18, Looking for Advice

[enorth]

Best financial advice for an 18 year old male: DON'T develop an interest in modifying cars. There is pretty much no faster way to spend lots of money, only to run it into a tree, curb, or another car.

Thank you! That's some very valuable advice

[disneysteve]

I'm not really thinking about my own place as of right now, but thanks for that advice. How much do you think it would be wise to have ready for that?

You need to plan on having 2 month's rent plus a security deposit up front to get an apartment. Scan the classifieds to see what an average apartment is renting for in the areas where you would be likely to live. If rent would be $800/month, you'll need about $2,000 to get started. You'll also need money for furnishings and supplies. And you'll need your emergency fund to reflect your higher expenses, so an additional $2,400 to cover rent for 3 months and more to cover utilities and other living expenses in case you become unemployed.

[rennigade]

If you put the money into a roth ira invested in a mutual fund that earns 12%, it will grow to 684,000 when you are 65. Question is, what are you investing it for.

What investment guarantees 12%? Let me know so I can jump on that gravy train.

[jIM_Ohio]

What investment guarantees 12%? Let me know so I can jump on that gravy train.

12%- no guarantees, but I think microcaps and tech could hit 12% returns over next 10-15 years.

But if it doesn't then the ride will be crazy. And if those sectors do hit 12%, get out quickly.

[LuxLiving]

Size of emergency fund?

hmmm...I have two sons about your age right now, and they both are living at home saving to move out...they own their own cars and the expenses that come along with them....so, for them we've set a minimum of $1000 right now in the Emergency Fund with goals to move it up a bit at a time to $3000 before they move out. That is in addition to the money they keep in their Car Repair Fund.

I'd also like to ask you about your health care situation, I'm assuming you are going to be covered at your work? If not, then you need to be planning for health coverage. My one son got sick during the time when he left one employer (against parental advice) and before he was eligible for the open-enrollment date at his new employer. The result? A $1600 hospital bill that he now is paying off a bit at a time. Sucks.

He had a little bit put back in his Medical/Dental/Prescription/Co-Pay Fund, but not nearly enough.

MORE in his Emergency Fund would've been helpful.

Guess where most of his stimulus check is going???? He got back $600. So, he's taken $100 to have fun with, $200 to pay back his Dad, and $300 towards replenishing the Emergency Fund.

I just think you'd want to overestimate here and not stint. Something will come up. Best be prepared.

My boys also have savings bonds. We are not cashing them in to invest them elsewhere. We consider this part of their liquid emergency money. If push came to shove, it's easy to get at.

[maat55]

What investment guarantees 12%? Let me know so I can jump on that gravy train.

I have MF's that have averaged just under 12% the last 15years. Americans funds Capital World Growth & Income fund. Go to Morningstar and look for them, you will find plenty. The New World fund is over 13% the last 10 years. I have both of these. I'm looking at plenty of other ones, just as good.

[disneysteve]

What investment guarantees 12%? Let me know so I can jump on that gravy train.

I have MF's that have averaged just under 12% the last 15years.

Certainly, no guaranteed investment will return 12%, but maat55 is correct that there are numerous mutual funds that have generated those numbers over the long run. I own 2 funds, Heartland Value and Cohen and Steers Realty Shares, that have done so. Heartland has an average annual return of 14.26% since 1984 and Cohen and Steers has averaged 14.39% since 1991. Vanguard has 5 funds that have averaged at least 12%/year over 10 years (I don't currently own any of them).

So returns like that are definitely achievable by the average investor. I've owned Heartland for over 13 years so I've enjoyed that track record quite a bit.

[enorth]

Certainly, no guaranteed investment will return 12%, but maat55 is correct that there are numerous mutual funds that have generated those numbers over the long run. I own 2 funds, Heartland Value and Cohen and Steers Realty Shares, that have done so. Heartland has an average annual return of 14.26% since 1984 and Cohen and Steers has averaged 14.39% since 1991. Vanguard has 5 funds that have averaged at least 12%/year over 10 years (I don't currently own any of them).

So returns like that are definitely achievable by the average investor. I've owned Heartland for over 13 years so I've enjoyed that track record quite a bit.

Would a MF be a good choice now? I checked out the Heartland Value and is seems to be down quite a bit over the past couple of years.

