the loan with the high interest rate because I'm losing more paying 8% than I am making 5%. This is why economists make a distinction between 'good' debt and 'bad' debt. My federal student loan which I'm repaying at 3.375% is good because I can make more money by just paying the minimum on that debt and using my current income to earn at a higher interest rate. It's also federally subsidized so in certain cases I can get a deferment which means I can halt payments, and the federal government picks up the interest while the loan is defered. When the deferment period is over, the balance on my loan is exactly the same as when I started deferment.
Here are some of the conditions for deferment that I got from my federal loan holder's website:
You're never going to have a loan with such good terms ever again in your life, take advantage of it. Unfortunately my private loan is completely unsubsidized, and has nothing behind it like car loans or mortgages do. So it's more risky for the bank, which is why you get screwed with the interest rate. I'm guessing rates are about as high as they're going to be right now, so I would consider getting a long term CD from your local bank. But pay attention to your interest rates and pay back loans with higher rates or worse terms first. You've probably got all your debt in federally subsidized loans, so I wouldn't worry about it too much, just pay the minimum and put your money to use elsewhere.
We always knew Comcast was corrupt, here's the proof: http://tech.slashdot.org/comments.pl?sid=1909890&cid=34545432
If you have any innovative/profit-making ideas, I think you should try that. Investing in stocks is an early start to lose money, so you can earn more money in the future. If you want to be more adventurous, you could invest in foriegn(non-U.S.) markets. You can always donate some to charity.
Here is what I'm doing with my money:
1. For the money that you need semi-fast access to: HSBC has a 5.05% savings account. Go to hsbcdirect.com for more info. It is a little bit of a pain in the ass to setup, but well worth it.
2. For the money that you don't need to touch for a while, try the ING 12 month CD @ 5.25%. It isn't the highest interest rate for a 12 month, but it is close and ING is very reputable and reliable.
Oh ffs, when you graduate you will earn plenty of money. If you have some money to spare now buy some nice clothes a decent watch and as much booze as you can handle. You are only young once and college is THE best time to have fun and get laid. As George Best said "I spent my money on cars, drugs and women. The rest of it I squandered". Dont waste your life thinking about the future.
People like you shouldn't qualify for government subsidized loans.
Some things to consider are how much risk can you afford (e.g., could you afford to loose it all on a bad investment?) and how long you can wait for the investment to start showing returns (e.g., 2 years vs 40 years). Lower risk investments include CDs, quality bonds, etc. The spectrum gets more risky as you look at money markets, mutuals, stocks, derivatives, options, etc. With longer term investment horizons, you might be able to take advantage of longer term trends, ammortize risk over a longer period of time, take advantage of compounding power, etc. Diversifying your investment can help reduce risk as well.
As others have suggested, it's always a good idea to get professional advice. I'd add that no matter how good the advice you get, it's still your responsibility to make the investment decisions. So you also need to do your own research. You'll probably make mistakes at the begining. But any investment mistakes you make at this point in your life are probably smaller and easier to deal with than if you wait and start investing later in life.
One source I'd recommend is to read the works of Benjamin Graham http://en.wikipedia.org/wiki/Benjamin_Graham. He's considered the "Father of Value Investing". His analysis of areas such as the conditions that triggered the great depression and "investing" versus "speculating" are a great read.
Best of luck!
What is this, 1975? Oh sure, the first loans an American student should try to get are the subsidized (no, technically not 'interest-free' - the gov't pays the interest directly to the bank) Stafford loans. But those don't go very far these days. Next up are probably the unsubsidized federal loans, which accrue interest. Then there are the private loans, which run the gamut from low interest/low fees to why-don't-you-just-use-a-credit-card interest rates. Those most certainly are not interest-free, though many of them will simply cap the interest onto the balance while you're in school.
A post a day keeps productivity at bay.
I hate to reply to my own comment, but there are a few other things that are important. Maybe not so much in college, but you should definately start working on these as soon as you get out.
Realize that if your parents are still able to help you out, you don't need as big of a safety net. I do not have that luxury, so if I end up on the street without enough cash for rent, it means I get to start my life again from the bottom.
In no particular order...
I'm sure I've missed a few, but these are the basic steps needed to guarantee that you'll be able to enjoy your retirement down the line.
I just had a similar situation where I have money in the back now but come the start of the school year, I will probably need it. I found a blog called, strangely enough, Bank Deals that keeps track of all the best rates in money markets and CDs. Many of the CD specials are from local credit unions that most people don't have access to, but many of the internet-only banks have some pretty good interest rates on money markets right now. I put most of my money in one that was running a 5% and $50 bonus special (since expired). I'm thinking about some short term CD's but from following the blog I notice the rates ahve been inching up so I'm biding my time.
http://www.popularculturegaming.com -- my blog about the culture of videogame players
Biggest money sink for folks your age is a car. Don't buy a new car. Find a used one. Certain brands don't have great resale value so take advantage of it, for example Chevy Malibu. Maybe a relative is trading in a car and will give you a good deal. Sure it may not be new or sexy, but the savings in depreciation, insurance, etc will be significant.
Don't forgo good experiences. Do some traveling in foreign countries, maybe spend the summer volunteering somewhere interesting. Sure these cost $$, but you will have the memories the rest of your life. This is in contrast to young adults who go to party places like Cancun over spring break. It's a lot cheaper to get drunk at college.
Good luck.
This loan money is money you're going to need to repay in a fairly short time, right? The stock market is volatile. When you need the money a year or two years from now, the stock market could be way up from where it is now. It could also be down--possibly by 25% or more. And that's just the market indices. If you invest in individual stocks, rather than index funds or other diversified mutual funds, your investment's value could fluctuate even more.
Better options:
Finally: have you thought about the ethics of using your student loans in this way? Were the loans given to you in order to help you pay for your expenses as a student? Do you think it's okay to ask someone to loan you money for one thing and then use that money for something else? Isn't that a form of lying?
The first step in doing any good research is finding good sources. I don't know where you go to college, but by now you should have learned that somewhere. Asking the Slashdot crowd for financial advice is like asking a group of fifteen year old boys what a boob feels like. A few of them will know the right answer, while the rest will confidently feed you a huge story. A wise man would ask a woman or a married guy. He'd ask an expert. Because the rest of these Anonymous Cowards are going to have you running around feeling various sized bags of horseshit.
The trick is to put your money in something that can roll over. CDs are not bad for this, but the money is not accessible without penalty. However, this may be a good thing. If you can "bury" the money in something that you can't touch then there's little incentive to raid it. Savings accounts are horrible not only because the interest rates are pretty poor, but you can get the money out so easily that it's tempting when your friends want to go out, you see a laptop that you want, you want new wheels for your car, etc.. You can get about 5.4% APR now for a 12 or 13 month CD.
If you want something riskier, get some mutual funds. You could get 20%, 50% or better over a year, but there's a lot of risk. If you can afford to lose a portion of the money, put it in some medium risk funds. Your bank can get you started.
Going to college is supposed to give you the skills and knowledge to succeed in society (which in turn *should* make you successful in the workforce). I don't know what you're majoring in, but seeing as you are posting on /. I will assume you are an aspiring engineer or computer scientist. You are probably investing in an education that will give you good returns later in life, but education isn't always everything.
You're better off spending your money on physical fitness, whether it be on a personal trainer, yoga lessons (great way to meet chicks by the way), etc. A lean muscular body will give you more confidence and will help you land a job (the next time you're at a career fair try flirting with the HR reps--it works). Plus you'll live longer. Don't invest your money now and die of a heart attack at age 50 before you can enjoy the money you saved today.
(If you're already in great shape then ignore everything I just said)
... knowing where you are. Cash position, cash flow, etc. Once you know that, you can make better decisions.
Oh, and listen to my podcast.
Christopher S. Penn
Daily financial aid internet radio on demand, no iPod required
http://www.financialaidpodcast.com/
Got iTunes? http://www.financialaidpodcast.com/subscribe/
Subscribe for free to my show!
Check out some financial blogs! There are tons of great ones out there for college students:
http://www.hberry.net/
http://www.iwillteachyoutoberich.com/
Or a listing of several finance blogs by people under 30: http://under30honorroll.com/
As the +5 poster above said first and foremost be frugal (but not tight). Have a budget and keep a list of what you spend your money on (in a spreadsheet, on a notepad etc). Keeping a list gives you more money in some magical way I'm not sure how.
If you don't know what to invest your money in then put it in government bonds while you learn. Bonds are simple and extremely safe. Basically you can expect around 5% return (paid in cash at regular intervals) which you can then either spend or reinvest back into bonds. Don't just give it to someone to invest for you.
Finally read some stuff about investing and keep a very open mind but a tight fist. I highly recommend stuff about/by Warren Buffet. The only stuff he's written himself is essays to Berkshire Hathaway shareholders which makes pretty dense reading. But a clever chap by the name of Lawrence Cunningham has compiled them into a book called "The Essays of Warren Buffet: Lessons for Corporate America". Don't be put off by the title. It is a thin book and very easy and entertaining to read. It is also the best book on investing I have ever read.
Educate yourself. Mutual funds make you nothing. 5-6% barely keeps up with inflation. Educate yourself for now and the future. Check out http://www.success.investortoolbox.com/ . The Vice President of Harvard School of Business was so impressed with this company's educational value, he's now on the board of directors. -Zweezil
First, a varied stock portfolio. Don't put all your eggs in one basket. Warren Buffet used to give his grandkids gifts of money to invest, and one of them decided to put her money into Pillsbury or something, some pastry thing, and when asked why, it was because it's what she knew about. Okay, a kid knows about yummies. But the point it, vary your stock investments and keep it to companies you are familiar with. Second, don't invest much in your own company. If it folds and you're without a job, you don't want to lose all your investments with it. Third, CODs. The gain is less than you'd potentially have with stocks, but it's more stable, more reliable. Four, give it to me and I'll start a company. :)
Keep in mind that the greater the chance of gain, the greater the risk of loss. The safer an investment actually is, the lower the gain, but at least you're basically guaranteed one.
It's a girl!
I am a rising junior in college and decided to take out loans to cover all my costs so I could graduate with money in the bank.
You have cash but you're still taking out student loans? You could graduate debt free, something most college age people only dream about these days. Interest is what on student loans these days? 8%? Has to be close. Unless you're making more than 8% on the cash you have in the bank, it doesn't make much sense to borrow.
Still, there's no reason to have cash sitting around while you're thinking. Go to http://www.treasurydirect.gov/ and open yourself an individual account to buy T-bills. You can buy 4 and 12 week T-bills and make close to 5% with very little risk. Unless you think our government might default, not out of the realm of possibility. They take the money right out of your account and put it back in, with interest, when your bills mature. If you bought a $1,000.00 4 week T-Bill they'd take $995.00 out of your account (the numbers are just an example) and put $1,000.00 back in 30 days later. You buy in increments of 1,000 dollars. I stagger my purchases so I have t-bills maturing every month. That way if I lost my day job my maturing t-bills would roll in like a paycheck for a few months. It also cuts down on impulse purchases when you have to wait a couple months to get the cash together.
The exact discount rate on the face value is determined by auction. You don't get to participate in the auction but the gov gives you the discount rate of the last auction.
Personally, I'd rather be debt free than sitting on a wad of cash barely keeping pace with inflation. That's pretty much up to you, though. Good luck.
That's our life, the big wheel of shit. - The Fat Man, Blue Tango Salvage
If you really need it to be liquid, I would put it in a high interest savings account. Right now ING Direct offers something like 4.35%. You get interest issued monthly so it can compound. It takes 3-5 days to transfer money into or out of the account. Not to shabby as far as interest and liquidity goes. Also you can set everything up online so you don't have to go anywhere and talk to anyone about it.
If you can handle it being a little less liquid then put it in a 6 month CD. You can get interest rates around 5.5-6% for your 6 month investment.
Good luck!
Check out I bonds: http://www.treasurydirect.gov/indiv/products/ibond s_glance.htm
They guarantee a rate of return above the inflation rate, currently ~2.5% above inflation. It's not risky, and liquid in an emergency.
EmigrantDirect.com has a very no-hassle savings account. It gives you 5% interest currently and the interest rate goes up every time the Fed raises the prime rate.
Your money won't be locked up at all which is very important in case you need it. And the yield is up there with most CDs (Certificat of Deposit) which would lock up your money over time.
Check them out!
Disclaimer: I'm a happy customer there, but in no way affiliated otherwise.
Stay away from all forms of online gambling including poker. Sure way to burn lots of cash while in college...
Get out of debt ASAP and then stay out. Don't let any man own you.
Check out Dave Ramsey for a good plan to get free.
http://daveramsey.com
If you have a BIG loan, like you indicated, it will still have interest due some day... If your defered until gratuation, then you need to find a HIGH interest, LOW RISK (should you need to pay as much as possible back asap). Also, you need to make MORE interest than your loan will incure...
// a negative number is GOOD)
ie, if you have a car loan at 8%, and CC's at 12% and you find a chunk of cash. You pay the CC's FIRST because they "COST" more in interest. If your Savings account is only giving you 4%, then it is not worth it to save until the CC's and the car loan is paid off, because any money you "save" will actually cost you 4% that would have been towards the car.. etc.
Make sense? (ie, think of it as a math problem.. total % cost - Total % earn = cost
This means you DO NOT want:
Local Savings (not enough interest)
CD's (locks the $ up for very little more interest)
Stocks (too risky for your future)
Gambling (too risky for your future)
Drugs (too risky again-- I'm not kidding, another story for another day... )
Two things that you *MIGHT* want to consider...
#1: Online Savings Account (I use ING Direct, always higher than the local banks...)
or
#2: Investment in HARD bullion. BUY Low, Sell High.
Now the #1 option is easiest, low risk, long term type. This is what most people will want.
the #2 option is HIGH risk, but easy to convert. If you catch the market when gold or silver is down,
you buy as much as you can. Later as market spikes, take advantage of the chaos and sell. Even if the
market does nothing but tank, you still have a HARD currancy basiclly... so you'll never loose it all.
(unless they figure out how to transmutate Lead into Gold)
Of course, I'm not a professional anything, so please don't blame me if you loose any money. Always
consult a professional.
--- Relax, that mass muderer is just trying to reduce our carbon footprint, one fetus at a time...
If we're talking less than $10k and that's your emergency fund where you need immediate access then put it in either a savings account or a money market account. That's about it. Everything else depends on you accepting that your money is out of your hands for a while.
If we're talking more than $10k then what the hell is wrong with you? Why did you take out loans? Are you demented?
--
Once you get out of college, its a whole different ballgame. Pay your credit cards and loans to zero, put about $10k in the bank and go buy a house. A house is the single best investment most of us make. Let me explain why:
1. 95% of the time, homes go up in value. You owe the bank a fixed, decreasing amount. The bank doesn't get the increase in value; you do. That increase in value is 100% your money. Just because you sat there and owned a house.
2. 100% of the interest on the mortgage is tax deductable. This means that you pay the interest BEFORE you pay income tax. Let me put it another way: The federal government chips in for about 25% of the interest on the mortgage.
3. Get a 15 year loan. A 30 year loan is a sucker deal: The first three years you pay off about $200 and all the rest is interest. With a 15 year loan, half of what you pay goes to the principal on the loan right from the start. That means half your payment is really to yourself: you keep that money but its in your house instead of in your pocket.
If you're lucky, you end up in a situation like mine: I've spent $100k paying the loan on my house these past six years. In that time I've paid down about $40k worth of principal and my house has increased in value by $300k. For every dollar I've put in, I've gotten nearly three and a half back.
--
Later on when you're rich and famous the game is to keep most of your assets in an S-Corp. Individuals pay taxes on their raw income. You sell stock at a $1000 profit and you pay taxes on $1000 even if you turn around and invest it in another stock. If an S-Corp sells stock at a $1000 profit and then invests it all in another stock it pays no income taxes because its costs equal its gross revenues (no net profit). So, the S-Corp owns your car, your house and everything else you can get away with under the law. You pay normal income taxes on a modest self-paid salary that covers your routine consumption. Everything else operates out of the S-Corp and is damn near tax-free.
Moderating "-1, Disagree" is simple censorship. Have the guts to post your opinion.
I'd setup an ING Direct or Emigrant Direct savings account. No risk, and you earn 4.35% or 5% depending on which one you choose.
Emigrant gives you more, but ING gives you $25 if you're referred and $10 for each person you refer.
Not to be a whore, but if you go this route I'd like the $10 for referring you. Otherwise go with Emigrant.
I'm in the same boat, and unlike what a lot of people here seem to be suggesting, do not invest in a mutual fund. We don't have enough funds or time to make anything resembling a profit from a mutual fund, even an aggressive one. Even an high profitability metals fund will generate a negligible yearly return when compared against the yearly maintenance costs.
I would strong advise checking out fool.com . Personally, what I'm doing is using my account at tradeking.com and doing speculative stock trading. I dabbled a little in forex, but with the US Dollar how it is, it wasn't very profitable when compared to the work.
You also might want to call up Schwab, they've been realigning their business model a bit lately, and they may be worth a look. Also, be sure that you keep a buffer of assets that can be accessed in an emergency. Basically, I keep an extra month of living expenses on hand, and I invest "relatively" conservatively, and watch it like a hawk to minimize loss.
Good luck.
I'm a huge fan of target funds. A target fund is a fund that's "targeted" for a particular year: e.g., the "target 2035" fund is what you'd use if you intend/want to retire in 2035. In the early years, the fund invests mostly in higher-risk, higher-yield stock market opportunities, but as you get closer to the target date, the fund moves to more conservative investments automatically for you.
.21, which is pretty damn cheap; and if you want to be more aggressive than the funds that match your age, you can just invest in a "younger" target fund -- e.g., if you want to retire in 2030, invest in a "target 2040" fund.
I think they're ideal for people like me who don't have the time, skill or patience to keep careful, constant track of investments; who would like to invest relatively safely, but not too conservatively, with minimal effort; and who want to feel confident knowing that their investment is being reallocated more or less as it should be as you grow older without having to sweat the details. (One article I read called them the good option for people who want to put their investments "on autopilot.")
We use them for retirement (targeted 30 yrs from now) and to save for our kids' college educations (targeted for when each turns 18). We went with Vanguard for both (Vanguard Target Retirement fund, Vanguard age-based fund) because Vanguard is big and reliable and, when I was doing the research, had the lowest fees; but a lot of the big investment houses have them now, so you can check around. This recent Money article likes the ones from Vanguard, Fidelity, and T. Rowe Price.
The only knocks I've heard against target funds are that they sometimes (1) charge higher than necessary fees and (2) have overly conservative strategies. But the fees issue is fading as they gain in popularity and are competing for investment dollars, and it doesn't take much shopping to find pretty low fees -- e.g., Vanguard's fees top out at
Just my $0.02.
(sorry, couldn't resist)
I know a little about what I am about to say so go with it. Your best bet right now probably is a savings account, or perhaps if you want to get real aggressive, a money market account. Those are getting a decent return with the fed having raised rates to now. When you graduate you are going to have to start paying on those loans, so you can't afford to risk your capital in an especially volatile stock market at the moment. I know a lot of guys with lots more money than you that are getting chopped around pretty good right now trying to chase a return.
In short, the stock market won't really be the place to be for AT LEAST a few more months (October or November) and even then you might not get a whole lot of upside. Too many people talking about recession right now for you to lose up to 20% of your future loan money trying to get rich before you graduate. People are living a long time now. You'll have plenty of time to get rich after you graduate, especially when you can give investing more attention. For now focus on school and keep your money in the bank.
It won't be as easy or cheap to do later in life, especially the second part.
First, get a budget.
:)
Second, if the money is a loan, it's not *your* money. Spend it wisely.
Third, don't risk it. That means don't buy stocks or bonds. You're only a Junior, you'll have plenty of time to invest in the future. Also, the market's unsettled at the moment and there's a real risk of a recession in the next 18 months or so. You don't want to be buying into a bear market with capital you may need to liquidate fast.
