Help me invest my $10K

[TeenInvestor2688]

I am a high school senior with about $10,000 in my Scottrade account. I have Proctor and Gamble, Circuit City, Carmax, Pfizer and a couple of others. I also have $1000 in an online savings account. I have no CD's, bonds, or mutual funds. I think I need to start over an come up with an investment plan. Any ideas of what I can do with my money? Thanks for your help!

[baselle]

Tell me more. What are you saving/ investing the money for? For how long do you want to invest this money?

Tell me more about your stocks. All of them. What do you know about your companies and why did you pick them? (Did you pick them?) Not trying to bully you here - tell me why you liked those companies enough to buy a piece of them.

[TeenInvestor2688]

I really don't know what I am saving for. I guess the simple answer would be my future. My college is paid for and I have no debts. Most of my stocks were gifts. However, they are only 10-30 shares of each so they wont get me anywhere in the long run.

[Haku]

Good lord, why couldn't I have been like you when I was in high school? No debt and all asset! It's enough to make me want to cry.

Despite your impressive head start, you may want to start back up from the beginning.

First, for the short term, you'll need an emergency fund. 1k is actually pretty darn good for a high schooler. I would make sure that you "invest" that in a high interest online bank. May I interest you in GMACBANK.COM?

Second, let's think mid term. You know that, no matter what you end up doing, you'll need your own place to live eventually, and you'll probably want or need a car. With that in mind, you may want to budget part of your asset towards something safe like blue chip stocks; perhaps one that pays dividends even. That way, when the time comes, you can cash in on those and help pay down the mortgage or MAYBE pay off a car entirely. Something like that. (Actually, Pfizer and Proctor & Gamble sounds pretty darn good for this task.)

However, a teenager should be extremely bullish in the stock market, so don't forget to earmark some of your asset in high risk, high yield stocks. Make a portfolio that can really grow, just so long as you realize that you could also afford to end up losing every penny in this section.

Your college is paid for? I hate you.

Now let's talk about your long term. Obviously, you're also going to want to save for retirement. Hell, shoot for being a millionaire by the time you retire! Why not? With that, the second you get a job (and I hope that's very soon even if it's part-time), then you'll want to open up an IRA. Just about any financial insitution can help you with that. Max it out ever year, and you will be Golden!

We've got a few other people who are really good with investing here who I'm sure will chime in later to better help you with your asset allocations. However, I would definitely not worry about CDs or bonds at this point in game. You may want to roll all that in a mutual fund though.

Last but certainly not least, please allow me to impart my best advice yet.

Ready?

Ahem.

DON'T BLOW IT!

The biggest problem about being young is getting caught up with the rest of the youth crowd and end up spending whatever they have. Don't be like them. Or me. I started out with a fairly decent footing in life too, but I screwwed up also.

If you want to read some more, I highly recommend www.iwillteachyoutoberich.com. It's written by a 20 something for 20 something. Ramit is a riot sometimes. Best of all, it's free!

Alternatively, if you want a book on the basics of the Real World, I also recommend "Debt Free by 30". Even though it's largely focused on getting out debt, you'll find very practical information in there such as insurance, taxes, and all sorts of other ordinarily boring stuff, but necessary stuff that you'll really need to know. Best of all, it's also written by 20 somethings for 20 somethings, and it shows what can happen if you're not careful.

In the end, the biggest thing right now is to never forget what a huge head start you have over everybody else, and I applaud you for having the sense to not squander it like I did. Oh, last few tidbits. Research every stock you have, learn to build an air-tight budget, and please don't forget to invite me to your mansion someday.

[TeenInvestor2688]

Thank you Haku for taking the time to help me out. Let's see, the $1k of savings right now is in INGDirect, however, HSBC is paying a better rate so I believe I will switch. I guess I got lucky, my parents got into the 529 a few years after I was born so they paid college off. My car is my grandfather's '98 honda so that is paid off as well. I have been working a few jobs while in high school and middle school so that is where this money is from, along with gifts from holidays and birthdays. I wont blow it, I hate spending money, except on baseball tickets and food. I have been thinking about a ROTH IRA for a while and I believe I will get into that. I just have trouble choosing stocks and mutual funds and since my account is small, I dont know who to talk to about investing because they might not have an interest in my minimul investing capabilities. Thanks for your time.

[TeenInvestor2688]

I am really interested in puting money in a mutual fund, yet I have no clue what category I am interested in. All I know is I want no load and a low expense ratio. Any suggestions?

[sweeps]

Vanguard Target Retirement 2045 Fund

[TeenInvestor2688]

minimum investment is $3K, I need something a little lower por favor

[sweeps]

I thought you have $10K to invest?

It's going to be difficult finding funds that have a minimum lower than $3K.

[Haku]

What about starting out with a Roth IRA first, and play around with that? Minimum balance requirement is much lower, and you still get to learn about investing.

[Ima saver]

Yes, you really need to open up a roth IRA and my suggestion is with Vanguard also. If you can't swing that, I would open a roth IRA at the bank and keep adding to it until you can build it up to $3000, then transfer to Vanguard. I like the Index 500 and the total Stock market funds.

[Ima saver]

I also like the fund that sweeps suggested!!

[TeenInvestor2688]

I can do it, and I will definitely look into it. I would just have to sell some stock to get the $3k.

[TeenInvestor2688]

So I keep my Scottrade account and just turn that into a Roth IRA. Everything transfers over to the Roth and I buy the mutual fund from Vanguard through Scottrade. Does that sound right?

[TeenInvestor2688]

I was on this site: https://flagship5.vanguard.com/VGApp..._Event=FeeInfo and was looking at the fees. If I have this mutual fund through Scottrade, do I still pay all of these fees listed on this site or are these just for fund invested with Vanguard?

[sweeps]

Do you have earned income (i.e. income from a job)? If no, you cannot fund a Roth IRA. If yes, you should be able to contact Scottrade and fund your Roth IRA with proceeds from your stock sale.

If you buy a Vanguard fund from your Scottrade account, then yes you will be subject to a transaction fee. I believe it's $25, but I'm not certain. The best thing to do would be to contact Scottrade (their phone support is very good), and ask them exactly what you'll have to do and what fees and commissions will be required.

Final note: I would encourage you to do some more research if you haven't already. I think the Vanguard fund is a very good one, but the decision is ultimately yours to make. I want you to choose whatever investment makes the most sense for your situation.

[TeenInvestor2688]

Yes, I will. Thank you.

[Bluezy]

I would suggesting keeping your funds as liquid as possible until this bull market eases. I would also not chance the tempation to buy heavily during a bull. Take advantage of high interest savings or a money market sweep in your brokerage until the bull market subsides. That way you can earn as much as possible.

Cheers!