[noppenbd]

A mutual fund is always a good choice for long term investment because it gives you the chance to make much better returns than other investments, while minimizing risk (market risk is reduced by being long term, and investment risk is reduced by diversification inherent in a good mutual fund).

Buying a MF when it is down may actually give you a chance to get the funds on sale, so I would not worry about that.

The bigger problem is that past performance does not guarantee future results. In fact, recent outperformance may be a sign that underperformance is in the future. Studies have shown that it is extremely difficult to be in the top tier of a fund's peers for multiple years in a row. That is why I choose funds that have low expenses. While low expenses do not guarantee future performance, choosing a fund with high expenses will definitely cost you in the future. I use mostly index funds through Vanguard, because their expenses are among the lowest available.

[disneysteve]

Most domestic stock funds have been down recently since the broad market has been down. Some foreign funds, though, have been on fire. For example, Vanguard Emerging Markets Index was up 24.95% for 1 year and 34.53% over 5 years.

Is now a good time to be investing in stocks? Absolutely. Prices are down from their highs. The economy is struggling. If you are investing for long-term goals like retirement 20 or 30 years away, or in your case, almost 50 years away, stocks are the place to be.

[disneysteve]

Would a MF be a good choice now?

A mutual fund is always a good choice for long term investment

This is semantics, but I wanted to clarify something. "Mutual fund" can mean many different things. Many people use the term when what they really mean is STOCK mutual fund. A mutual fund, like an IRA or 401k, is just a type of investment vehicle. A mutual fund can be anything from a money market fund to a municipal bond fund to an S&P 500 index fund to a gold and precious metals fund to an emerging markets foreign stock fund to a real estate fund...

So just asking if a "mutual fund" is a good choice or just answering that a mutual fund is always a good choice really isn't meaningful. It depends on your situation and goals and on what type or types of mutual funds you are referring to.

[enorth]

This is semantics, but I wanted to clarify something. "Mutual fund" can mean many different things. Many people use the term when what they really mean is STOCK mutual fund. A mutual fund, like an IRA or 401k, is just a type of investment vehicle. A mutual fund can be anything from a money market fund to a municipal bond fund to an S&P 500 index fund to a gold and precious metals fund to an emerging markets foreign stock fund to a real estate fund...

So just asking if a "mutual fund" is a good choice or just answering that a mutual fund is always a good choice really isn't meaningful. It depends on your situation and goals and on what type or types of mutual funds you are referring to.

Thanks for all the info!

Man... I feel like I want someone to just tell me what to do.

[maat55]

Thanks for all the info!

Man... I feel like I want someone to just tell me what to do.

READ BOOKS and you will learn.

[noppenbd]

Thanks for all the info!

Man... I feel like I want someone to just tell me what to do.

The first rule of investing is to understand what you are investing in. That is why you need to spend a little time learning about investing before jumping in. I recommend you take a free online "course" (really just an in-depth website) through the LA Times website called Investing 101.

Money Library - Los Angeles Times

They also have Mutual Funds 101.

disneysteve, thanks for correcting my statement. I should have been more specific and said "stock mutual funds". I do stand by the meat of my statement that in general stock mutual funds are good investments (no matter the timing) and preferable to single-stocks for most investors.

[enorth]

The first rule of investing is to understand what you are investing in. That is why you need to spend a little time learning about investing before jumping in. I recommend you take a free online "course" (really just an in-depth website) through the LA Times website called Investing 101.

Money Library - Los Angeles Times

They also have Mutual Funds 101.

disneysteve, thanks for correcting my statement. I should have been more specific and said "stock mutual funds". I do stand by the meat of my statement that in general stock mutual funds are good investments (no matter the timing) and preferable to single-stocks for most investors.

Great. Thanks for the info. I'll try to find a little while to look at those sources as soon as possible. I recieved an Amazon gift card for graduation and might spend some of it on a couple of the books that were recommended earlier on in the thread.

My financial situation has changed considerably since I last visited the thread. Through mostly graduation gifts, I've accumulated quite a bit of cash and in total I now have around $4,000 not including my $600-700 in EE savings bonds, all of which I can afford to invest in something. Liquidity is still of little importance to me. If I was to decide to go the stock route, which stocks would you recommend I research? My dad is currently interested in NBF (Nova Biosource Fuels). What do you think about this company?