Fourth, why are you asking on Slashdot for financial advice?
-EvilMagnus
Investments are extremely effective ways to make money when you already have a lot to work with. If you've got $50,000 or more you might be able to do better than a savings account in the short term--maybe. It's unlikely you'll make any money making stock/bond investments with less than that, as trading costs eat up returns very quickly. As others seem to have suggested, living frugally is a far more effective way to keep money in the bank. You're probably not really going to be able to make money with money for some time (if you're anything like me, I'm in college too).
The risk tolerance for this money is extremely low and the time horizon is short. A money market with a 5% return will protect your money from inflation and make a small return on top of that.
I wouldn't have asked the question here. I would go see a financial professional if I were you.
However, I'll answer your question. I am not a financial professional but I do have a Commerce degree (and a Science one). I am not responsible for this advice because you are not paying me for it.
You have 18-24 months left (I don't know what rising junior means - if it's anything like rising damp then I'm worried), you aren't paying interest at present but you will once you finish and you've been saving cash into the bank because you intend to pay all your loans back when you finish.
So far so good - a fairly sensible plan.
Assuming you want your money in 2 years' time you cannot afford to take any significant risk. I would recommend against mutual funds or any stock purchases. Those things have a timeline of about 10 years (but do give a very nice return for the risk and timeline).
You could think about buying some blue-chip bonds. Make sure what you buy is rated very highly by a respected ratings agency like Standard & Poors or Moodies. At least A rated if not more.
But, to be frank, I'd just put the money into a high interest savings account, a call account or a term deposit (what do you call them in the US? CD's?).
No, you won't get much return but you're not taking much risk.
As soon as those loans start accruing interest then pay them back as quickly as possible. Do not make the mistake of having money in the bank earning x% while you have a loan accruing y% where y > x. Paying back the loan is risk free and therefore the best investment you can make.
Immediate access and high yield are conflicting requirements. For immediate access with reasonable yield and limited downside risk, it is hard to beat a savings account. Stay away from the stock and real estate markets unless you are investing for 5+ years. One option for short to mid-term (6 month - 3 years) investing is a ladder of US Treasury Bills. You can set up an account at TreasuryDirect, tied directly to your bank account and run everything electronically:
http://www.treasurydirect.gov/indiv/indiv.htm
Yields on recent T-bills are 5% for 1 mon, 5.1% for 3 mon and 5.265% for 6 month. You can set them to automatically rollover (reinvest) when they mature, or if you decide you need the cash, cancel the rollover. You can also buy 2, 5 and 10 year T-notes, but the yield is no better than the T-bills, so why bother? Note that returns on treasuries are state tax, but not federal, deductible.
So, you get reasonable liquidity, some tax leverage, better than savings account rates, and easy managability. As others have suggested, compare the return you can get with that on your loan, factoring in tax effects. You may be better off paying off loans first.
My advice is don't take advice from someone unless they are currently doing what they are advising you to do.
How many people advised to you buy real estate but never mentioned what type or where? The real estate market changes with the wind and even on adjacent streets. "Buy real estate" is completely useless without many many more details.
Sounds like you want a short term something that is making more then a svaings account and is relatively safe. If you want to keep the research low and meet those requirements, I'd advice a CD from some bank. More often then not, early withdrawl if needed is only a few months of interest lost to penalty.
I just bought an 18 month CD for 6.25. It required a 15K minimum though but from what I have seen in the past few months, rates are creeping up so that seems like a good length and the right amount for me right now with my extra "savings" money. That 6.25 if far more then I've got back on my retirement account in the last 6 months.
On a side note and not that anyone cares but I have that $15k from buying a $12k new car instead of a $22k new car a few years ago. I put what I would have been the difference for the $22k car into savings a few years ago after the cheaper car was paid off early. In theory, I could have bought a $3k dollar car and saved alot more but to each his own.
I thought a CD was a good short term investment for me and would probably be for you as well. There. I took my own advice about you taking advice.
You are right to start young. Go to DaveRamsey.com and take it from there.
What ever you do, do NOT get a loan from Sallie Mae. SLM Corporation, the backers of Sallie Mae loans is a very profitable company that would love for you to sign on the bottom line. They give kick backs to universities to sign you up. They are also well connected in DC - better than credit card companies. As a consequense, you cannot get out of one of their loans if you experience a hardship - not even credit card do that to you.
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http://www.cbsnews.com/stories/2006/05/05/60minut
http://www.nytimes.com/2006/07/14/business/14sall
I dont know what they are called over there but here in .au the banks offer something called a Term Deposit. Basicly, you take a chunk of money and give it to them for a fixed term (say, a 6 month term) and you get more interest on it than you would from a normal bank account.
I think you can get it back if you really need to but you do loose most of the interest if you do so.
I am just starting college and I have had an Etrade account for over a year now. I am 18, and not only have I made a few hundred dollars off an investment of $2500, but I've learned a lot about finances and business in general. I bought Transmeta at $1.32 and sold at 1.70, and am now a holder of Microsoft which is doing well. Do your research and place your 'bets' carefully, and the percieved risky bet turns into a calculated decision. If you don't feel comfortable with stock trading, Etrade has a very good "Money Market" account, which I view as a hybrid CD/checking account. It is high-yield (5.X%) account from which you can withdraw your money at any time.
Just something to think about.
- Travis
Finance is quite interesting, since you can leverage loans to the point that you can make money on borrowed money. Although a number of comments say that any existing loans should be paid down over keeping the money in the bank, careful consideration should be placed on three factors: access to cash, interest rate variability, and tax impact on earnings. Do a cost/benefit analyis to see if it would make more sense to hang on to the cash.
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* Access to Cash - Taking out a loan of any type and dumping the proceeds into a short-term savings account gives access to cash on a short notice. If the interest revenue on the deposit matches (taking into account taxes) or is close to the interest expense for the loan, then you can use this deposit to assure that cash will be available when needed without the worry of securing a loan in more-stressful situations (e.g., between part-time jobs). Having a loan balance can also help establish a credit history.
* Interest Rate Variability - Loans and investments can have fixed or variable rate interest. You want to acquire variable rate loans and fixed rate investments when you expect market interest rates to go down, while fixed rate loans and variable rate investments are better when market interest rates are likely to go up. For example, those who acquired variable rate mortgages three years ago are paying much more in interest now than those who acquired fixed rate (and at the time more expensive) loans.
* Impact of Taxes - Remember that you have to pay taxes at your marginal tax rate (e.g. 15% or 25%) for any interest or unqualified dividends you earn. One who pays income taxes at the 25% rate will only net 3% on a 4% yield investment. Likewise, only some types of loans will give you a tax break on interest you pay. A student loan at 6% only costs you 4.5% when you factor in the tax break, but 6% credit card interest costs you a full 6%.
I recommend Vanguard's Prime Money Market Fund. It currently yields 5.04%, you virtually can't lose money since the share price is fixed at $1, and you can write checks out of the account for immediate access to the funds. You'll earn higher rates than in a bank, but you need a $3000 minimum deposit.
http://flagship2.vanguard.com/VGApp/hnw/FundsSnap
You can actually feel it gripping!
...don't *only* deal with oil. Those top guys are heavy into stuff like-modern armaments. Construction and "infrastructure RE-building. Get the drift? And they have sneaky ways to keep oil prices up, stuff like starting huge wars that bork most of joe random nations oil exports-say, like iraq. Next up to get borked-iran!
oil will stay HIGH, they have the global political clout to insure this.
Now,for the original poster, hope you see this-diversification, all eggs NOT in one basket. You want cash (handy cash, in your wallet some and hidden some, not just a normal checking account), short term and long term bonds(no taxes, dig?), some old stuffed shirt blue chips, energy stocks, a fair pile of precious metals(I have done *well* on those, so don't ignore them, they are still a deal now), and buy your day to day tangibles in bulk and on sale. Jeans on sale, get 5 pair, not just one. shoes, etc. Food, stuff that can store, wait until on sale, buy in bulk. I can't tell you how many times I have saved serious money by following that simple method. Also helps when those weird times happen when all of a sudden reality changes, big storms, power blackouts, etc. Makes for a stuffed pantry (hint: under your bed can hold a lot of canned goods and like bulk rice and pasta, etc), but over the course of a year you can save a lot, and being a young guy, I bet you like FOOD all the time, no reason to exist just on ramen. Stock up-on sale. Get a small chest freezer, fill it with the sale stuff. You can cut your food budget almost in half by filling up with the sale stuff over a few months then keeping it topped off. This WORKS. I was raised in a medium large family, my mom taught me to shop like this because she had to, and it works.
If you need transpo, go for non flashy reliable, go diesel if you can, I got a hunch fuel is going to be pretty dear this time next year. One of those 50 MPG vehicles will be schweet then. Valuable, too. If I wasn't so busy now I would even consider accumulating "good deal" used diesel vehicles just for resale next year. They'll be going up. I remember the OPEC embargo days....
anyway, good luck, shows you are thinking squarely.
First, if you have any credit card debt pay that off. Credit card debt should always be avoided if possible.
Second, ideally you will have some money in the bank after you graduate just in case things do not pan out immediately. (I graduated a CS major in 2001 when during the school year everybody went from having great jobs to having no jobs at all... I was laidoff the week I graduated.)
Third, if you have say $8000 in the bank and do not expect to use it for the next six months or nine or twelve months you can generally go to your bank and have say $3000 put in a short term (6-12 month) certificate of deposit (CD). The CD will not earn very much interest, but it will be better than your savings or checking account. Putting the a few thousand in an investment like stocks is not a good idea for the short term and you might need that money after you graduate. (Maybe you'll get a great job in Hawaii, but have to pay for your own expensive relocation, who knows.)
I'd recommend, for anyone, to check out Vanguard. Start out reading a book like, the 'Bogglehead's Guide to Investing'. This is a great book to get started with (John Boggle founded Vanguard). There's a loyal community of 'Vanguard Diehards' willing to offer advice, as well. Goodluck
First thing, don't carry any credit card debt. The rape you with interest rates and fees. If you can't pay off your card every month, don't use a card. I've diligently paid off my card every month for 10 years and have never paid interest. I have some friends, however, who are incapable of doing this. Not that I'm better than them; it's just that people are different.
Secondly, there is good debt and bad debt. A student loan is good debt. A mortgage is good debt. A car loan can be good debt. An education, a house, and typically a car are good investments and are worth the interest you will pay on the loan. Credit card debt, financing for a wide screen TV, etc. is bad debt. It's just a sinkhole for money.
You will hear a lot of people who will advise you to pay off all your debts before you invest anything. I actually advise you do keep modest debt and do modest savings. In my case, I got a lot of student loans which I locked into a 3% interest rate. I could have paid back most of my student loans, but instead I chose to put the money in an IRA. I have a car loan at 5% interest rate, which I could pay off, but instead I put the money in an IRA. Why is this? It's because I have no problem making sure that I make my car payments every month -- I don't want my car reposessed -- but I do have a problem sending money into savings every month. Think about it -- most people are able to pay their bills every month -- there are immediate repercussions if you don't. But, when people have extra money, they have a hard time putting it into savings. If you have all your debts paid off and you have extra money, most people will splurge it.
In a year and a half, my car loan will be paid off. I will also have a substantial chunk of change in the IRA. I don't know if I would have been able to save that big of a chunk if I had paid off all of my debts years ago -- the temptation to travel somewhere or buy something really expensive ( c'mon -- when would I ever have this much money again) would have been too great. That's just me, though -- maybe you are different.
I don't advise you to live like a monk, but also don't live like a party boy. Have a decent social live in school. Don't avoid going out on the weekend to save money ( but you could avoid a ski weekend or spring break in cancun). Human beings are social, emotional animals, and close friends and good buddies are an absolute *necessity* for mental and *physical* health. A network of people will also be invaluable when it comes time to get a job, find a new one, or decompress after dealing with a bad boss. We are social animals and friends are your greatest asset. Also keep in mind that marriage is a legal contract that merges your two finances, so taking the time to pick the good significant other is a wise investment of your time and finances.
Finally, as far as what specfically to invest in, here is my strategy: have enough liquidity to get you to the next investment. First off, start with savings. Build up enough in your savings account ( seperate from your checking account) that you could go a few months if you lose your job. The savings account really has a poor rate of return, but you are just creating a cushion here. Once you have enough for a couple of months, start buying CDs from a bank. These have a guaranteed return, but have a penalty if you withdrawal early, so you can't rely on them during joblessness. Buy one-month, then a three-month, then six-month, then a year, so that you have money maturing at those intervals. One you have a steady set of maturing funds, you can afford to keep the money in the CD longer, so you get a better rate.
Finally, then invest in *mutual funds* with money that *you won't need for years*. Mutual funds are a long-term investment, and you might lose money if you have to pull it out in five or even 10 years.
Don't buy individual stocks; you don't have the expertise or time to understand how well an individual company is doing -- nor should you. Leave it to the professional mu
Computers are useless. They can only give you answers.
-- Pablo Picasso
This is probably the wrong place to be asking this question, and the advice being given on these boards are enough proof of that (e.g. "walk to your bank and invest in a mutual fund" - first banks don't administer mutual funds - they can't legally do so - and third, mutual funds are not risk-free investments).
First, you should buy a book on investing. Not some get rich quick book, but a real investing book. I have no suggestions here.
Second, what you seem to be looking for is a nearly 0 risk investment that yields better than a bad savings account. You should contemplate US treasury bonds.
Right now they yield around 5%. These bonds are typically considered "risk free" in that, as long as the U.S. government is around, they will print you dollars to pay you back. Of course, if there's lots of inflation that money they print for you will buy a lot less, but then again, you have the same exact problem with your savings account. You can do practically the same thing with a bank issued CD, but treasury bonds are fungible on the open market, unlike CDs. That means, if you have a 5 year note treasury bond, you can sell it on the open market before it matures, or you can wait for it to mature. With a CD you will pay a penalty (which will negate the benefit of having had it in a CD) if you try to cash out early.
Last I checked, you can buy the bonds in $1000 lots from the fed government. In short, you buy the bond for some amount less than the face value, (e.g. $950) and then in a defined amount of time (based on the maturity you select (3 month, 6 month, 2 year, 5 year, 30 year) it will pay you the face value ($1000). You should check out the Treasury website. This is extremely easy for US citizens, and I think it's still doable for those outside the US.
Either of these options though is substantially safer than investing in stocks, mutual funds, private bonds, etc. Of course, as always, you should be wary of what you read on a message board, and no investment is 100% safe, and that includes savings accounts. I'm not a professional and I could be wrong about anything I just said.
Look at this... no joking!
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http://forumserver.twoplustwo.com/showflat.php?Ca
The real deal is to get into your IRA as early as possible - there are ways to do this before you are 18. If you're past 18, 3k per year, DO IT. I don't care about student loans, mortgages or car loans. FIND $3,000 any way you can and put it away now. If you're in the late 20's you need to figure something else out.
It is against the FAFSA's rules to take out loans for non-schooling related reasons, in other words, you cannot take out a loan and then put that loan market on the stock market. That is not what financial aid is for. This is not free money, the banks aren't just saying here, borrow this money, pay it back when you can. This is subsidized meaning that the government is paying the interest for you.
Let me rephrase that: I am paying the government to pay the interest for you. If you don't need that money and have all this extra to spare, then you should return part of the loan.
I had this idea too, a year or two ago I had some money saved up and thought about taking out the max loans I could and putting it in bonds or something. Then I looked through the FAFSA docs and they explicitly state that you are not allowed to do this (I can't find a link at the moment, but if you look around you can find this).
You can get CDs with only hundreds, rather than thousands, of dollars. I have one that I started with $800. If you want a risk-free way to make a little on some money you know you won't need for a while, CDs are a good choice. You won't make a lot, but it's better than a savings account.
Hookers, drugs, alcohol, and many trips to strip clubs
What's the matter, James? No glib remark? No pithy comeback?
Big picture, investing a few thousand over two years isn't going to make much a difference. With such small principal, even if you do extremely well, you'll look at the interest at the end of two years and think "what a waste!". I would use the money to pay down any high-interest debt, or begin some long-term investing like an Roth IRA.
Instead, concentrate on the discipline of 1) saving and 2) spending less, far less, than you earn. This sounds easy and obvious, but most people just can't do it. The amount, 1%, 5%, 50%, it doesn't matter. If you can save 5% now when you're making very little, then when you're making ten times as much later on down the road, all of the sudden you are saving a huge amount of money every year. Then, you invest THAT.
I can explanate how to administrate your network. You must configurate and segmentate it, so it can computate.
There are a couple companies that do online savings with good rates. Emigrant Direct is like 5% and it's paid monthly, I think. ING Direct is like 4.85%. I'm considering doing this, myself. You just open a normal checking account locally and then transfer the funds to your online savings. If you want some money back, just transfer it back into your checking.
JJ
My two things:
1) As you point out, the federal government is paying the interest on your loans. That means the bill is being footed by US citizens(people like me). The loans are provided to pay your educational expenses, and investing is not really an educational expense.
2) There is nothing wrong with investing the money wisely while you have it. You should do it in a way that is not risky and leaves the money accessible. I'd use a money market account. If you're lazy, go set up a paypal money market account, if you want security go to a local bank or credit union.
Going back to point one, if you're taking out loans in considerable excess of what you are using for college expenses each semester and hoarding the cash (whether invested or not), you're either breaking the law, breaking the contract on the loan, or simply venturing into the cold land of ethically questionable behavior.
Tom Gardner recommends in "What to do with Your Money Now" that you do not invest in the stock market unless you do not anticipate taking the money out for at least five years due to the short-term volatility of the stock market. He also explains that many, many mutual funds are very bad deals because of the fees charged for the investment.
It looks like CDs or money-market funds might be best for you. I don't understand the exact nature of how a money-market fund works, but your money is much safer there in the short run than in a stock-market fund. With a CD, you loan money to a bank, but you commit to allowing the bank to keeping the money for a given period of time. Typically, the longer you let them keep your money, the higher the interest rate they pay you on it.
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As others have said, pay down your loans before attempting to invest. If you must invest, open an IRA and put your money in an S&P 500 index fund, which is almost guaranteed to gain 9% annually on average before inflation. As an IRA the gains will be tax-exempt. But do not attempt picking stocks on your own without at least a year of fantasy investing and constant research. Most mutual funds lose against the S&P 500, and those are run by professional fund managers. As a beginner, you might pick better stocks by getting lucky (if that interests you, consider poker and lottery tickets as well), or by extensive study which will likely bore you and take longer than maintaining linux. For a start, stick to index funds in an IRA, and unlike most people around your age, you might have a chance at retiring comfortably. You'll also outpace most of the pros without the number crunching insanity.
not sure WTF it is doing on slashdot.
What is the best ratio b/w calls & shorts on sweet crude for the next 6 months?
If your timeline is only a year or two, low risk is usually what's recommended. If you're young and saving for retirement, then risker is fine, since if something goes wrong, you've got plenty of time for things to work out.
One of the best low-risk investments is directly in US Treasury Notes/Bills/Bonds, and it's really easy to do. Any US individual can go right to the Treasury Direct web site, set up an account linked to your checking account, and purchase 4-week notes to 30-year bonds. This site is run directly by the US Treasury, and does not involve third party brokers. Rates are running right about 5% right now depending on the term.
Anybody can participate in the weekly US Treasury auctions, and it's pretty simple. I'm surprised that more individuals don't use this.
you're not a real college student.
All that we see or seem is but a dream within a dream.
His idea isn't necessarily a bad one -- if he's got subsidized loans, the government pays the interest while he's in school. If he saves 10K over a couple years at a 5% CD rate or something like that, he can come out with a reasonable profit at virtually no cost (save time) or risk to himself.
I am a college student who has been investing for at least a few years and I've documented my experiences on my blog.
www.fiscaltimes.com
Depending on your style, some of the tricks may appeal to you. But if you're looking for day trading and any of that nonsense, don't bother.
Waffles! Tasty waffles with lots of syrup!
First and foremost, remember that there is no such thing as a free lunch. If it sounds too good to be true, then it is. You're not going to get rich off of this money, you should plan on slowly growing it.
The stock market sounds like a bad idea to me. If you're investing in a 10+ year time frame, then it's a good idea, but there's a good chance that you will lose money in the next year or two if you invest it in the stock market. Really, finding a good money market account or investing in some CDs (staggering the maturity dates to make sure that there's always some money available) is the best way for you to make some money off of it and to make sure that it doesn't disappear. I'm not sure that you're going to beat the interest you're paying on the loans by much with that strategy, but you've got to decide what your risk tolerance is.
That CDs are generally a suck investment. Why? Even at 5%, you have to factor in inflation and taxes on your gains when you withdraw.
Drops that 5% down pretty quick don't it?
Nothing wrong with borrowing to invest, if you know what you're doing. I did exactly that in '99. Borrowed money to buy into 14 IPOs and cashed each one out after 90 days no matter where it was. Ka-ching!
Of course that's the exception not the rule. Only you can learn about investing and what is comfortable for you in a given market trend. Keep most of it in safe investments and maybe later use 10-20% for speculative investments that you understand. Don't lose what you can't afford to.
Otherwise also remember that most money managers can't beat the S&P 500, an index that isn't magical at all except it's the 500 largest companies. "Money manager" needs to be taken with a grain of salt.
1. as a prior poster said, live smartly. don't believe the lie that a bunch of crap will make you happy. it doesn't.
2. put your money in a savings account or a short term cd. you should get 5%+ - and that isn't too bad at this point.
3. max out your 401k when you go to work - especially if there is a company match.
4. max out your employee stock purchase plan if you get a 15% discount. worst case scenario is you make 18% on your money in 6 months. that's about 40% per annum - not bad for a worst case scenario. often, though the stock goes up so you can make much more.
don't believe the 10% number for stocks - we have been, and still are, in a stock market bubble. applying the 10% concept to market tops is a big mistake.
real estate is a big bubble, too.
in the usa, the dollar is getting beaten down, the deficits are soaring and government is corrupt at all levels.
we either have to pay back debt or risk turning greenbacks into something that resembles monopoly money. i'm surprised we've lasted this long without more of a correction to reality.
sometimes, not losing money is truly "making money."
also, don't buy a home unless you can afford a 30 year amortized mortgage. better yet, go 15 year.
don't blow your money on stupid stuff like nice cars... if your friends don't like your personality, they aren't your friends.
good luck - you are growing up in *really* challenging times.
First, whatever you think of money right now will likely change when you get a real job. If a thousand dollars is a lot right now, it'll be just a short-term loss after you graduate.
So here's what I'll suggest.. I'm sure people will hate this idea, but I did something similar and it worked out well. This is a gamble, I wouldn't do it myself, but you're young and can easily get over a loss.
First, try to make some money. Make it in a safe way. Invest in a growth mutual fund with a strong performance record. Try to shoot for 10% in earnings. Maybe you'll get lucky and it'll be 20%. Go for a no-load fund, don't pay brokerage fees. Maybe one of those popular real estate stocks would work as well.
Next, be prepared to lose it all. You can get over it if you're willing to play a little game with credit cards. Take out a huge cash advance on one card and immediately transfer it to a 0% card.
Dumb idea? It saved me $3000 when I did it based on what I would have had to pay in interest and financing fees on a loan.
----- obSig
right now is one of few times when CDs bring almost same return on investment as mutual funds - plus, CDs are guaranteed. so, unless you want to play with stocks (VERY time-consuming), go buy a CD.
/. :)
Schwab has some good rates (it lets you buy CDs from many banks), highly recommend it
P.S. I agree with the post that says don't ask
Go talk to a professional
Did you know that "FTW" ("for the win") is a direct translation of "Sieg Heil"?
Read the terms and conditions of your student loan first, and make sure that you are legally allowed to invest the funds you have obtained, particularly if you have a loan that is subsidized by the federal government. Old Uncle Sam doesn't like seeing his investment in your future put at risk.
ING also offers a fairly good rate on their regular savings account, right now I think it's around 4.5%? Much higher than any brick-and-mortar banks will give you. It takes a couple days to transfer in/out of your checking account, but that's the only drawback. I've been with them for like four years now and love it! ingdirect.com (Don't know anything about HSBC, but if their service is just as good with a better rate, go for it.)
Warning: Apple/Nintendo fangirl. Likes her electronics cute & cuddly. May be rabid.
I also strongly, strongly recommend A Random Walk Down Wall Street. If you want a one-Web-page summary of why most other sources of investment advice are not to be trusted, see Greenspun.
send all spam to theotherwhitemeat@ropine.com
This isn't rocket science, so I would avoid hiring a professional or using one that works off of commissions. If you have a good friend (that's not in college), getting some free advice won't hurt. Here's the process in a nut shell:
1. Avoid credit card debt. If you have any, pay it off. If you can pay off your card every month, then use it, you'll build a nice credit history and get have no problem getting that first apartment. If you can't, lock it away (either in a freezer or cut into pieces) and get a debit card instead. You're better off not closing the account if there's no annual fee since they base your credit rating partially off of how long you've had your accounts open.
2. Save your emergency stash. This is what you're really asking about right now. I recommend this after fixing any credit card problems because credit card interest is pretty bad. And should you get in a jam without an emergency stash, you could go back to your credit cards, but lets hope that doesn't happen. For working folks, this is 3-6 months of expenses to get you through a layoff. For you, you have to plan to get through college, possibly move, get business attire and other necessities, and then find that first job, so start figuring how much you might need for that. This money should be very liquid and not at risk, so something like an ING Orange or CD would be pretty good, or feel free to find higher rate alternatives.
3. With those done, you are really comparing interest rates and risk. The stock market usually returns somewhere in the 6-10% range, but you may have to stay in for 5-10 years for the bumps to average out. When you invest in individual companies, be prepared to lose all of that money because you never know when the next Enron will appear. For example, say you think there's a 25% chance you'll lose 0-20% or more, a 50% chance you'll make between 0-10%, and a 25% chance you'll make more than 10% in the 2-4 year horizon you have set (before your loans start coming due). Do the math to see if it's worth the risk, and check your gut to see if you could stomach the worst option. If you don't believe there's enough upside to beat the 95% chance you'll make 5% in saving or CD, then there's no reason to play the market. Finally, consider any loans or other debt, and determine if you can do better investing your money than you could just by paying off that debt to avoid the interest. If you are determined to go with the stock market, but don't know exactly what you are doing, go with a no-load, low expense ration index fund. Vanguard and Fidelity both come to mind. Avoid the latest fads (.e.g gold, oil, realestate/reits) since by the time you are ready to cash in, the fad will be over.
And finally, I'd recommend Suze Orman (she's on CNBC, has a few of books, and also does PBS fund raisers) and the Motley Fool for the beginners advice. After you get those under your belt, consider moving up to the wall street classics and some of the higher risk folks (the random walk, think and grow rich, robert kiyosaki, and so on). Also, while you're just figuring things out, start watching your credit report. It's free and will hopefully have you making smarter decisions when you know how your score could be effected.
Buying securities with borrowed money is against the law.
I know, I didn't get caught and made 20% in 3 months.
(the longest and most stressful 3 months of my life !)
You might check the fine print on your student loans about
investing and earning interest.
College student have left over money?
What?
_buzlink_
I hope you get the loan free while you're in school. If that's the case, I'd totally do what you're doing. It's free money. Even if you invest in money markets you're going to make a small profit. I would advise using a low cost money market like Vanguard Prime Money market: Vanguard.com. If you're willing to tollerate risk, you could invest in something like the S&P 500. I know many people would be freaked out by using borrowed money to invest in the stock market, but if you are dollar cost averaging, your risk goes down. Since I assume they give you the money in payments as opposed to lump sums, that means you'll be dollar cost averaging your purchases. Keep in mind, if you do this, your account could go down. It could possibly go down a lot. If you started in 2000, you'd probably regret doing this. But, if you plan to contribute to a 401k after you graduate, I really see this just as some prepayments to the 401k. After you graduate, pay down your student debt in monthly installments coming out of this S&P fund. If you do this over a 10 year period, you'd be dollar cost averaging out of your S&P 500 fund as well. This would be a pretty good way to do this. The thing to be careful about is if you discontinue this program due to losing money. If you are they type of person that cannot stand to lose money, just go with the money market fund because chances are you'll sell at the bottom.
No Sigs!
I'm a college student. How do I get the fuck over myself and my situation and realize it's common rather than unique?
I'll be your candy shop of infinite deliciousity if you'll be my discotheque of endless rump-shaking.
If this is money you may need in the near term, I highly recommend investing in a money market account. Not the money market account at your bank or credit union, which probably have a low-percentage rate of return, but rather something like Vanguard's Prime Money Market Fund, or Emigrant Direct. Both are paying around 5%, which is pretty darn good. Money market accounts are insured up to $100K by the FDIC. And both Vanguard and Emigrant direct offer all the services you might need, such as being able to write checks against the account, schedule automatic deposits or withdrawals from other accounts, etc.
Don't fool around with the stock market or mutual funds if you plan to need this money in the next few years. If you want to invest it for the long term, put it in something like Vanguard's Total Stock Market Index fund and let it sit. Better yet, set up a Roth IRA account with Vanguard, contribute the maximum amount each year, and don't touch it until you retire. This will be one of your smartest moves.
why not take a look at some high yield savings accounts? they can earn as much interest as a CD, but you have the convenience of instant access to money
right now, HSBC direct is at 5.05% APY
another popular one is ING Direct at 4.35% APY
i believe even citibank offers one
my suggestion is to sign up with several and transfer money between them depending on who has the highest rate. right now, i've put some cash into hsbc. you even get an atm card for immediate access to cash (note: this is not a debit/check card). transferring money is easy, too. once all the requisite materials have arrived via snail mail, you can link you existing online banking accounts.
i can transfer from my local bank to hsbc in about 3 minutes. the funds take a few days to transfer, but it's "instant" enough for me. i usually find the better deals crop up in the anandtech hot deals forum, but a google search may work as well
Question:
I've been seeing those annoying ING commercials for years now. They claim "high interest", but with most banks these days that just means 0.3% instead of 0.2% annually.
You're the first person I've ever seen advocating those accounts - what kind of interest do you actually see? How much work is it to put money in or pull it out when you choose to?
Endless arguments over trivial contradictions in books written by ignorant savages to explain thunder in the dark.
1) Go to college 2) Ask Slashdot about saving money 3) ...
4) Profit!
I'm a pure computer geek living in NE FL. I've made 78.23% annual return on my real estate investments over the past 2 years.
Real Estate is incredibly easy because you're dealing with parties that have emotional/psychological attachments to their investments (i.e property).
The strategy I employ is simple: make many very low offers. When one is accepted, I then determine what to do with the propoerty: flip, rent, rezone, split lots, etc.
It's really very simple. I'm always surprised more people don't do this. I'm certainly not complaining as I welcome the lack of competition.
Best of luck with whatever you decide to do
> I am a rising junior in college and decided to
> take out loans to cover all my costs so I could
> graduate with money in the bank. My tuition bill
> is minimal"
Go to a bank and get advice from a pro who can also tell what you need as a college student. If he is honest he will tell you that you took out too many loans, it is neither right nor profitable to bet the stock market against your interest rate, and you should pay back as much of the debt now as you can, leaving a margin of safety.
The point is that you are already investing the money, in yourself. There is no need to swipe that money from yourself and invest it elsewhere again, adding risk to yourself. The investment is what will allow you to spend more time studying and researching good professors than working in a part-time job for student wages, and is also a very good bet that you will make enough money in the first year or two of work after college that you can pay back all your student loans.
Another thing, if you only took loans out to cover living costs since you have a free tuition, then you do not have enough money to make it worth investing. After you subtract the interest you are not going to make more than a few percent on your money. Forget it. Since you don't have any knowledge of finances or anyone to advise you yet, I would recommend that you focus on what your absolutely necessary expenses are and how much you need to live on. Make separate accounts to help you maintain discipline for each semester, and spend your time on studies instead of slashdot. While college appears to be anamorphous free for all, the absolute top performers in each class will in fact get special opportunities, and you need to focus right now on hitting the top of the class and finding your graduation job, maybe even taking time on an internship in the summer. Slashdot is insidious like the stock market and every hour you spend on it is subtracted from your total in Nirvana.
Buy the book Options as a Strategic Investment
Use 10% of the available money to do these. While the book is pricy, it allows you to trade stocks at 1/10th the cost and risk of actually trading them. Which is exactly what you need.
Yes this is more complicated, however you'll be able to pick it up from the straightforward presentation of the manual
Put the rest of the money in an ING orange account (4.something interest rate).
Same profitability as stocks with less risk than mutuals.
--Michael
Want to see every step I took to start my company? http://www.rowdylabs.com/blogs/pitchtothegods
I was in a similar situation I was getting more money in school loans than I needed, and at the time I was immediately paying back the loans. But then one day in the run up to the 2004 Presidential election, I saw a documentary on Bush's history in the oil business. While working for Harken, an oil company, Bush accepted huge loans, as a member of the board of directors, with low interests and then invested the money. I realized I was in exactly the same situation, the interest rate on my loans was around 2%. And I could continue to defer the loans so long as I was in school even into graduate school and internships with the government paying the interest they have acquired after my graduation. Wanting the safest investment with the highest return I decided to put them into mutual funds, essentially collections of stocks. At the start of each semester I invested in a different fund to further my diversification. The funds I chose have done well making about 20% overall (this year has been unkind) and I was lucky enough to buy a natural resources fund before the price of oil started to spike that has earned about 60% to date. Given a three day window, I can sell a part or all of a fund and have access to the money.
If you don't have thousands to invest, forget about stocks, mutual funds, etc. -- There are some great ways to earn ridiculous percentages on small amounts of money. See this site to get started. I'm in on the Bank of America deal where they give you $100 after two months just for opening an account, with additional 'Keep the Change' rewards for using your debit card. Keep your eyes out for similar incentives. Key Bank is offering a free 1 gig iPod nano for opening a checking account, etc.
Other than small things like that, just live frugally, pay off your debt as soon as possible, and start investing for your future as soon as you can. Remember that the miracle of compound interest works best for you the sooner you start putting away. Want to retire by age 50? Start saving now! A great option for young people in the low/no income tax bracket is a Roth IRA. You put the money in at your current tax bracket (low if you're a student with little income) and it grows tax free until you take it out. You mentioned you'd like to have access to your money if you need it -- with a Roth IRA, you can take out your principal (though not any capital gains, unless it's for a house) any time you want without penalty.
More young people should think about their financial future, though for too many a never-ending cycle of credit card debt seems to be the norm. Best of luck to you.
http://cltracker.net -- powerful craigslist multi-city search
Mumbledy years ago when I was taking out student loans, they wouldn't give me as much in the fourth year, because I had some left from the year before. If the rules have changed, more power to you. It's only cheating the system if you hide your investment from the loan grantor.
As for "taking money that other students might need", if they really need it, then they are going to float higher on the list of the needy and get their share before you do. Besides, we're not talking grants or scholarships here, this is a loan. The bank does want to lend you the money, after all, because they will earn interest on it while you struggle with your career and pay it off slowly.
As a young (twentysomething) investor myself, I think that (as far as the market goes right now), the best things to invest in equitywise (i.e. the stock market) are commodity ETFs (I.E. USO, the oil ETF, and GLD, the Gold ETF), commodity trusts (like BPT, which are tied to the price of oil and give out a healthy royalty dividend based on their output), and a select few stocks that have a low PEG ratio (which you can find by going to someplace like Yahoo! Finance). I'd be wary of anything with a PEG over 1.25 or so, unless the earnings are accelerating. I'd also take a look at the international ETFs (EWZ, EWJ, etcetera, which mirror international market prices in their respective countries), but I'm not knowledgeable enough about the relative pricing of the international markets to make a specific recommendation. I'd stay out of the consumer cyclical stocks (i.e. non-essential product companies which sell to consumers) and stick with the bread and butter consumer stocks like Procter & Gamble, Pepsi (which owns Frito-Lay), and Johnson & Johnson. The reason for this is that even in a slowdown (which looks likely in the next couple of years), people won't stop buying toothpaste and soft drinks and stuff you need in the medicine cabinet. You could also stick your money in a bond or a CD. I think that given the market, that might be the wisest and least risky choice of all.
Look, there is a good chance there will be more wars, until eventually we wipe ourselves out. The best thing you can do if you are college aged, is to invest in the end of the world, because there is a good chance it will happen in our lifetimes.
Invest in the obvious weapons companies, like Lockheed Martin. Invest in Boeing. Invest in Haliburton. Invest in tabacco companies. Invest in gun markers, alcohol, and anything else which will profit from the chaos. If you want you can hedge your bets on energy, but definately invest in the big oil companies, they arent going anywhere and will continue to remain profitable for the near future. Invest in corn, corn syrup won't be going anywhere, and if alternative fuels such as ethanol or biofuels take off, corn will become nearly as profitable as oil.
The best strategy in my opinion is, if you can see the end of the world coming, invest in it so you can profit from it. Invest based on peoples emotions, so lets see, currently the world is filled with pain, hate and misery, so you should invest accordingly. You will have a lot of people drinking more, you will have plenty of natural disasters, which companies profit from natural disasters? You will have plenty of new diseases, which companies profit from diseaases? We may have new wars, we may have the war on terrorism, so invest in security related industries, suviellance, and others. Invest in companies which will profit as the world falls apart, and you'll get rich while the world ends, increasing your chance of survival.
If the world doesnt end, you'll be broke but alive.
Although be careful - the financial professional's first obligation is to enrich himself, otherwise he is self-selecting to not be a finance professional.
That's why you go with someone who isn't mixing recommendations with his or her commissions- ie, a fee-based financial advisor. They won't have the temptation to steer you towards any particular investment strategy (or worse, to a specific investment firm/fund/stock/etc) for personal gain; rather, they're motivated by having you tell friends/coworkers/family how good a job they did.
Much of the job is beyond "buy this now" type advice; much of it is "you might want to do ____ because it'll reduce your tax burden because _______", etc. Fee-based advisors could almost be considered "financial educators", because most of the job (from what a friend told me, who is a fee-based planner/advisor) is just helping people learn about investment strategy, taxes, and law around financial matters.
Furthermore, for something as (relatively) simple as "I'm a student, I've got X sitting in the bank, how can I be in better shape?"...the fee shouldn't be very much, although as a young person with little knowledge in these matters, the two of you could talk for hours upon hours (and you'd be all the better for it.) Still, the fees are usually based off of your assets, because the more assets, the harder it is to manage. Things are a lot simpler with a)no kids currently / in the immediate future b)no girlfriend-who-may-soon-be-wife, c)no house or other real estate d)no existing investments to evaluate and e)very low relative net worth.
I recommend getting an online brokerage account
The original story poster is obviously an "investing n00b"...how is he going to know where to begin?
Once you have invested whatever you want, ignore the money. It will go up, it will go down - but over 20-30 years it is a very safe investment.
Did you not read the part about how he wants a short-term investment? The simple answer was "an ING savings account making 4.5-5%, or similar".
Please help metamoderate.
Invest in home brew. As a university student I find my largest expense (rent aside) is beer. That is why I purchased a home brew kit. Whatever you do with your money, you will have more of it if you brew your own hooch.
We are currently in a war, a long war. Many companies are currently profiting. Lets see which companies will profit in the future if the current mindstate of the world stays the same?
1. Weapons companies.
2. Security and surveillance companies.
3. Drug companies.
4. Alcohol, Tabacco and Firearms companies.
5. Datamining companies.
6. Cosmetics
This is just 5 examples. The point is, you should invest based on the emotions of the current society and population. People have chosen death, misery, pain, through all sorts of different means. Some are smoking tabacco, some are alcoholics, some are gamblers, but the key to success in investing is to profit from human vices, and from popular emotions.
Example, when racism increases, it helps the cosmetics industry. When obesity and weight becomes the new race, it helps the dieting and supplement industry. Both of these help the bio-tech industry, and genetics, stem cell research and other related fields, in the future will profit from cosmetics.
Example #2, Disease, expect the avian flu, madcow disease, cancer and heart disease to become more popular and bet on the companies which treat but do not cure the disease. Once again related to stem cell research which certainly could cure the disease but wont.
It's also safe to assume, that if the world ignoance/homophobia level stays the same as it is today, homosexualiy will eventually be declared a disease, and there might eventually be a drug which can cure it. This would be a drug to invest in if it's ever released in the same way that viagra was a drug to invest in when it was released, or the breast implant. In the future there might be a pill which can make breasts large or small, turn skin from white to black and back to white again, and all sorts of other cosmetic things which now surgery is required for. If this happens, it makes sense to invest.
Never bet against human nature. Always bet on humans to remain self destructive and ignorant, thats the secret to profit. Expect a future with even more homophobia, racism, sexism, agism, and other isms, and expect the hate industry to merge with the drug industry.
For every $1 invested:
after 10 years, you have $2.60
after 20 years, you have $6.70
after 40 years, you have $45
after 55 years, you have $190
Keep in mind that inflation seems to end up around a factor of 10 over 25-30 years. So, in 55 years you have $190 which is roughly $1.90 in present money for every dollar you invest now.
Allow me to put it in to terms that make sense to a typical male, slashdot-reading, college student:
At the strip club, $40 will get you two lap dances now or three lap dances and a beer when you're 75. On the other hand, should you die at 60, you get the choice of two lap dances before you die or none at all if you wisely invested.
At the end of the day, investing pays the salaries of the people who do the investing for you, makes the very best investors very rich, is a gamble for most, and a good way to not really do much beyond keep up with long term inflation plus a little bit for those who want to play it safe.
Another more boring suggestion: Spend $1,000 on presentation skills classes. Spend $1,000 on a great suit that gives you the confidence of knowing you look the part. Spend $250 on getting a professional to help you with your resume when you graduate. Then sail through the interview for a job paying $5,000-10,000 more every year than you would have got otherwise. As your career continues to build from there, compounding over time, there aren't many better investments you can make. I don't know of many other investments that can pay five times over the initial investment every single year.
Don't forget the study of a few years ago, pointing out that you could have done better than the market by investing in beer.
Not stock, but cans - save the cans, turn them in for recycle fees, and you would have made about what typical savings accts were paying.......
Buy stock, buy bonds, even buy gold, but don't buy realestate. Real estate only makes sense when you know the population will increase, and demand will increase. What if population decreases?
Since we do not yet know if population will increase or decrease, realestate is a very temporary investment which might make money this year, but be worthless if say avian flu hits, or if there are natural disasters. It's better to profit from the natural disasters, avian flu, and everything related to it. This makes more sense than investing in homes when people cannot find clean food, water, and are hiding from bird flu and killer storms.
I'd suggest you invest in bottled water. I suggest you invest in food. If I thought the world could last long enough I'd tell you to invest in bottled air, and wait for the clean air to run out, but thats for our children to invest in. The point is, houses only matter if theres clean food, clean water, a disease free environment, etc. In a world where natural disasters are increasing, where terrorism is a threat, and where clean water and food is running out, it makes the most sense to invest in the companies you know for sure will profit in the rebuilding efforts, the companies which will create the drugs, the companies which sell bottled water, the companies which sell clean food, and especially the farmers. It makes sense to invest in gold in case there is an economic collapse of some sort. It makes sense to invest in silver, it makes sense to invest in corn because it's the most popular crop in America and it's only a matter of time before it becomes more popular. It makes sense to invest in surveillance because how are we going to track the terrorists? It makes sense to invest in emotions.
Which emotions are people going to feel after a natural disaster? Some will feel sad or upset, some will feel hate, some will feel one way or another, but when profiting and investing, it's all about predicting how people will feel, and investing accordingly. Investing is a science, of psychology. It's neuro-economics. Our economy is not rational, it works on emotions, it's irrational, it's hate, love, fear and other emotions, but thats the secret. You know what to invest in based on what the majority of people are feeling, and you know what to invest in based on what the majority of people with money are feeling. Most people who have a lot of money, what are they feeling? Figure it out and invest.
I am going back to school and am planning to open an high-interest checking account to hold my (Stafford & private) loan disbursements while I spend them. I would assume that even interest-bearing checking accounts are okay so long as they are FDIC-insured. Does anything that's "at risk" constitute investing?
Otherwise it looks like I will be stuffing my matteress...
You won't lose your money if you invest in oil companies. You won't lose your money if you invest in tabacco companies. You wont lose your money if you invest in alcohol companies. You wont lose your money if you invest in surveillance companies.
There are some companies which are guarenteed to make money simply because the federal government spends billions of year giving money to companies to defend the country. You can bet phone companies won't be losing money, banks won't be losing money, most hedge funds wont lose money.
I can always be wrong, but if I had the money, I'd invest in Haliburton.
Forget paper investments. Buy underpriced goods and resell them. Sidestep eBay type items, mailable things, and look for "motivated sellers" who need cash fast. Develop an eye for spotting bargains. They're not rare. (Example: giveaway or cheap furniture listed every day on craigslist, always at a premium in college towns first day of school.) People who are moving usually just want a quick sale. Haggle for a lower price when you're buying, refuse to haggle when you're selling. Do 3 deals a year making 25% profit and you can nearly double your money. What do you think banks and brokers do with your money? They buy and sell and give you a cut.
I also agree it's probably going to take another few years before stocks are a good investment - say, 2012-2015 - and we're going to need a major market dump before that happens. As one market analyst remarked some 30 years ago "You can't breathe in all the time; at some point, you have to exhale". It's just so with markets - the cycles the poster above referred to are the result of new technologies changing societies and markets, and then a sort of 'resting period' while they digest all those changes. The bull market from 1916-1929? Society was investing in cars, telephones, and radio. A bear market while that was digested. The bull market from 1949-1966? Television, jet travel, mainframe computing. Then a pause from 1966 to 1982 while they were digested. The bull market from 1982 to 2000? PC's, internet, cheap telecoms, broadband cable, etc., etc. We're still digesting those changes.
My guess is the next boom will be fueled by major advances in biotechnology, natural language speech recognition and synthesis, and, of course, pr0n and anally implanted RFID's.
What was once true, is no longer so
GenKreton, I am a finance guy (who enjoys reading Slashdot). I have never posted before, but I thought I should at least give you my opinion since I have extensive experience in personal/corporate finance. First off, there were a lot of good suggestions in the responses (ETFs, brokerage accounts, lifestyle decisions, advisors, etc). But the most important thing that I can tell you is that you need to put together a full financial profile of yourself (either by yourself or with someone's help). That would include understanding your constraints in the following categories: (1) Liquidity (do you have any need for a large chunk of cash at any point in the near- to medium- term future or can you stash away your cash for the long term?) (2) Legal (are there any legal reasons you can/cannot invest in certain securities, etc.?) (3) Taxes (all sound investment strategies at least begin to understand your tax profile and try to steer you towards a strategy that maximizes after-tax returns) (4) Time horizon (you're in college so your time horizon is still the rest of your life... this is more important who is, say, retiring in 3 years) and (5) any specific or unique circumstances you might be facing (grad school? volunteer work for a year after college? etc)... Taking these five factors together can help identify your return AND risk objectives (how willing and/or able are you to take on risk?). Sorry for the very long response, but sound financial planning is a big picture thing, and I don't want you to throw your money into a basket of stocks for example, becuase one person told you that was a good idea. They (a) don't know your specific circumstances and (b) are only offering one choice, which is really no choice at all. Anyway, I hope this helps.
Don't deal with financial professionals, if they were any good they'd be rich and thus unavailable to the likes of you and me.
Think about peace of mind, money in the bank does nobody any real good. Get rid of debt, *I* *BELIEVE* that in the long run you'll be happiest if you owe nobody anything. Three and a half years later I still wake up every few nights in a cold sweat with the thought that I owe money on my house. It is bad enough that I've considered selling out part of my 401(k) and paying my land off. 10% to the feds might be a small price to pay for the peace of mind.
Above all, ignore my advice and that of others, you and only you know what will keep you wide awake at night and what will have you sleeping like a baby.
-michael
If so, perhaps consider contributing to a Roth IRA. You can only contribute as much as you earned, so you need a job to qualify. The benefits of a Roth IRA are pretty neat. You pay with money post tax, and the earnings are all tax free. As a student, you're very unlikely to be paying taxes. If you need the cash you put in, you can pull out up to the principle you've contributed penalty free. The only downside is that this is really a long term investment, being a retirement account and whatnot. So your options will generally be geared towards long term investments, and you probably wont be able draw down the account should you need the cash without falling under the broker's minimums. But by starting early with money you'd perhaps waste on a new computer or beer, you'll give it a long time to compound.
If you're pretty sure you're gonna need the money when you graduate, go for Treasury securities. You can invest personally without needing to fill out (many) complicated forms or formulate a bid, so long as you come in under a couple million. The yield curve is looking strange lately, but it really doesn't matter much. You're buying securities with the backing of the most reliable institution out there. The biggest risk is that you could have done better a short time later. But your rate is still good. It will probably be tricky to get a rate higher than your student loan, but if you're in school, the government will take care of interest on subsidized loans.
Finally, it feels like a pretty dicy game to be investing in stuff that you couldn't afford to do without a student loan. Those are supposed to cover the costs that your other aid can't, and while I suppose you're free to invest your own money, I wonder how much of this investment can reasonably be called "not from the loan itself."
But you should really think carefully about investing while carrying a loan.
I Browse at +4 Flamebait
Open Source Sysadmin
What is a "wittle"?
(And while you're at it, what is a "yewt"?)
"A great democracy must be progressive or it will soon cease to be a great democracy." --Theodore Roosevelt
Investing a federally backed student loan is against the loan terms you agreed upon when you signed your loan docs (not to mention that it is a federal crime.)
We find that you are in default of your loan agreement, and the ENTIRE LOAN is NOW DUE.
We will contact you in the morning.
Sincerely,
Citibank loan officer
sigs are for losers (except to point out that sigs are for losers)
So you want something with a high APY and immediate acces. Check out online savings banks. I've been using EmigrantDirect for a little over a year now (www.emigranddirect.com). They have one of the best rates at 5.15% (effective monday). The 5.15% APY is guaranteed to never decrease; its better than a lot of mutual funds out there. HSBC also has a pretty nice high rate savings account. The competition is pretty fierce, so the companies keep leap-frogging each other with rates... which is good for us. I keep trying to get my bro at PSU to open an account, I wish I did when I was in school. It couldn't be simpler: 1) Guaranteed high rate 2) immediate (2-3 day) access to your cash 3) profit!
...return the money that you aren't using? It is only going to accumulate interest, and even if you invest wisely you will still need to exceed the cost of the compounding interest to make any profit.
I will look after it for you at the excellent rate (for me anyway) at -100%
Wasn't the fact that people borrowed money to invest in the stock market a contributing factor to the stock market crash of 1929?
Invest in intel. Right now their stock is at about 17 bucks a share, buy as many as you can, (use sharebuilder or if you have a bank of america checking account, use them) and then when their stock takes off (INTC) sell out. You'll make thousands, remember who gave ya the idea ;)
Another option would be to put the money in a high yield savings account. There are accounts out there with interests rates as high as 5%.
Step 1: Buy a bunch of pot!
Step 2:
Step 3: Profit!
I hear and I forget. I see and I remember. I do and I understand. -Confucius
Normally I wouldn't comment unless I have something useful and productive to say, but on behalf of all people paying their student loans back for years and years, what you are doing is LAME. If you don't need the money (and if you are thinking about investing it you clearly don't) you should not take the loan. Taking an unneeded loan just pushes up the rates on all the rest of us who do (or did).
If you really are living on this loan just leave it in the bank. You are not going to get much more interest on it with anything safe during the time period you are going to need the money. If you try to invest it you are likely to lose it all. Given your lack of social awareness (and legality) of your ideas on the loan I imagine you'd be the type to default on paying back, which would also hurt those of us who are.
Student loans are for paying school investments, not screwing around. I don't even know how you got a hold of it, usually they disburse the money straight to the school. Plus if you are on interest free loans, those loans are given to people with the greatest need (most of us had to take interest bearing loans) and if you are not needing it you should being returning it.
Maybe I should be less harsh on you since I don't fully understand your situation. But it's just very hard on a lot of people to pay for school and you really come off as a jerk with the way you are asking this question. Most people have to scrap and beg to get enough money to pay for tuition, books and all the expenses of being a student. My dad had to borrow money against his 401K to help me finish my last year in college. So if you have money you don't need you really should give it back. And if you do need it you shouldn't be fooling around with it. No investment is going to be much better than the bank over the course of a semester or a year unless it is a very high risk opportunity. Even putting the money in a mutual fund or money market account isn't so smart, since the rate is generally not much more than a few percent over a basic savings account and neither are FDIC insured.
Just enjoy being in school and being one of the lucky ones without money woes. Time to worry about investing and so forth when you are done.
Peace, or Not?
I found myself in much the same conundrum--overall, I needed to finance my education with loans, however I knew I would need to have a small contingency fund for when I graduated. Many people can't rely on just moving back home for a few months while they look for a job. Alot of students count on having that rainy day fund.
Basically, since you're dealing with a short term investment, you want to aim for stability, but since a student's financial situation is also topsy-turvy, you want flexibility too. With that you really have a limited set of options. Here are the four best, in order from lowest return to highest:
1) conventional savings account -- maximum flexibility, minimal return.
2) high-yield savings -- something like an ING Orange account, which places minimal limits on transactions, is FDIC-backed, and has a respectable interest rate compared to a regular savings account.
3) money market account -- not federally insured, but higher returns and most let you make a few withdrawals without penalty, so you can get at some of your money if you need it earlier than planned.
4) certificate of deposit -- returns at about the same level or slightly better than the money market option, but your money is locked in for the length of the CD, unless you want to pay a hefty penalty. This is your best option though if you know for sure that you won't need the money until a given time.
Realize that all four aren't exactly lucrative options... right now the max you'd probably get is between 4.5 to 7% interest on the latter two options. And the savings account option is barely an investment in terms of return... I get a paltry 0.55% on my savings, but hey, it's stable and I can get at my cash whenever I want.
I noticed alot of people were critical of trying to invest while taking out student loans. As long as you're not taking out the loans for purposes of investing them, there is nothing wrong with what you're doing. The federal financial aid process is designed to take into account your existing assets and projected earnings during the school year you are receiving a loan for. If you already have or earn funds that you would like to invest, there is really no restriction on this, so long as you can prove that the balance of your loans was applied to legitimate educational and living expenses as defined in the terms of your loan.
I also fail to see why some people consider the possibility of investing while taking out student loans to be illogical or unethical. It's financially prudent to at least retain a reasonable sum of reserve funds at all times, especially if you know you will need that money later, for when you can't rely on loans to help cover your expenses. It's really just a question of finding a reasonable balance between holding on to money now and saving yourself from later costs from interest on your loans.
To those who think it's unethical to retain funds in a sound investment while taking out taxpayer-backed loans, it's quite clear that these people don't understand the basics of how loans work. When you buy a house and get a federally-backed loan, they don't expect you to empty your entire checking and savings account, 401k, and kids' college fund before giving you the loan. That would obviously be counterproductive, as you'd simply manage to send the person careening into an instant bankruptcy. So why should you have to completely bankrupt yourself to pay for your education? Clearly anyone who makes such a criticism does not understand basics of how things like student loans, credit and mortgages work--and clearly you shouldn't listen to their advice!
And BTW, "federally backed" loans does not mean taxpayer funded for the most part. The system of loan guarantees is funded with seed money from the federal government--thus from the taxpayers--but once the money is placed in the system, it is recycled into new loans over and over again, and the default rate is sufficiently low so as not to trigger growth in the federal inputs into
All it would take is a 20% drop in population to kill the housing market. We know there are major bugs/flus out there...and we know one of them is bound to mutate one day. Eventually there will come a bacteria that we cannot kill, even with the strongs antibiotics. We'll be able to wash it off our hands, but once it is inside us it'll be between our immune system and the bacteria.
Lots of older folk and young kids will die. Suddenly that house investment will crash on you as the market will have dried up. As long as people insist that their doctor prescribe antibiotics for their virus, and as long as cattle disease is prevented and not cured, then this is not a question of if, but when.
Risk and profit goes hand in hand. It is a nature law. If one investment has better risk/profit ratio than others, all people will invest there, until it has no advantage. Only exception are small market, and secrets. But this in itself is a risk, as you might not be able to sell the papers when you want to get out.
Short term bonds is the sure bet.
Personally, I have some money in eastern europe stocks (fund with risk spread, run by major bank. That gave me 71.6% profits last year, but it is up 10% this year (but down 11% the last 3 months). So this is the bigger risk = longer term. But it is worth it, unless you need the money when the price is low.
My mistake here. Junk bonds are not commercial paper. None the less, I think my point stands. Companies do default on their commerical paper. See for example this
Moody's report.
1. Nobody knows what they're doing. Never trust anyone who is sure that they know what they are doing when it comes to money, including me. A "balanced portfolio" is just code for "at least I will only be partially wrong."
2. Keep a record. Use a simple program (GNUCash, Quicken, whatever) to track your finances. Just keeping a record of what you spend will be pretty valuable. Buy things with a debit/credit card instead of cash when you can, so you don't forget what you bought.
3. Don't worry yet. Unless you have a whole lot of money in the bank, what you do with it right now hardly matters. That is, to a large degree, what difference does it make if you save an extra $1000 during your college career if you'll be making $50k or $100k or whatever your field pays when you leave. You'll suit yourself better in the long run by focusing on doing well in school, impressing your professors, taking that internship, and making that name for yourself than working right now if you don't need to, etc.
4. Don't listen to #3. The point of investing right now isn't to do well at it, it's to learn about it so that once you start making $50-$100k or whatever your field pays, you can invest your money more wisely than you could today. Wells Fargo has a pretty painless service called ShareBuilder that will let you buy some stocks if you want.
5. Don't listen to #4. Your major expense after college will probably be a house, and you'll probably want to be focused on saving towards that. This means you'll want to have money available when you graduate, so don't invest substantially in anything very risky or long term. CDs are probably a good option, but you could toy with some stocks.
6. Think short term. It doesn't make sense to try to save for retirement yet, since that's so far away. If you are disciplined, you'll be better served by quickly owning your own home than trying to pay it off slowly and saving for retirement at the same time. You can take up to $10,000 out of your IRA penalty-free towards the purchase of your first home, so you might want to make use of the tax advantages there. You can start seriously saving for your IRA when you get a real job.
7. Live cheaply. It's easier now than it will be later. You don't have any dependents yet, so you will only have to answer to yourself if you decide to eat rice and peanut butter for a month. Do you really need that car? Are you at home enough to even watch cable? Do you really need that cell phone?
8. Steal. Can't you use the free, nationwide LINKSYS or DEFAULT network for your internet access? Do you really need to buy that CD? [My lawyer points out that this is a joke, and I would never recommend doing anything illegal.]
9. Cheat. Sharing expenses is a lot more effective than trying to reduce your own expenses on your own. With a roommate or significant other of your persuasion, you can significantly cut your share of the rent and utilities, leaving more to save. You might even be able to share cars, computers, phones, and so forth.
10. Earn. It's a lot easier to save money when you're making lots of it. If you are working, make sure it's paying what you can get for your abilities. If you aren't, try to find a part-time job that will be a steady income, apply for scholarships, etc.
11. Enjoy #7-10 in moderation. Remember #3. Isn't it worth it to live in the dorms, even if they cost a bit more? And so forth.
As a recently graduated college student who was just played that same wonderful game...
1) Stocks are bumby now, they may be in the future. Over the long term you will make the most money by intelligently picking stocks. DO NOT TRY THIS. If you fuck up, your out money at an interest rate that will hurt. If you do want to play the market, you need to intelligently pick your stocks. To do that requires time and research students don't always have (Exam time?). If you want to, Read a beginer book like Jim Cramer's Real Money (Note: He is a polarizing figure), Then read an advanced book like Benjamin Graham's The Intelligent Investor. Then you might have a shot at beating the bank's interest rate.
2) The other way to play the stock market is to jump into a mutual fund. The exposure of stocks, with the saftey of diversification and profesional help. I recomend finding a mutual fund that tracks an index, like the S&P500. Hell, Pick one or two well respected investment firms, like Fidelity or Wachovia, and say "I have $ that I would like to invest, closing [day your interest payments start], What can you do for me?" Make them want your money.
3) Real estate is hard, takes time, and that cycle of the economy is played out.
4) Gold may have peaked, and may fall in value.
Good Luck.
... is getting out of debt first.
1. Ask Slashdot for financial advice
2. ???
3. Profit!
I am also a rising junior in college, and I have found that the best way to invest my money has been the PayPal money market account. Right now I am making 5% interest while having instant access to my money through the PayPal debit card. Plus, I get 1% cash back on all my PayPal debit card purchases. And the best part, there is no minimum balance.
Dearest Mr. Cretin,
My name is Dr. Rod Paige, and I am interested in helping you to invest your money wisely. Together with my partner, Kenneth L. Wainstein, who is experienced in these matters, we would like to contact you regarding your investments.
Since you state your desire not to live in your parents home, we may also be of assistance in helping you make new living arrangements in one of our housing blocks.
You may contact us at the phone numbers and addresses below:
Dr. Rod Paige
Office: 1-800-872-5327
Fax: (202) 401-0689
U.S. Department of Education
400 Maryland Avenue, SW
Washington, DC 20202
Kenneth L. Wainstein
Office: (202) 307-0258
Fax: (202) 514-9155
Judiciary Center Building
555 Fourth Street, NW
Washington, DC 20530
As an initial installment on your investment in your future, please be prepared with a money order or cashier's check of the full amount of funds you have received in student aid.
Should you you fail to contact us soon, we may take it upon ourselves to help you out and contact YOU!
Thank you for your cooperation in our investigation of this matter.
And if you dont' want any risk go hole yourself up in a bomb shelter for the rest of your miserable life. All investing has risk, hell even FDIC insured accounts have risk - if the whole federal government sinks then you're not insured any more. If our government collapses though he probably would be free of his student loan too. Oh well if you're so worried about risk, the only advice you can give him is to pay the money back. Money you owe is money you don't have, and thats risky.
I think the George Best method would work best:
"I spent a lot of money on booze, birds and fast cars - the rest I just squandered."
Your only young once.
No trees were harmed in the posting of this message. However, a great number of electrons were terribly inconvenienced.
What everyone should do when they are investing is do the research themselves
Personally I think a lot of people are really stupid with their money because they actually trust all the sugar coated advice they
hear, such as the stock market generally goes up. Anyone with any experience in economics will tell you that markets go up, down, and
sideways. You need to be able to be smart enough with your own money that you can handle anything the market throws at you. Most
importantly never stop learning, keep reading everything from everyone about investments. I would start by reading "Rich Dad Poor Dad" by Robert Kiyosaki
You took out loans to "have money in the bank"?!? That's not your money, that's the creditors money, and you're playing with fire by so willingly taking on debt for short-term needs. You're screwing yourself over, and the first thing you should do is pay back those loans ASAP, and then live within your means!
Slashdot: Playing Favorites Since 1997
Your best investment would be to buy the place you are going to live in over the next few years. The fact that you do not have to begin paying on the loan until you graduate, makes this an incredibly good deal on top of the low interest rate. I would be impossible for the market to offer you a better return on your money because the elimination of rent from your budget will be the single greatest way to start putting long-term money in your pocket.
Only if you forgot the first rule of investing: Never invest more than you can afford to lose. If you follow that rule, you won't go broke from investing, no matter how badly your investment does.
Besides, I don't think that the booze sellers will go bankrupt even if the world doesn't end. Even if everyone else sobers up, the investors who ignored the First Rule will keep them afloat ;)...
Forget magic. Any technology distinguishable from divine power is insufficiently advanced.
Assuming those loans are at a rate something more than inflation and that interest is accruing, the best thing to do would be to pay them off.
Of course, if you've got a sweetheart rate, or interest doesn't start accruing until you graduate or something, they're worth keeping as-is, and you should probably look into various tax-free and risk-suitable savings schemes.
I agree entirely with the parent but would like to point you to the supporting thoery: http://en.wikipedia.org/wiki/Modern_Portfolio_Theo ry
Basically, to earn a higher return you need to take more risk and you can only beat the capital markets line if you have special information that the market doesn't know about. However, since you normally pay more than the risk-free rate on your loans, "investing" in debt repayment actually falls above the capital markets line and is almost always a good idea.
However, you are saying that you have a unique opportunity to borrow at below the line. If this is true (check that taxes don't screw you over) and legal/ethical then you should invest in a riskless asset (e.g. US government treasueres) that pays out as close as possible to when you have to pay back your student loan. That would then be an arbitrage trade (http://en.wikipedia.org/wiki/Arbitrage).
Some people I don't understand what's so right about provocing other races/thougths and values in this way ...
--- I am known for the ones who want to find me on the net. Is that a privacy risk or a privilege? One might wonder..
Hi!
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VoIP is the wave of the future. You can be part of this fantastic technology by buying our shares. Many unsophisticated investors such as yourself have got in on our IPO in the hopes of big gains.
In a very short time the original investors in Vonage, such as myself, will be able to divest our shares. I encourage you to purchase your shares in Vonage SOON, before this occurs.
We also offer low cost calling to our Nigerian subsidiary, if you are interested. . .
Jeff
You won't lose your money if you invest in oil companies. You won't lose your money if you invest in tabacco companies. You wont lose your money if you invest in alcohol companies. You wont lose your money if you invest in surveillance companies.
;) ).
What about the opposite? Surely there are some companies that are good investments AND don't leave you with a guilty conscience from sponsoring people that are profitting on the misery of others. (Or am I living in la-la-land again?
"What do you think?" "I think 'What, do you think?!'"
On how much money you initially have to invest. If you start with 1,000, and have nothing to lose, I recomend buying biotech that has just gone public. If you research their claims to make sure its not snake oil, its a little safer then Russian roulette, with a higher payoff.
If you have 20k, and everything to lose, might I recommend a bank stock? Stable investment with a dividend. With some the divedend is close to 5% yearly. You could then use that money for the riskiest stocks you can find. If you lose, there is always next year.
If you have ten grand and nothing to lose, I recomend Russian roulette. Only really cocky individuals do the classic "gun to head" bit. Most people opt to shoot their foot. You could gain 100% return every go. Its about as risky as taking out a federal loan to gamble with the stock market without knowing anything about it....
You could also be frugle. Invest $200 into some decent brewing gear, and make your own beer. You can save a ton of money on a hombrew, have more flavor, and sell the rest to your friends. Use the profit for more beer gear, and repeat. Because in times of regression, alchol is always a safe investmend.
3 degrees of separation from Vladimir Putin
I would recommend getting a certificate of deposit. Browse different banks asking about their "specials." It's not unusual to be able to get over 5% APY for a CD as short as 1 year.
Sigs pose an operational security risk and help the baddies aggregate data. I guess commenting does too, oops.
The stock market is a long term solution, not a short term, and yes, college is currently short term for you. If you were to invest in stocks at this short notice, you'd be running the risks of day trading and the high losses associated with it. There are higher earning options. First, you know when you're going to need your money, so you might want to look into CDs. Create a CD ladder. For example, using ING Direct's rates (one of the highest out there, but check bankrate.com for rates and also look at HSBC's and Emigrant Direct's rates for comparison) and the assumption yuou have 4 remaining years at college, you could do the following with $10,000 (a round number or example use only): Rates by Month: 6: Rate: 5.00% 12: Rate: 5.25% 18: Rate: 5.25% 24: Rate: 5.30% -- Max Rate 30: Rate: 5.25% 36: Rate: 5.25% 48: Rate: 5.25% Given the 24 mo. rate is the highest, you could do this: 6 mo - $2500 12 mo - $2500 18 mo - $2500 24 mo - $2500 After 6 months, take what you need out (if anything) and reinvest it in a 24 month CD. This will mean you now have 1/2 your money earning 5.3% or higher (interest rates are likely to rise). Then after another 6 months, do the same, and in a year, you'll start having a nice revolving interest with your money freeing up in regular intervals. You should invest your budget for those 6 months in a high yield interest bearing money market account (such as the ones available at ING, HSBC, or Emigrant Direct). Check around to see who has the best rates. Currently ING's rate on their savings is 4.35% which is pretty decent but I believe HSBC is offering the highest rates at this time. This is a low risk method, but since you need the money in less than 10 years time, it is the best investment method. Check with sources such as bankrate.com, suzeorman.com, motleyfool.com or (I'd give my little financial website but I don't know if it could handle slashdot effect :))
Buy Gold. Gold Gold Gold Gold Gold Gold. It's up 10% year to date and has no ceiling.
I can not say it enough. It will not go down, and if for some fluke of a reason it does, you can buy lots of discounted gold!
The chinese and arabs are going apeshit on gold. It has completely transcended supply and demand. It is now purely a psychological market, and the price will only climb.
Also, it is WW3 proof, unlike the American Dollar or any stock market. Should the shit hit the fan and international commerce ceases to exist, your gold will still be valuable.
Maybe you're not a survivalist, but Gold is going to be perhaps the most liquid asset you can buy, and you'll have no trouble at all selling it.
Thank you. I was thinking exactly the same thing. Are there ethical investing mutual funds? Or is it better to invest the money in something like the vice fund and then spend the profits buying from eithcal companies?
I am TheRaven on Soylent News
Vanguard Prime Money market has 5.04% yield VMMXX If you can meet the minimum the use INGdirect, or HSBC.
I'm a college sophmore w/ plenty of money in the bank. I have never invested in anything and there are A LOT of small things I've done to make money. 1- Sell most of your stuff that you don't use at some sort of yardsale. 2- If you can make something and profit, do it. hemp jewelry, cookies, etc. 3- Sit in a public place doing something odd and w/ a cup out for money. You're not begging, you're entertaining, so it brings a fair amount. 4- Sell some sort of home-made comic book or newspaper for something like a quarter. Everyone has a quarter and many people are interested. 5- Try selling hugs for a quarter in a public place. Sounds corny but people think it's cute. It works. 6- Get all the free stuff you can: Don't buy napkins, toilet paper, or tissues. These are all available other places. If you go to a school cafeteria, bring a tupperware with you now and then and save food for later. Go to free food events on campus. 7- Don't use a car until you NEED to. Try to plan your life around public transportation. Go as long as you can without owning a car. 8- Reconsider any entertainment needs. Stop buying new games or going out to the movies. Again, start looking for free events. NEVER eat at a resteraunt if you can avoid it, unless there is some sort of free food there for college students. (Subway did this once at my campus). 9- Don't try investing in anything unless you're sure you'll make money. Even something like selling on Ebay can backfire and make you lose money.
"if only i had known i would have been a locksmith." -albert einstein
If your parents don't throw you ought 2 months after graduation or age 24, they are idiots.
If you plan to put any money you need in the next 5 years in anything but a money market, CD, or interest earning account, you're an idiot.
Bonds are too risky for short term investments.
Mutual funds are too risky for short term investments.
Stocks are too risky for short term investments.
Anything under 5 years, is short term by definition.
Live as cheaply as you can, and pay back all loans that you can and graduate debt free. You need between $1k-$4k when you graduate to get an apartment and pay all the deposits for phone, water, and rent. No TV, no high speed internet, and almost no furniture. Heck, I didn't buy a bed for 4 months after I graduated.
Oh AND GET A JOB! Minimum wage coming in is better than nothing.
Those loans are costing you more money in the long run. You may very well save money by paying off the loans as opposed to paying the interest over how ever many years.
I've been in the very same place you have, and as a Junior in college I actually started my own hedge fund and became an investment adviser. With that being said, a few thousand does not give you many options, but your age allows for 100% risk! Assuming that you have less than $10k, you should look for alternative investments, or look to use the money to start your own company while your in school. $10k is not enough to become a stock trader, but it is enough to learn the Futures market. $10k will not make you rich sitting in Government or Corporate bonds either. Finally, $10k is enough to become a longer term investor, which means doing fundamental analysis in an industry you look, and finding the best of the best. For example, a risky company is Phinder Technologies (PHDTF.OB) they are a penny stock engaged in E-business apps (my fund owns a whopping 6000 shares). Other examples from the are Sirenza Microdevices they make the chips in satellite radio sets, etc. Try to find where humanity is going.
Finally, my fund (http://theopenfund.com) does take in new traders with a minimum capital commitment of $25k, and we train and everything. Currently, we have five traders.
Well, I hope these tidbits at least allow for some thoughts!
-------
artlu.net
When I took my loan, there was a list of things I could do with it. Investments was NOT an approved use of my loan. I'm sure putting it in a low yield savings that you have easy access to is ok...
Things I was allowed to do: food, shelter, utilities, childcare for my kids expressly so I could attend classes, school books, a computer a year...
That money is given explicitly to enable your schooling, not to help you make money. Check the terms of your loan lest you be caught with your pants down and get in a lot of trouble.
---- I'm out of your mind!
shop around for sri funds (socially responsible funds) these are funds that go through a screening with variable requirements (from a simple no investing in weapons manufacturing to thirld world sustainable development investing ) good ones tend to payoff just as well as normal funds and usually a bit more in the long term, you can shop around for one that suits your conscience and your wallet, its a profitable version of voting with your wallet ,and it suits the spirit of investing for your future better
So assuming that you are 20 and retiring at 75, every dollar you invest now is about $200 at retirement (or, seen another way it is $20 per year at retirement)
Considering the state of the US economy, the demographics of the US population (hint: it's aging fast) and, perhaps most important to this discussion, this publication (warning: .pdf) by the St. Louis Federal Reserve Bank, that $200US at retirement might have the same purchasing power as that $1US now.
YMMV.
--The usual disclaimers apply
So, first thing is to pay off credit-card debts. You don't get a deduction on the interest and it's hard to beat a sure 9%-21% return on your money. If you take care of your credit score, then you will be able to borrow the money back later when you need it.
Second, recognize that an investment's risk is proportional to its expected return. You can make just a little bit in a savings account (check out ING direct, which is paying around 5% right now), with no risk to your principal. Or, you may make a lot by speculating in stock options, but you stand an enormous risk that you'll lose everything. You can solve mucch of the risk problem by diversifying, but you cannot completely cure it. It's hard to diversify without a lot to invest.
Third, look at your time-horizon: how soon do you need the money? Over the long-haul, the stock market will out-perform "safer" investments. A broad-based stock mutual fund with minimal expenses will allow you to at least track the market. The Vanguard S&P 500 index is very low-cost and tracks the S&P 500.
Ignore advice about whether the market is in a "Bubble" or not -- if there was a general consensus that it was true, it would cease to be true because everybody would sell.
Fourth, DON'T, whatever you do, DON'T buy an insurance product like whole-term life insurance, universal life insurance or annuities. Insurance sales people take massive commissions straight out of your payments. And insurance companies, by law, are very limited in what they can invest in. As a result, you throw away a big chunk of money and then don't get a great return. If you need life insurance, buy a level term life policy from a financially sound company and invest the remainder. Doing that will give you the same insurance benefits, but a better return.
As a college student who is too rich to get aid, yet too poor to actually pay for school I just want to say thanks.
It makes me happy to know that my fellow students are seeking sound investment advice about what to do with excess financial aid money. Of course I am not eligible for that aid, because you need it so desperately.
So anyone have any good advice for a senior who is going to be about $60,000 in the hole in about 9 months? What should I invest in...
If you can't stand risk, may need immediate access to all of it, and may not keep it invested long term you may be best off finding the highest yield savings or money market account.
If you have enough and you can stand to not have access to most of the money for months at a time, you may want to see about setting a series of rolling CDs. As an example: You have $6000.00 and can by 6 month CDs for $1000. You buy one CD a month over 6 months. At the end of the 6 month term, you roll the CD into a new CD. It is a safe investment, you have access to the $1k for that month, you can get the rest if you need to with a penalty.
If you can stand some risk and not having access to the money, you can invest some in zero-coupon bonds and the rest in the stock market. Mutals are good.
If you would like to play with the market but want to keep a good portion of it safe, you can get an acccount with some place like ShareBuilder.com. They do dividend reinvestment.
The options are about endless. Limiting factors are amount, term, risk, and return.
There is no "-1 offended" or "-1 you don't agree with me" mod options for a reason.
You're asking the wrong website. Ask over at fatwallet
in the financial forum (or read it).
"God fights on the side with the best artillery." - Napoleon, Marshal of France - speaking truth to power
If you have the money I would say pay the tuition. Less debt you have the better off you are.
Check out Dave Ramsey www.daveramsey.com he has some great ideas about debt and never having them again. My wife and I started the plan this year and it is a great feeling to be paying down debt and getting rid of payments. Its amazing how much we are paying in interest that would could be using for something else.
His plan is pretty simple. Get on a written budget and STICK TO IT. You have X dollars comming in budget them ALL and dictiate where it goes. Use all cash! We put money in envelopes and when the cash is gone we are done with that catagory for the month. This usually takes up to 3 months to figure out what you are doing and to get it right.
Cut up the credit cards!
Save 1000 dollars in the bank for an emergency fund.
Start listing all your debts smallest to largest and pay off the smallest ones 1st. This helps with a mental good feeling of getting rid of payments. It worked for us! We feel great when we pay off another one. The car should be payed off in 2 months.
Don't go out to eat, don't go on vacations till you get the debt taken care of.
Once you are out of debt then you start saving for a house, retirement, etc. Check out his website he lists it all. We are very happy and hope to be out of debt within about 2 to 2.5 years INCLUDING all the stupid stuid loans... Then off to save for a house...
Most banks offer CDs that you can mature at any time and you'll get a better interest rate than the 0.75% they offer with their crap-ass savings account. If you don't like that, get into a money market.
"I have never won a debate with an ignorant person." -Ali ibn Abi Talib
Since I assume you're talking about investing for just a year or so (i.e. until you graduate), and since you want something liquid (i.e. that's easy to cash out when you need the money quick), I'd recommend something on the order of a money market account. They average a better interest rate than normal savings accounts, but are just as liquid. Of course, with the rash of electronic only savings accounts (ING Direct, HSBC Direct, Citibank e-Savings) offering on the order of 5% interest rates, they can be more appealing than money market accounts now. If you can afford to tie up a portion of your cash for 6 months or more you can still do better with CD's, etc. of course. I'm not very knowledgable when it comes to bonds - except that they are a nice conservative investment. I'd stay away from the stock market though unless you're investing for a longer term (i.e. >5 years) - it's much too volatile in the short-term.
Investing that money in any stock or mutual fund is the worst thing you could do. The only money you should ever invest like that is money that you can afford to leave alone until the market recovers from a crash. For liquidity, safety and good return, use something like a Vanguard Prime Money Market account.
If you just want to get by, listen to the multitudes here. Put your money in a mutual fund, shares of stock, a money market account, etc., and 10 years later you'll probably be about the same as where you are now economically - POOR.
You need to start thinking - seriously - about what you want to do with your life, financially. You can be rich and retire within a matter of years, if you wanted. You need to understand the path of money and how the right investments will make you rich - not just be something to look forward to when you turn 65.
Your entire first sentence is a blatant oxymoron. Let me get this straight, you borrowed massive amounts of money, thousands of dollars, to cover "all your costs" [which you state are minimal,] to graduate with money in the bank? First off, if you have minimal expenses for college, you should be taking advantage of that by investing the money you earn, not the money you borrowed [which as a previous poster stated, is illegal]. Second, I understand living is an expense, but get a job like a responsible person and pay your way. Third, if you don't need to touch your money for three or four years, it may be smart to use a minimal cost savings account through someone like ING Direct. They don't have physical banks or tellers, so they save $ and pass it on to you in the form of higher interest rates for your savings. Ex: Average savings account interest yield today .25%, ING's is 4.35%. That's insanely better.
Here's a plan, may or may not work for you but its working for me. I didn't take a single loan out for college. I had one meager merit scholarship, and I worked part time during nites and weekends, and full time over summer and winter breaks. I paid my way through college with the miniscule help of my parents, and I graduated in four years. I now have a substantial salary at a significant software company, and I still live at home. While some of my friends are blowing their new influx of cash on their own new apartment and new car, mocking me for choosing to stay at home for 3 more years, I will be buying a house while they pay rent on something that holds no equity.While other friends are forced to live at home to pay off 30k-40k (sometimes higher)in student loans, I have managed to put 20K in the bank in 12 months, while still living comfortably with plenty of spending money in my pocket each week. Not to mention the fact that I'm not spending a single dime on my Master's degree, which I am getting part time. Now picture just turning 25 years old, with 60k in the bank (to be used as a down payment on a beautiful new home), 3 yrs full-time experience in my field, a fantastic rewarding job at a major company, and a Masters in Computer Science. Not to mention all that was done without a single ounce of debt to my name (or my parents). I think you will see better plans involve NOT borrowing money.
He can finance his investments at the risk-free rate in the derivatives markets. Student loans are more expensive.
At a minimum, put your money in an ING orange savings account. Guarenteed 4.35 return - no risk.
George II -- Spreading Freedom and American values, one bomb at a time.
2) I want options when I graduate to move to where I need to or whatever. I don't want to live in my parents' basement till I am 35.
Interest isn't the only cost of borrowing money. From the Federal Student Finacial Aid website:
So, you took out a loan for $10,000, and had to pay 3% for doing so, which leaves you with $9,700 to put in some investment. If you don't make at least a 7% ROI in the first year, you will have less money than you started with, since your loan origination fee + inflation will eat away at the money.
Assuming you find some no-fee magical investment that makes you a whopping inflation-adjusted 12% ROI every year for the four years you are in college (which would be a bull market to rival the 1990's), that gives you $15,263. After you pay back the original $10,000, you'll have a gain of $5,263, minus all the taxes you paid, since interest is capital gains taxable. So, you'll end up with around $4200 from your magical investment. If you live in the real world, where ROI on a good investment is more like 5%, you'll end up making around $1400.
In contrast, if you got a part-time job flipping burgers for 10 hours a week at $7/hr, that's a total salary earnings of $14,560 over four years, around $12,000 after taxes. Oh, wait, I forgot, you're a savvy investor, right? You'll be putting your earinging straight into the bank, earning an inflation-adjusted 2% interest on that money in a money market account, so you'll actually have $15,002.
One more thing... if you want to "have options" when you graduate, four years of actual work experience, *any* work experience, will serve you a lot better than four years of playing X-box while the clock ticks on your borrowed money. Just knowing that you've learned how to show up for work on time will be a big plus for most employers when they make a hiring decision after your interview.
Not to sound like a cantakerous old grouch, but if you want to have money, security and a future, go get a job. Any job will do for starters.
The man who does not read good books has no advantage over the man who cannot read them. - Mark Twain
Play online poker, like the rest of your buddies!
Keeping your debt to a minimum and eliminating it as quickly as possible should be your top priorities. Everything else should be aimed at that.
RTFM; please, I beg you.
What was once true, is no longer so
Check out Primerica they do a free Financial Needs Analysis (FNA) for you and will come back with a long term (retirement) as well as short term (what to do with what's in your bank) assessment. They also base the recomendations on things like - when you want to get married, own a house, retire etc. It's tailored to you not to some actuary table.
Things to note:
There is no point in investing in stocks and bonds...You won't be able to leave the money in place long enough for it to be worthwhile. Don't get seduced by the day trading mentality...People forget the damn taxes. That stuff is only profitable if you can beat capital gains, and the market isn't volatile enough right now for that to be likely.
Put the cash in a money market account. You'll get better interest, and you can make large withdrawals several times a year. That's about all you can do unless you want to speculate with that money, and I think the bank would go apeshit (rightly) if they found out you were gambling with yer student loan money.
ad logicam Claiming a proposition is false because it was presented as the conclusion of a fallacious argument.
See a relevant discussion on Fatwallet's Finance Forum. You have the right idea--invest all the money you can. There are plenty of others on the board in similar situations. You'll learn a lot there.
You're already off on the wrong foot.
The first thing you need to do is get out of debt. If that means living in your parents' basement for 2 years, so be it. Do you want to be sending your money to a bank for your entire life? If so, keep borrowing money for everything you need. People often think that you will always have a payment -- a car payment, house payment, etc. You don't have to. But it takes hard work, and most people are not up to the challenge and are too lazy; that is why we have a middle class that has a big debt load and a small savings.
Being debt free is one of the greatest feelings in the world. You are not beholden to anyone. Want to quit your job and switch careers? It is that much simpler without the debt. Not to mention that when you are debt free, you have a LOT of disposable income which you can invest (and you should).
Why not spend two years after college getting your act together? I paid off $25k in debt in 16 months, and I think I could have done it much sooner (and I had a mortgage to pay too). How? First, I created a budget and stuck to it. Secondly, I got a roommate. And lastly, I did side work throughout the year. Two years will fly by and you will be debt free and have more money each month than you ever have had before.
Living does not have to be expensive.
The US exports a huge amount of iron ore. With China & India experiencing a huge amount of growth, the demand for iron ore is higher than it's ever been. Resources such as steel, iron, oil will continue to be needed worldwide.
(1) Live frugally. There are (theoretically) 21 meals in the week. Each meal you make at home saves you between $3.00 and $30.00 and is probably healthier (prepackaged convenience foods like TV dinners don't count, as they're expensive and less healthy). Car insurance and gas are very expensive - rent a place within walking distance of where you need to be.
(2) Pay off credit card and other interest-bearing debts immediately. You will never make money if your debt is losing 20%.
(3) Place your money in legal risk-free non-investments: CDs and interest-bearing bank accounts like an ING Direct account are legal ways to make Federal loan money work for you without incurring the hefty "processing fees" associated with a fraud conviction.
Alas, only one comment raised the ethics of using student loans for noneducational purposes. If these are federal low-interest loans, it is unethical to use them to invest. In fact, the contract you signed may even make it illegal. However, if these are private student loans, you can burn the money as far as the government or anyone else is concerned.
If enough people took their federal student loans and invested them, instead of using them to pay for school expenses, public and political support for the federal student loan programs, which cost taxpayers billions of dollars a year, would be undermined. Congress could consider further cutting the program or making the terms less generous.
The people hurt most will be those who can least afford to pay for college. For them a student loan means the difference between going or not going to college or going to a community college or their state public university.
Student loans are not only cheap, they are exceptionally flexible. If you lose your job, you can fill out an unemployment form online and defer without question for 6 months. You can claim financial hardship (yes I have a job, but I have testicular AND breast cancer). You can adjust the term of the loan at will. Call them up and you can go from a 10 year payment plan to a 30 year plan in 10 minutes. You can even pay them less than interest! As long as you pay them and stay current, they will bend over backwards.
I personally have had to use options 1 & 3 -- having been laid-off 3 times in 3 years. A friend of mine used option 2. He didn't have cancer, he just claimed financial hardship after purchasing an all new machintosh home theatre -- they run a debt/income ratio check on you and your done. If you go back to school (9+ credits) they are deferred until you're done, and then you don't start paying again until 6 months after. Hell, someone I know has been living off student loans and staying marginally student/employed for 14 years (she's 31). Grades have no effect on your loan or rate either.
You will never get cheaper or easier money in your life. EVER! On the downside, your student loans are impervious to bankruptcy. Same person from above filed bankruptcy and they STILL keep loaning her money! She is up to 90k! You can't shake student loans. If you die and you haven't paid them everything, they will pull the gold fillings from your teeth and sell your body to science!
...absolutely unequivocally undeniably ILLEGAL. You can put whatever money is disbursed after the school takes the money it is owed for your education and put it in a basic savings account, thereby acruing some interest, but to purposely invest the loan money is against the law.
What should you do? Give the money back, or figure out some way to spend it legitimately. When you file your taxes - and student loan recipients do get looked at - they will say "How did you have this much investment capital and still get loans? You either lied on your application, or you actually invested your loan money." Either way, you are going to have to 1. pay back the loan, 2. pay additional fines, 3. pay lawyers fees, and 4. hopefully dodge jail time, depending on how your investments do.
What?
Great opportunities will open up in Lebanon when we install a US-friendly, democratic, government there. I advice you to save your money until that time.
Investment opportunities in Lebanon through Israel.
Break the total into several pieces. Every 90 days, invest a chunk in a 90-day Certificate of Deposit (CD).
When the first CD matures, reinvest it and its gains in a 180 day CD. Repeat for all of the chunks, each time doubling the period. It depends on your time horizon, but if planned correctly, you will have long term CDs maturing every 90 days, maximizing the yield.
CDs are FDIC insured, and if you have a panic, you can usually get the principal immediately, giving up any interest gain.
The best part is, you can spend the next three months writing a Ruby on Rails app to handle it all for you...
You described the classic - laddering of bond maturities. Unfortunately this doesn't help currently in the USA because the 1 year interest rate is about the same as 5 or 10 year rates.
The MOST important factor you haven't clarified is your investment goal.
When might you need the cash and for what? These choices make a HUGE difference
in strategies.
For more new graduates without much savings, I'd say you need to say liquid as you may
need to buy a car or move, etc. If we assume a 2-3 years horizon, that really cuts out
stock, real estate, and any exotica others have talked about. That is because the chance
of a downturn JUST when you need the money is too high in these investments.
So CD is just fine. The most adventurous one should get with a 2-3 year horizon is
investment grade short maturity corporate bonds which you can buy using a brokerage account.
Beyond that, the advice about paying off debt is sound in most cases. However, there IS
some advantage for a new graduate to carry a small debt AND keep paying it off.
That way you can build a credit history. The key is not to dig your self deeper
by borrowing to pay for vacations and such.
with Citibank e-Savings at 5.00% APY and HSBCDirect at 5.05% APY, these are no longer "mere savings account," esp when you consider the historic return of a 60 stock / 40 bond portfolio to be only 8% annual.
IANAFP, but I've done a lot of reading about stuff like this. Also, I'm assuming you don't have any outstanding consumer debt like credit card debt or anything like that. That should all be paid off first.
;-) Investing by lending (CDs and bonds) is generally much safer than investing by owning.
My advice would be to use Investment Laddering with something like CDs or short term bond funds. You'll have a little protection in case the market goes bad, and much better interest rates than a savings account. CDs and bonds would probably be better for you than stocks since you want to be sure you have money when you graduate.
Anyway, an investment ladder will be something you can keep implementing even after you graduate, and depending on how you set it up, you'll always have an investment maturing every 6 months or so. If you don't need the money, reinvest it again.
What you're basically describing is investing on margin (i.e. investing with borrowed money). Most experts steer people away from investing on margin. The possibility exists to lose money that wasn't yours to begin with AS WELL as having to pay interest on that money. And the interest rates are usually high.
You might be thinking that the interest rate on your student loans is really low. But recent legislation changed that. See this article for a description of the recent change. To summarize, the rate on Stafford Loans is going up to 6.8% and PLUS loans are going up to 8.5%. To compare, my mortgage is only 5.375% and my wife's consolidated med school loans are only 2.875%. So the new rates are pretty high.
What I would suggest to you is to find a really high-rate savings account or a money market account. I often see Emigrant Direct mentioned on Ben's Bargains as a good place to park your money. If you want to go down the money market route, I can highly suggest Vanguard's Prime Money Market Fund. Don't bother with the tax-free money market funds. You don't have enough income to make it worth it.
I would definitely steer clear of investing in stocks. It's just to risky to do with borrowed money. Once you have some money of your own that you can put away for a long time (think retirement savings), that's when you turn to stocks. Also avoid bond funds. Unlike individual bonds, bond funds have no maturity date, so they entail risk with little reward.
Others have suggested that it's illegal to invest your student loans. I find that hard to believe since that would preclude putting your loan money in any form of interest-bearing account. Maybe there's an exception for FDIC-insured accounts?
a more modern finance textbook can be downloaded at http://welch.econ.brown.edu/book/ .
I'll have almost $60,000 worth of student loans when I get out of school this December. How much will I own in student loans when I get out? The same $60,000... At a minimum need to pay the accruing interest on the loans while you are in school. Say if you have Federal loans at 4% interest and you invest in safe investment which you have immediate access to you money, which would be around the same 4%, you are not making anything. I would also bet that in fact you are losing money because the loan balance is larger, hence accruing debt faster than the amount you are making off the savings. Budget, pay the interest on the student loans, and stick the rest in an investment account from which you can have a debt card to access the funds immediately in an emergency. It acts like a credit card until the end of the month where the securities are liquidated to pay off the bill or you send a check to cover the charges. Either way it prevents the panic call to your broker or planner to sell something now and still have to wait for the FedEx'ed check or the 24 hour EFT... It also gives you a grace period which you are not making decision under duress, maybe you have the cash at the end of the month and don't need to sell. I had my first through ML, but now have moved to Ameriprise...
> Finally: have you thought about the ethics of using your student loans
> in this way? Were the loans given to you in order to help you pay for
> your expenses as a student? Do you think it's okay to ask someone to
> loan you money for one thing and then use that money for something
> else? Isn't that a form of lying?
Actually, he is using the money for exactly what a student loan is for: to pay for living expenses while he is a student. He is going to use his savings for the investments or whatnot.
There are many safeguards in the student loan program to prevent abuse of this sort. First, student loans are a form of financial aid. As such, if someone has too many assets, they will not qualify. (Referring to federally subsidized student loans here.) Second, you cannot receive more financial aid than the official cost of schooling as determined by the college. So he is not going to borrow an excess and bank the difference.
If I understand your problem right. You've taken a loan out and you want to invest it.
That investment will have to be able to pay more then the load itself, and (I don't know US law) any applicable taxes you make on the money you invest.
If your loan is $10,000 at 6%, and the taxes at 15% of your earnings you will have to make back the 6% interest plus the 15% of the >6 percent earnings in order to show any gain at all. Probably around 8% or 9% return in order to make it worthwhile.
If these figures are anywhere close to what your situation is, you might be better off REPAYING THE LOANS, and concentrating on school.
Wow, I guess I have a lot to say on this subject. Disclaimer: As probably most /. posts, I am not qualified in any way to make the following statements. Do your own due diligence and check everything I say.
:)
1. I agree that living frugally is paramount. Living frugally trumps the advantages of buying a house (unless you're going to put a lot of labor into fixing up the house) This means if you can find a house as small/cheap(#2) as your apartment or find enough roommates to make it so then it's often a great idea, but unless you can count on lots of long-term appreciation don't buy a bigger house than you need.
2. However, if you CAN find a cheap enough place, note that: the principle part of your payment you're investing in the long-term, so don't compare that part to your mortgage and you get a tax deduction for the entire amount of mortgage interest, so reduce that part by your taxes (and you won't pay gains on the first $250,000 of profit, either).
So my rule of thumb is that if your 30-year mortgage, before tax advantages is only 25% more than your rent it's probably a good deal. This does not assume any significant appreciation, but it doesn't apply in a town that's dying or if you're in a coastal city right now and there really is a huge housing crash.
Also if you HAVE any equity in your house when you buy it and have good credit you can lock-in a home equity line of credit, not borrow from it, and have a guaranteed credit reserve at minimal or no cost.
3. I'm going to arbitrarily define a long-term investment as one where you can reasonably guarantee you won't need the money for 5 years. Generally I wouldn't get into the stock market without that kind of horizon, which I don't think you have now. Because a volatile investment can go down with little reason, and often if it goes down without a great reason the right answer is to hang onto it. So don't do this unless you're sure you have enough of a liquid reserve and then you have maybe twice that
4. However, if you want the short version of doing pretty well with relatively low risk in stocks go to fool.com If you want the shorter version: buy S&P500 and Russell index funds. Generally avoid most mutual funds.
5. There are three basic strategies I'd address to having available, relatively short-term money. How much of it does depend on whether you have the bank of Mom and Dad for a really big emergency...
And really it's a tiering process... you should have SOME very liquid cash, some that's a little less liquid, etc.
One option is certainly a money market. Another is a short-term CD. You might look into some treasury securities.
6. A technique for investing in vehicles that have a slightly longer term than you like is to invest, say 1/4 of your cash in a 3 month CD, then in a month invest another quarter and in two months another. (Leaving 1/4 as cash) Then everytime a CD matures you can roll it into another (many banks will do this automatically) but at any given moment you have to wait no longer than 1 month to get your money.
7. Roth IRAs. If your cash now is from actual earned (taxable) income, you are probably eligible for a Roth. And if you are, you should be putting money in it up to your income or the Roth cap. Things to know:
A Roth is a tax designation, NOT a vehicle. So you can have a "Roth savings account" or a "Roth CD" (but you can't mix it with your other money, of course)
Because you contributed after-tax money to the Roth, you can generally withdraw anything up to the entire amount you contributed without penalty*. (You can't ever withdraw the INTEREST until your retire, though) This makes a Roth unique among retirement tax options in that it can double as a liquid reserve (if it's in a liquid vehicle)
*(You still don't especially WANT to withdraw it, because what you can't do is ever put that money back into the Roth. If you withdraw it you are essentially in the same position as having never put it in, but because there are caps on per-year Roth contributions there's a big incentive to start early and keep contributing.)
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Don't be crazy! There is no reason why paying off his student debt should be a top priority. Student debt tends to be at low interest and is sometimes tax deductible. He (or she) should do the math: if that money can be better used for high interest-bearing investments or paying off higher-interest loans, they should be the first target.
Don't confuse magnitude with interest: he may have large loans, but at low interest rates, there should be no panic at all. Factoring in the rate of inflation often makes student loan interest very close to 0, if I'm not mistaken. And I may be.
I don't know where you people get your information but:
1. It's perfectly fine for him to have this loan. Some of you say that he can't since he isn't using the money for "educational expenses." He took out the loan to pay for college so he could hold on to his own money... the loan IS paying for education expenses.
2. Most people can get loans for college with 0% interest while you're still in school. Yes, that's right, no interest until AFTER you finish college.
It all makes perfect sense - take out a 0% interest loan and pay your tuition. In the meantime, invest your money so you earn a little extra in interested. When you get out of college, pay off the loans.
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Ramit knows his shit.
Don't invest loaned money. Pay back the loan. If you loose your investment, you're not out you're money, you're out the bank's money. And you won't even have anything to show for it.
I don't work for E*TRADE, but I do have their money market account and it pays the best interest in the business and refunds your ATM fees. Keep the balance above 1000 bucks and it's fee free as well. The best one out there in my opinion.
Terrible karma and aiming lower, which in this environment of one-sided reason, is higher.
You're asking Slashdot, which means you're a geek. Which means you probably need paragraph one. If for some strange reason, you don't need paragraph one, ignore it and go to two. The reason for both paragraphs is that money is valueless: you make it have value by using it, and your ultimate aim is always (sometimes indirectly) your happiness.
1. You don't have a girlfriend. Buy one, and buy the ability to get another, so you have confidence because you can replace her if she goes. If you have confidence, she's more likely to stay, anyhow. That is, spend money on DANCING LESSONS and CLOTHES. Get some female friends to help you with this (not just one) -- learn how to dress. You can afford it. But the cheaper things which the girls advise you to. Note that girls don't understand what they want much better than you do, but they know what they like to see. You'll have to learn to behave on your own, but nice cloths and dancing will get you the positive interactions you need so that you can learn. You'd get all this anyhow, later in life, but you'll be happier if you learn this stuff earlier, and you can afford to.
2. OK, #1 was optional but this is not. There are transaction costs associated with all investments. You don't understand them. For instance buying a small amount of stock is usually nuts, as the transaction costs of buying and selling eat any profit. This one's obvious, but there are lots of little thigns to learn. SO: allocate a small amount of money to learn with. Play with it. The skills you learn now will help you later. Put some of it in something you can get out of at a reasonable place. For instance, half in a one-year CD, half in something shorter term, depending on what you think you'll need. (You'll screw up on that -- don't worry, it's the learning process.) The rest of it, the stuff you know you don't need ever (as much or as little of that as there is), buy into a mutual fund and forget about it. The deal is that you want to put this money away and forget about it for 40 years -- you won't though. Whatever fund you pick, you'll kick yourself, and after a few years of watching it and considering, you'll know much better where to put it. But invest SOME now. You're gaining a doubling by starting now, and not when you're established.
(BTW allocate $10k for when you have a child. Put that $10k in a fund for the child's retirement when it's born. You'll never have to worry about it ending up poor.)
Get as many W-2's as you can and get as many mortgage loans as you can afford simultaneously. Buy houses that appraise for at least 30K above what it is listed for and you will make a profit, otherwise the money gets eaten up in closing costs. Its hard to find good deals, but they are out there every day if you are looking, or if you wrote software that does this for you. You can get really rich buying houses for $100K that are really worth $300K after $40K of renovations.
In reply, I would like to bring to light the primary fact: as a college junior, he represents that he wishes to have some money after college, with no time frame stated. Therefore, I'm working under the assumption he wants to have a sort of liquid reserve immediately after graduation (which is either 2 or 4 years away, I assume also). Most of the posts I have read (and, admittedly, I have not read all the posts) focus on long-term investing and not necessarily what his financial goals are. Couple decisions that you need to make first and foremost. First, do you plan on staying in the area, moving, or undecided after you graduate? Second, do you plan on getting a job in your chosen field immediately upon graduation? These will both primarily affect your decision on investment vehicle. If you are undecided on location, or are certain you are leaving the area, then real estate is a potentially a poor choice in the current economy (depending upon your area, obviously). In addition, with interest rates on the rise, the stock market may not be the best choice either as the majority of your short-term (again, I am assuming we are talking about a window of 2 to 6 years or so) appreciation on stocks will come from growth stocks, which are generally driven by investment and, hence, negatively affected by rising interest rates. Therefore, if it's liquidity you are looking for along with relatively short-term appreciation and less risk than growth stocks, I would suggest either investing in a mutual fund targetting income stocks (such as a Dow Jones index fund) - these are also generally no load - or non-coupon bonds or bond funds (see the following for a description of bonds) http://en.wikipedia.org/wiki/Bond_(finance). And, as always, NO CREDIT CARD DEBT!!!!
To have a right to do a thing is not at all the same as to be right in doing it
If you really don't need the money any time soon and it's earned income, I'd go ahead and open a Roth IRA. Getting an early jump on retirement saving pays BIG dividends down the line. Whichever investment you end up using within your Roth, the extra time spend compounding interest and/or growth will help you immensely in your golden years. If that doesn't sound good then I suggest blowing it on hookers and booze.
There must be a bunch of DaveRamsey crasies with mod points. His central tenet is potential suicide in modern banking. Yes, live on a budget. Yes, live within your means. Yes, pay off most of your debts.
NO, do not cut up all of your credit cards.
NO, do not avoid loans like the plague.
Here's where his philosphy falls flat: Many insurance companies and all financial institutions need a FICO credit score to put in their system so they can evaluate you and produce a rate. If you don't have a credit score, you may as well have a 400 (bottom of the barrel). Keep two credit cards open, use them regularly (gas, groceries) and pay them off each month.
If you make a big purchase (house, car, student loan) get a low interest loan. You can pay it off quicker than necessary, but make sure it's on the books for at least a year. Don't want a mortgage and have the cash? Get a 5 year balloon an put the cash in a CD - the rates should cancel, or you'll end up a couple bucks ahead, and it'll look great on your credit report.
Remember, if you're not a multi-millionaire with cash-safe investments, you're going to need financial help at some time. Suprise medical costs can bury you financially, as can possible legal action. Don't get caught paying two or three times the going interest rate because you wanted to be "Dave Ramsey Debt Free". I've got news for you - if you pay your CC every month, and have more cash in the bank than you owe on your house, you're still debt free.
Is it just my observation, or are there way too many stupid people in the world?
I'm about 6-8 months from getting 2 bachelors degrees from CU (go-go-gadget-concurrency). Even before I started college my uncle took some inheritance and invested it in gold, for me. That paid off a quarter of my total loans (~6%, btw). It's already been stated, but it's just as true now as it was 20 posts ago; commodities, commodities, commodities...but if you absolutely, positively MUST get into the stock market right now, consider defense contractors or pharmaceutical companies, maybe even a foreign auto-maker like Toyota.
I work at an internal hedgefund for a large investment bank. If you want to do the right thing with your money, ignore most people who tell you to invest in commodities, etc. Do you think you can beat professionals who are smart, spend their whole day looking at these investments and are paid based on their performance?
The right investment for you is to perform the cost benefit:
if (the money you have) * (the interest you receive from ING direct or treasuries or whatever is not risky) - (tax paid on said income) > (interst paid on loans) - (tax benefit of said interst), then you should put your money into an interest bearing account. Typically these are realizing about 5%/year. If Bernanke raises rates again, they will realize more. You will be better off than just paying the loans now.
If you instead want to invest the money for the long term and want to use future income to pay off your loans, then the smartest investment for 'regular' people is to invst in the spyders or into a high yield savings account. Anything else is very risky and you start to compete with people who are much more knowledable, better capitalized, have better information, and more experience than you. This is especially true with small caps, commodities, and other 'hot investments.' It's like sitting at a poker table with Johnny Chan. If you don't know who the sucker is, it's you.
One: Unless you are willing to spend a LOT of time doing research, you are better off paying someone to manage your money. Mutual Funds routinely do this for less than 2% per year expenses. Two: Despite what the index people say, there ARE mutuatl funds that beat the index, reliably. But it will take research to find it. MorningStar has a nice free web site that can help you do it. If you don't have the time, then just pick an index fund that seems appropriate to you - but even that will take a small amount of research. Three: Look at long term performance, i.e. 3 year or longer, to negate the short term luckyness. Make sure the expense ratio (how much you pay the fund) is not too high, and avoid an upfront or back end fee.
excitingthingstodo.blogspot.com
Mind if I take a short nap in your safety net?
Just til I can get on my feet again.
Want a beer too?
Have you met my wife? She needs a nap too.
My kids need a nap too, they have issues.
Someone answer the door, I ordered a pizza... Does anyone have any money for the pizza?
Why yes, I support only socially concious politicians that believe in a strong social safety net, not those greedy capitalists.
Yes, we should have a more socialist government, I need my fair share too!
YOU GREEDY CAPITALIST PIG!!! How can you claim the safety net is being used as a hammock? You're just plain mean!
- High Tech workers, please say NO to Union Carpenters, their Union sees fit to control our compensation.
What the heck is a "rising" junior?
It's common sense that most people have lost sight of. Lots of people who think they're sophisticated investors have these ideas about using OPM (other people's money) and "leveraging", and all this other stuff that can work sometimes if the best laid plans all work out according to your ideal way you hope they will. If anything else happens--layoff, illness, you're screwed because you have taken on extra risk. Most people don't factor the risk of having debt into their investment return calculations. If you don't watch it, you could look up in ten years and those student loans will STILL be hanging on your back.
If you can be debt-free (a reasonable mortgage excepted) and have an emergency fund of around 3-6 months of accessible cash, you are sitting in a very strong position, and investing with cash from that point is a much more powerful thing. Also, there are psychological and emotional factors to not owing your life to the banks. There is a master/servant relationship that comes into place when you borrow money. The lender has a claim on your life to tell you what to do that I would just rather be free of. I look forward to when we get our house paid off, and I can walk out into the back yard and feel the grass between my toes that I own. I won't be living in someone else's house.
We may experience some slight turbulence and then...explode. -Capt. Mal Reynolds
With that said, I feel like my thousands sitting in the bank could be doing work for me instead of collecting dust till the day I graduate.
First of all, read the fine print on your loan agreement. It may be against the terms of your contract to use the loan for anything but educational use (i.e. tuition, books, transportation to/from school, and living expenses if you're living away from home). Making a tiny bit of money in the small number of years it will take you to finish your degree/diploma will get wiped out if the bank/gov't/whatever does a financial audit. It doesn't even have to be anything that you do that inspires them to audit you; external pressure to "look into things", especially in cutback times, often is what instigates audits.
I am a rising junior in college and decided to take out loans to cover all my costs so I could graduate with money in the bank. My tuition bill is minimal as I have a nearly full ride, but living is always expensive.
Secondly, if you can afford school without getting student loans, why in the world are you applying for them? There is a limited pool of money out there for student loans, especially government ones. If people who can afford to go to school without taking out loans do so, this means that people who can't afford to go without help will often get the short end of the stick. If you don't take out a loan or are not eligible because of your great financial status, you're not being "punished" -- rather, you're being rewarded by not having to pay back the loan with interest. However, when you take out a loan that you don't need out of a limited pool of money, some poor schmuck out there who is scrambling to pay the bills already will be allocated $2K a year to pay for his $15K/yr education away from home (rough estimates).
Thirdly, how did you get a student loan in the first place if you didn't need it to pay your way through school? If it's a bank loan, that's understandable, since they can usually get parents to co-sign they will give a loan to just about anybody because it will eventually earn them mad cash. However, government guidelines are usually much stricter, and take into account not only your financial need and how much money you have in the bank, but also how much your parents make a year and have in savings. I'll grant that your government loan could have slipped through the cracks and you'd get the money even if you don't really need it. However, if you've misrepresented your income/savings/parents' income, you could just have royally screwed yourself. It's back to the audit thing again, and actively lying on an application won't just get the loan money taken away, it can also mean some mighty hefty fines and (possibly) jail time/marks on your permanent record for fraud.
Honestly, if you've already got a "nearly full ride" as you claim, get a part-time job if you don't already have one instead of a loan. You don't have to pay the money back, you'll make up the difference between your "nearly full ride" and paying everything off in full, and there are no moral/legal ramifications. And hey, if you end up making more than you need to live, you can always invest that money in stocks/bonds/mutual funds/whatever.
While money market funds can lose money (principle) in principle, because they are not insured, I believe the money market associations will point out that no one has EVER lost money in a major money market fund. The types of securities they are allowed to invest in (mostly government notes and commercial with very short terms) are extremely low risk.
In contrast, Savings and Loan accounts, though insured, had considerably higher risk because they were backed by long term mortages. During the Savings and Load crises, many of these mortages were for commercial property that was highly speculative and defaulted.
Although money market rates should track short term interest rates (which are relatively high right now, compared to the past few years), some institutions seem to be able to do much better than others. ING pays much better, right now, than most mutual fund (Fidelity, T Rowe Price) money market funds.
Depends on the amount, and just how much energy you have, and how responsible you are.
If you have enough, I'd seriously suggest real estate, more specifically multi-family housing. I went to school in Boston, and had 2 friends who scraped together enough $$ to each buy a 3 family house. (One in Oak Square and one in Davis square). They each bought them at a time when those areas were still sketchy (late 80's) and scraped cash to make ends meet while living there. Each had it set up so that they paid little or no mortgage because the tenants covered nearly 100% of the payment. I'll admit they struggled for a few years - and it wasn't pleasant seeing go through things like broken pipes at 3am or reckless tenants. But the outcome was incredible.
They both followed similar rules
1. Rent only to grad students
2. If no grad students were available, then women over men (less nasty)
3. Whatever unit they lived in was constantly under improvement, and when a tenant moved out - they'd rent the unit they just finished fixing for more $$
When they finished school and had jobs that paid well enough to save, they stopped altogether renting an apartment when someone left (if they had the cash) and added that floor to their own, eventually making the 3 family house into a 1 family house. Last time I saw my bud in Davis Square, his house was in fantastic shape, and now in a great neighborhood. The neighborhood even petitioned to have the street made into a dead end. My friend in Oak Square reverted the unit back to apartments when he was divorced, and leveraged it to buy 3 other units (he's now a slumlord - but a rich slumlord)
Or then you could be like me - spend it all on booze, and travel - I think I did ok.
Get your tagline off my lawn.
The fact is you're already investing tons and tons of money on your education. If you have money to burn, spend it on getting good grades (legally of course :). Get good grades.
You can waste time trying to make 10% on your 10k loan (~4k over 4 years) or you can be successful in school and make an extra 5k+ on your starting salary (every year).
Good grades also lead to scholarships, opportunities for Co-op position or research assistant positions. Where I'm from (University of Manitoba), the marking and teaching assistant positions pay way better than McJobs, they're conveniently located on campus and you get incomparable experience.
Your education is a huge investment, you can dick around and try investing "extra money" or you can focus on being the top of your class. Do the latter and you won't need to worry about the "few grand" you could've made in College. The best of the best effectively get paid to go University, why not be one of them?
Did you not read the part about how he wants a short-term investment? The simple answer was "an ING savings account making 4.5-5%, or similar".
;-} ) - if you are investing $1000 for one year you break even, but only if you ignore the time value of money and inflation! Including those two effects, you need to invest $5,000-$10,000 to break even (depends on your personal time value of money / actual inflation).
I did miss that. In general, my response is: there are no short term investments. If you cannot invest long term, pay off debt and then have a fun vacation. Earning even 5% is a silly excersize - the effort you put into it will greatly outweigh the returns. How much do you make an hour? $50? OK, so it takes you 1 hour to set up a savings account at your bank (and ask Slashdot
while (sig==sig) sig=!sig;
While, I do agree that trying to save money is very important, do so with education loans may get you into trouble. In general, education loans to be used for any direct costs for your schooling.
Start an IRA if you don't already have one. You'll wish you had in 10yrs.
If you want to play with the rest, read up first: www.fool.com
Music supply is no longer constrained by physical media.
The market speaks by offering a price that is deemed fair (free or near to free).
You may whine all what you want about the ethics of this (downloading has many pluses from a cultural point of view) but can't argue with the change of the supply.
Recording labels have being on denial bout this, this is what is being criticized.
IANAL but write like a drunk one.
It's a solid investment in a shaky economy.
And for God's sakes, start paying attention to what you're signing or agreeing to! Clicking through a EULA or two might have worked up till now, but not taking the time to ascertain the basic jist of the terms of a loan worth tens of thousands of dollars is just ridiculous. Skipping over these sections because they're lawyer-talk and boring is a recipe for disaster. Sooner or later, you're going to sign something that wasn't written in your best interest and consequently get burnt.
-Grym
Hmm some good advice, but lots of crap.
Clear Debt first- always. this means no more stupid spending.
Best order to clear debt is somewhat counter-intuitive. Many tryo to clear highest intreest rate first. Many others start by making larger payment on either the highest balance or the highest interest rate. These are both wrong froma mathematical perspective.
1st pay off the SMALLEST balance, regardless of rates. Then apply whatever you were paying on that loan the next samllest loan..and so on, and so on. This will get you out of debt fastest, and fastest is cheapest.
Once you are out of debt, start saving immediately. 401k's are best- taxes suck. after you max a 401k (yes I know you are not employed yet, bear with me) then invest in soething else.
There is risk and reward in all types of investment- stocks/bonds/ mutual funds/real estate there is NO SUCH THING AS A FREE LUNCH- you either get higher returns OR lower risk, not both.
For long term- a mix is your friend. All your eggs in one basket is STUPID. If you are young, you can afford higher risk/higher return options, in fact, you should look for them. Okay, look at the stock market, some go up, some go down. If you have all one stock-(lets say hmmm ENRON) and it tanks, you are broke- game over. If you have a mix, you lost some there, but make some elsewhere. I know some people say mix your own, and hate mutual funds, but how much of your time do you want to spend on this crap as opposed to having a life? A mutual fund has a mix of stocks, or stocks and bonds, or even money market/CDs.
A good mix of funds give you diversity without wasting your life. I very cheap fund is the index fund- for example- the "DOW JONES" is a measure of the market. a "DOWN JONES INDEX FUND" has stock that matches that index. It is low cost, because tha manger doesn't need to do squat.
Lastly, do it NOW NOW NOW NOW-
RULE OF 72- your money will double at a rate that equals 72 divided by intrest rate. so 10% intrest means double money every 7.2 years. at 20, that means assuming retiring at 62 (42 yrs) your moeny can double 6 times. so 10000 to 20000 to 40000 to 80000 to 160000 to 320000 to 640000
First things first... be wary of a lot of investment advice given on slashdot. These are the guys that fueled the bubble and think Google having a P/E of over 100 is A-OK.
I do work in finance, and have a great personal interest in these things also. I am assuming you have no debt, and are perhaps on a scholarship so you have extra money around that you can play with. If you are in debt, I suggest you pay off all credit cards first (it will be nearly miraculous for you to get an 18% return or whatever your card charges you).
As for actual investments, I am assuming you have little money to invest. Investing in individual stocks will KILL you on fees and eat into any returns. I suggest a no-load, light fee mutual fund based off of an index (be it the S&P 500, Russel 2000, wilshire 5000, energy sector, whatever). These give you a great deal of diversification and you are not subject to the risk of pictures of the CEO doing a line of coke off a 14 year old hookers ass getting out. At this point, mutual funds are the way to go. When you hopefully start massing real wealth in your 30's and 40's it will be cheap enough for you to invest in individual stocks. if you really like a certain area, IE emerging markets, transportation, etc... there is definitely a fund out there for you.
A note on diversification: I recommend against investing in tech stocks (assuming you are a techie). If the tech market bombs, your employment prospects will be shaky and your wealth will have taken a hit too, a potentially disastrous combination.
Interest rate + spread (bank) = Loan rate (money paid)
Interest rate - spread (bank) = Investment rate (money saved)
*calculations*
(money paid) = (money saved) + (bank) + (bank)
Therefore:
(money paid) > (money saved)
Why bother? Just take less in loans. If you need cash later, borrow later. Leveraging your student loans to get income from investments is a path to greater debt. To beat the student loan rate you either have to take on credit risk (might not get anything back) or interest rate risk (might not earn enough in the long term to make it profitable). If you're sitting for the CFA exam, then maybe you could pull it off. But if you're asking Slashdot for investing advice, you're not in that category.
Are they tied in any way to performance? Here in Sweden you need to get a passing grade for the courses for which you have applied for student loans, or you will have to refund them immediately. Is there something similar in the US?
My bro and I both work in the software industry in similar positions. My student loans will be paid in full with the next check. His student loans will take 30 years to pay off (he borrowed all that "free" money, and I worked my arse off as a lab technician).
My house is very nice. His house is not as nice.
Pay back your loans as soon as possible. Debt can be crippling, especially when it comes time to devote your time and money into the needs of a growing family.
Always pay your debts first.
If and only if you had your own money to invest (not on loan from the gov't, which is not legal, BTW), through gifts of bonds, inheritence, hard work, lottery winnings, or something, I'd consider buying a property in which to live while you finish school and improve it as a dwelling. Property prices are quite high right now, but perhaps you could still find a fixer-upper opportunity and "fix her upper", taking the appropriate cautions. If done right, this could benefit your day-to-day quality of living, and when you move on, you could sell or rent this property. It would solidify your credit, and could give you tax advantages (which wouldn't help much until you've got a real job). Partnering with a parent or relative (with clear contractual terms) could allow them a tax advantage, and you and them both a practical investment in something you'd get actual use out of.
Or you could just enjoy college and stop worrying about money, because it comes and goes my friend.
Maybe it isn't such a good idea (I wasn't really serious, anyhow)...
Reason is the Path to God - Anon
It's obvious that there is no perfect answer for everyone I could share with you my simple plan when I fell into the same situation with 3-5k in my account.
9 .asp). Both of these savings accounts provide APYs almost as good as CDs but they allow you access to the money when ever you need it.
First thing to note is that Student Loans will probably be the cheapest loans you will ever get in your lifetime, not to mention that the interest paid is tax deductible so it actually makes them cheaper than they already look.
Secondly if you have balances on high interest credit cards, you should attempt to pay off what you can WITHOUT depleting your emergency/living funds (ie car, food, fun, illness). This can be different for everyone, but for most students is 1-2k.
If you an average college student, you don't have enough money to invest long term, and you should be trying to save up for expenses you expect to encounter when you graduate (ie moving, suits, apartment, transportation, etc). I would suggest placing the remainder of your funds in an online bank. Many suggest ING, but they don't offer the same competitive APYs such as EmigrantDirect and HSBCDirect. Check out the following at bankrate.com for the best current rates (http://www.bankrate.com/cnn/rate/mmmf_mmasearch9
A couple quick stats:
* I have student loans fixed at APR 3-4%
* I get a tax deduction on my student loans so that loan is actually cheaper.
* I get an Online Savings account with an APR just under 5%, so I'm actually making interest on my student loan than I actually have to pay.
* If I ever need the money for anything (house, car, medical expenses) it's always there
Don't go bying
(disclaimer: I'm not a financial planer, this is simply what I have done with my cash)
When I was in college I followed (to a small degree) the advise of an economics professor I had by putting a couple hundreds of dollars into I-Bonds. I was able to buy them at my local bank, though you can also get them directly from the Treasury Department. They can be bought at reasonably low denominations, and you pay face-value (to get a $100 I-Bond you pay $100).
The great thing about I-bonds is that they are designed to make sure you don't lose money to inflation. You are guaranteed to earn a certain amount of interest (1%-3%) OVER inflation.
When I graduated from college I found myself in a tough situation (bad job market of summer 2002, etc). I cashed in those bonds, bought only a couple years earlier. Whereas other bonds wouldn't even have matured at that point, I was actually made a small increase off them. True, it would've been much better if I could've shelved them for longer, but, alas.
Anyway, when looking to invest remember the grand pyramid of stocks (risk), cash (safe, no gain), and bonds (safe, small gain)...and balance your investments according to how much of a gambler you want to be.
You're obviously young, so the worst that could happen is you lose money that you're going to end up using to pay off your debt eventually.
:P
This is the only time in your life that you have very little to lose! SO GO FOR IT!(a few thousand through out a life time is not that much)
Do extensive research before you invest though, and find a business major who can help you with the lingo and charts.
(I look for companies that are in the news, either for being good or for being bad)
naughty companies tank and then come back over a short period of time quite often
while companies that are in the news for being good often have a reason for it
Seriously folks: do you really expect this young man to play the market and win? What is the end goal of any investment? To use that money to either 1) live off of (good luck anybody not born with the last name of Gates) or 2) to retire early, retire well. Anybody who claims the first rationale has no business being here (and probably has platoons of highly-paid financial advisors growing their assets for them). For the rest of us, i.e. the slave-wage-earning middle of the country, the goal for our investments should be reason #2: retire early, retire well. If that's the case, then what is the best possible thing you could do with that money, if you're a poor student with no real income to speak of? Put ALL of it (and more, every month if possible) into a Roth IRA. I know that one of the requirements was money you could access easily, but if that's the case no investment scheme outside of a savings account will allow you to take the money out without some form of penalty/cost/fee. We all know that the earlier we start, the better off we are. I wish every day that I had started investing in a Roth IRA when I was in my early 20s. The miracle of compound interest means that I wouldn't be playing catch-up nearly twenty years later. Not only does that money get to grow an average of ten years longer than when most people start seriously putting money into a retirement fund, but that money when it comes out is TAX-FREE. The best I will be able to do my pathetic IRA is grow it for half the time and earn the joy of paying income tax on it when I do start taking it out. Anybody out here who is seriously telling this student to invest in stocks, mutual funds, ETFs, real estate (are you kidding me???), gold, silver, oil or adamantium, consider if you would have taken the same advice if you were staring at a retirement age of 70 with less than $100,000 in the bank. And no, I am not a financial consultant or broker or anybody else from the investment community. I'm just a middle-aged guy who sees what his options might have been if he'd only started earlier in life to save. Peace.
If you are not going to be drawing money constantly out of this investment go with short term (1 month) Treasury Bills or Certificates of Deposit. Do not go on a longer term now as the FED will rise FED fund rates at the end of August and probably once more before year's end. Then you can go into 6 months to 1 year terms.
If you need to constantly or urgently draw cash from this, look for a money market fund that is liquid (ie: lets you draw out money any day on a 24 hr notice or sometimes same day). Look for a fund that spreads out its investments in T-Bills or other high quality government debt, as well as some high rated commercial debt (banks, etc.).
With any of the above you are looking at 4.5% - 5.5% safe returns.
Do not look into playing with stocks, unless you plan on following closely daily market news.
There is no great secret to investing, there are stories of people turning 10k into a million, but there are also stories of people struck by lightning. Start out with any fixed income safe investments, play with stocks, real estate, or other fancy stuff when you can afford losing a few bucks, as of now you can't.
Cheers
Trying to win by taking out loans and investing them is no easy task.
I'm not sure if there are similar provisions in the US, but here in Canada, loan interest on investment loans is tax-deductible. This effectively decreases the rate of return necessary to see a profit.
Like woodworking? Build your own picture frames.
I've always been jealous of the way the banks and credit card companies lend out so much money at high interest.
Now, there are micro-lending options for consumers - this business is still in its infancy, but its worth a look:
http://www.prosper.com/ (U.S.A. only)
http://www.zopa.com/ (U.K. only atm i think)
I personally have over a hundred loans out to various borrowers, and even if many (%20+) of them default, I'm still beating the return I'd get from a money market account. They are legitimate, unsecured loans, and adversely affect borrowers credit ratings if they are delinquent.
They've been in the news a lot recently too: http://news.google.com/news?q=prosper.com
Your signatures belong to me.
Because you don't really own it if you have even a single cent of debt.
That doesn't make any sense. If I have roughly $750,000 in various investments, and I have a $200,000 mortgage on my house, are you really claiming I don't "own" my house?
What's worse, you can't simply walk out from debt, while you can walk out from a rented apartment
Bull crap. You most certainly can walk out from a mortgage. You sell the house and pay off the mortgage. If you've been in the home and paying the mortgage for even a short period of time (a couple of years), and the market hasn't utterly collapsed underneath you, then the sale price of the home will more than cover the remaining outstanding balance of the mortgage. So if you sell the house and walk away, you get to keep the equity you'd built up in the house in the meantime. With the apartment, however, you walk away empty-handed.
Additionally, you can't just "walk away" from an apartment either. Lease agreements typically have notification periods. You may be obligated to continue renting until the end of the year, or pay some sort of penalty. With a home, you could be gone in as little as a week, if you're able to find a buyer fast enough and rush the paperwork through.
Never take any debt if you can avoid it;
Absolutely terrible advice. In fact, my wife and I recently refinanced our mortgage to take some of the equity out of our home and invest in in real estate in a hotter area. We "borrowed" more money from the bank, at about 5% interest, and will (hopefully) make more than that back in the investment.
If you're confident that an investment will earn you a rate of return that exceeds the interest rate of the loan, then it makes sense to take the loan and invest it.
In Canada, interest on investment loans is tax-deductible. And the loan we took is secured against our house (obviously, since it is a mortgage), which means we were able to get a good rate. We're profiting off the bank's money. We're assuming a small amount of risk in order to profit from their money.
Why did your debtor lend the money to you ? Surely, if you can invest the money in ways that exceed the interest of the debt, he could as well.
Yet again, you are wrong. The lender (note the correct term. The "debtor" is the one borrowing the money, not lending) most certainly would invest the money as you are, if they were allowed. Banks are subject to much stricter regulation than individuals, when it comes to investing borrowed money. They are required to stick to "sure-things"; that is, loaning to people whom they are confident can pay it back. You, however, as the borrower, are free to do whatever you want with the money. Including investing it in somewhat less than "sure-things."
Taking loan to save your own money was stupid. Loans must be paid back with interest. You'd been better off living out of your own money and only borrowing money if you actually needed it.
I honestly don't know why you bothered to post at all. You clearly have absolutely no financial experience or insight to contribute to this discussion.
My wife and I recently bought a new car. We had $25,000 sitting in our bank account. We picked a car. The dealer offered us financing. At this point, if I were dumb enough to listen to you, I'd have jumped up and said, "No! Never take any debt if you can avoid it; Always pay with cash!" (that's actually exactly what you said; see your post above).
However, given that I can actually do math, I asked him what the interest rate of the loan was. He said 1.9%. I said I'd like to borrow the entire value of the car, minus whatever minimum down payment was required. Then I took my $25,000 and invested stuck it in a savings account that earns a meager 3.5% per year.
Dumb, you say? It's slightly fictional (we didn't actually have $25,000 sitting in an account with which to buy a car. I already knew it would
Like woodworking? Build your own picture frames.
plastics!
I'm not trying to make people depessed, I just don't think we can afford to hide from reality much longer. Eventually reality will hit you in the face, so you can either learn about it little by little, or face it all at once in the future.
If you havent figured it out by now, America has no conscience, capitalism has no conscience, corporations have no conscience, only individuals do, and this has nothing to do with making money.
If your goal is to make money, make money, and express your conscience somewhere else. It's not that investing means you are sponsoring these people, because these people will exist and express themselves through other means even if you don't invest in them. Basically if we don't invest, they'd steal. The point is, they will get the money no matter what you say or do, so why not get rich with them?
There are options, but if you want the world to have a conscience, then people with a conscience should learn to profit from having a conscience. Otherwise you don't choose how we profit or the environment we survive in.
Virtually no risk, and you can get at your money within a few days (bank transfers)! The $25 is after 6 months, and now you have to put in a few hundred dollars for your initial deposit, but otherwise its great! I've never had any fees or anything.
The problem is, ethical corporations arent usually good at winning because unethical corporations will do anything to win, anything to make a profit, and this is why profits are guarenteed. Ethical corporations in theory could have guarenteed profits, but it would take support and loyalty among ethical consumers, and we don't have that. Consumers are not rational enough to support ethical corporations, they arent intelligent enough to know the difference, and they just want to save money by shopping at Walmart.
The result is, ethics don't matter, it's all about money. Make your money or die, leave the ethics to the poor and people in the third world, because the market is unethical. Ultimately you have to adapt to the marketplace, and if there are no ethics, or if all the money is given to unethical corporations, then you invest in unethical corporations, and until ethical corporations win loyalty from ethical consumers it will never change.
I'm all for ethical investing, I say hedge your bets, but if i had to choose one or the other, I'd choose the obviously profitable unethical corporations. Ethical people do not run the most successful corporations, they do not run the most successful businesses. The world is run by unethical people, and ethical people are in third world countries starving, and in ghettos, and trailer parks, and generally the ones who recieve the majority of the misery. What does this teach you?
Lets see, if you train a dog by hitting the dog whenever it acts ethical, eventually the dog learns that in order to feel less pain, it has to act unethical, just enuogh to not be hit all the time. I have ethics, but when it comes to investments there are no ethics, and how I feel has nothing to do with decisions on making money. I wish I could profit from ethical companies, but the damn ignorant consumers keep shopping at the most unethical places imaginable. Consumers arent changing and investers simple take advantage of the stupidity of consumers who blindly buy based on brand names.
go to Alonovo Alonovo is a website which deals with edcuating consumers, it's a start, but it's also cultural. We choose the most driven people as leaders in our society, not the most ethical. It's also the way society is set up, a poor kid in Africa or South America may be the most ethical individual on the planet, so ethical that they'd die of poverty and starvation trying to feed their village, while the least ethical person in the village might be the person who gets rich off everyon else, rises out of poverty, and comes to America to ruthlessly profit. Until we actually value ethics in economic ways, ethics have no value to society, maybe only in the church does ethics have any value.
Investing is about survival, not ethics. If you look at the people who are poor, the majority have ethics, and so what? They are poor, so no one cares about them. Are you helping starving ethical kids in Africa? No. So if you have ethics, help other people who have ethics, or shut up about ethics and invest to profit, but make up your mind. You will have a difficult time trying to be an ethical investor.
Also, Germany was not "Hitler's" Germany. Every country goes through phases of being ethical and unethical depending on which corporations and individuals have control. Hitler may not have been the most unethical man in Germany, he was just the face of the German machine. Hitler had to get his support from somewhere, like banks, and groundtroops, and all those who were involved in pumping Hitler up. Why was Hitler pumped up? Because obviously it was the profitable thing to do, and it could cause the most misery at the same time.
Enough Enron's, and people might actually become ethical investors. I don't think anyone was happy about Enron, ethical or not, if you lost all your money you are going to be pissed.
I just graduated. I have $40,000 in loans.
Yes, I have $1000 in the bank. I also have $700 a month in rent and bills to pay and that is VERY low compared to more populous areas. If you said "I have $25,000" I'd take you more seriously. In the real world a few thousand dollars is chump change. Your "thousands of dollars" will go in a year of college. Don't be a fool.
You all are taking financial advice from people in the same financial boat as you!!!!!!!! Seriously do some research! Read Rich dad poor dad http://www.richdad.com/ Read about the real investors in this world, don't do the same as the middle class and the poor! True investors have enough money they are not afraid of high risk investments, thats why they get richer and richer!
I guess I would have to agree with the general consensus of this thread. Why get a loan if you have money? Pay as much of it off as you can. Pay off debt BEFORE you try to save and invest. What can you achieve by investing? If you have money invested , say $10k making say 8% and you have a loan of perhaps $20k costing you 8%.....are you going fowards or backwards? Even if you can find some venture that gives you a higher return on your investment, you still have to take off the amount that you are paying in interest on your loan. My wife and I between us have $50k of student loans. It is crippling. But we have made a budget and we are able to save around $2k a month to pay off that loan. Debt free here we come.
Hard work is just an accumulation of the easy things that you didn't do when you should have.
Look, if it were this simple, people would be driving hybrid cars. People would be investing in alternative energy. People would be investing a lot differently, but until we can get people to buy hybrid cars you cannot get people to invest in alternative fuels and thus you have a never ending cycle. Even the corporate laws prevent corporations from acting ethical. Corporations are sociopaths, and when you deal with them you have to become a corporation yourself just to get paid.
It starts with leadership, the top makes the decisions for the consumers. Yes it could change, but it will take a critical mass of leadership at the top to change it.
Open an account with ingdirect.com and get 4.35% APY. The money is not locked. I can send an invite that will earn you free $25. Mail me at amit2030 at gmail dot com if you are interested.
I would suggest 3(4) books:
The Total Money Makeover - Dave Ramsey
ISBN: 0785263268
http://daveramsey.com/
Multiple Streams of Income - Robert G. Allen
ISBN: 0471714550
and
The Millionare Mind/The Millionare Next Door - Thomas Stanley
ISBN: 0740718584 / ISBN: 0671015206
All of these should be available at your local public non-school library.
Libertas in infinitum
1. Live below your means - use the free bus pass you got with your tuition and don't get a car - or if you do, get a Vespa or something with 100 mpg or better. Realize that happy hour is when beer is cheap, but leave before it gets expensive. Realize that, if you have a girlfriend, there are tons of cheap things you can do that are fun - parks, garage sales, whatever.
2. Never invest in stocks - use that for money you don't need for five or more years. Bonds are for 3-5 years. T-bills (Canadian treasuries are even better and just as safe) are for 1-3 years. Money market is for money you always have say $1000 in an account - and gets a good rate of return.
3. Credit unions cost the least for loans, and credit cards, and give the highest rate of return on savings and checking. Use one - chances are you qualify for at least three nearby. Ask the financial aid office - they know about this stuff.
Oh, and bonus answer - never keep more than $20 in your wallet (get it in $5 bills, you'll spend it slower). Use the extra space for condoms.
-- Tigger warning: This post may contain tiggers! --
This is simple. It has been mathematically proved that the best single investment is the market portfolio (please read http://en.wikipedia.org/wiki/Modern_portfolio_theo ry )
What this means is that if you have some money and you can only perform one initial buy and then you have to live with your choice, the best thing to buy will be the more diversified found with the lower comission. Personally I like ETINX (disclaimer, I'm not afiliated in any way with Etrade)...
Nevertheless the best start is for you to read the documents at http://www.fool.com/school.htm?ref=G02A06
Best investments for a college student: beer and chicks. Makes your studying time so much more pleasant!
Seriously though, you might want to look at some sufficiently diversified, reputable mutual funds. I put my money into one that is diversified between bonds and stocks, and it's doing better than my own stock picks... the important lesson is not to get cocky, as the stock market is a gamble even when you feel like you know your stuff, and you don't want to spend your time worrying about your portfolio.
I want to play Free Market with a drowning Libertarian.
Maybe give http://www.gstock.com/ a try. They use seti@home style grid computing to try and beat the stock market.
That's terrible advise! Their web site login has already been down six days and counting. Out of the past 18 months I've had an account there, their web site has only worked about six weeks cumulative. Besides Dell, I have never dealt with a more technically incompetent company. Emigrant could pay 100%, but it still wouldn't be a good deal if you can't actually deposit your money or get it out. I had to put off the closing on a house I had scheduled for this Tuesday because I can't get them to send me a check for about 30% of the money I have in the account that I need as a downpayment on a new house.
If you're smart, you would have already chiseled the dealer down as low as he was willing to go before you mentioned that you wanted to finance it.
By the time you get to asking about financing options, the price negotiation stage of things ought to be finished.
Basically you should go through the whole transaction up until you're sitting in the business manager's office, implying that it's going to be a cash sale; at that point once the price has been hammered out and you're confident that you've wrung every last cent out of them that you can, and they're crying about how they have children to feed, then would be a good time to just casually ask what kind of interest rate they can get you. They will naturally choke and splutter and say they didn't know you were going to finance it, but I've never had one of them refuse to give me whatever the manufacturers' bank (GM Credit, VW Credit) preferred interest rate is.
Some dealers actually make this easy on you, by making the person who determines the selling price of the car a different person than the guy who deals with financing. It's a little tougher if they're the same person but still not impossible.
Alternately you can go into one dealership and pretend to be a rube and ask what the best rate is they can get you on a particular loan, and then when you go to actually make the sale at another dealer, you'll know what the rate is they can give you (since generally the rates don't vary from dealer to dealer).
Of course, when you start negotiating, the first thing they'll try to pin down is whether you're a cash sale customer or financing customer; if you say finance, they'll immediately start playing number games with you and trying to negotiate based on "monthly payments" rather than on the bottom-line price. The correct response is to be as vague as possible and give the subtext that you have money to spend right away.
Plus, by getting a hard ("cash sale") price out of them before discussing financing, it makes it easier to compare their financing offer to one you might get from a bank, credit union, or by loaning yourself the money (opportunity cost).
As my father used to say, "God never punished anyone for lying to a car salesman."
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