Investing: I dont know where to start?

**maat55** · 08-10-2008, 06:47 PM

Depending on your living expenses, you should start by building an emergency fund. This is generally 3 to 6 months expenses. Take the time to read books on various investment tools such as Mutual Funds, CD's, bonds etc.

Your most important challenge is to establish a savings habit. Learning to set aside a percentage of your gross income on a regular bases will build this habit. It can be as little as 2 to 5% to start. You will want it to grow to 10 to 15% by age 25. Start with 1k in a savings account locally, then try to build to 5k in an online high yield account. Eventually you can open an asset building Stock Mutual Fund account with T. Rowe Price or other group.

**jIM_Ohio** · 08-10-2008, 07:37 PM

I would comment you most important challenge is to spend less than you earn and the second most important challenge will be to manage debt so it helps you and does not hurt you.

If you can afford to invest $50 or more each month, mutual fund companies like T Rowe Price can help you and limit the fees you will pay.

There are other investment choices you could make and commit small amounts of money (sharebuilder for example), but I would suggest to look at T Rowe Price's web site and see if that works.

Generally speaking, at age 20, you want to learn a few things

1) compounding and the impact of time on compounding
2) how to live on less than you earn
3) how to use retirement accounts (deductable IRAs and Roth IRAs) to your advantage
4) get yourself a career which pays a reasoable wage- and learn how to live on less than the wage you are paid.

**batman** · 08-10-2008, 07:48 PM

Thanks 4 the replies! Right now I am starting a new program at a community college. I am in a two year program through an electrical plant in Ohio. After the first year I will have an apprentiship making $15 an hour 40+ hours a week. After that its 2 more semesters, then I am pretty much gauranteed a job if my grades are high making anywhere from $20-$25/hr.

Right now I am fortunate enough to have wealthy parents that are very giving. I basically have no bills except for the credit debt that weaseled its way into my life.

I will research into mutal funds and bonds, but I was thinking more along the lines of a high interest online savings account.

**maat55** · 08-11-2008, 03:42 AM

The top of this forum has a list of the highest paying online savings.

**batman** · 08-11-2008, 06:15 AM

I know I saw the sticky thread. How is Wamu? Are these banks insured and legit?

**Scanner** · 08-11-2008, 06:25 AM

You may want to also learn the difference between saving and investing.

It's a subtle difference but in short, investing is about ownership in what you feel will grow in worth and what you feel is important and want to see grow.

Saving is about putting money aside for a rainy day to be consumed later.

It's a little jump from going from a saver to investor but an important one.

**batman** · 08-11-2008, 03:10 PM

With that being said what would be a good investment with $100?

I am a risk taker but I do not just want to throw away 100 bux!

Any suggestions?

**batman** · 08-11-2008, 03:17 PM

I really want to buy some shares of stock but don't really know where to start.

**Broken Arrow** · 08-11-2008, 03:24 PM

I wouldn't buy stocks with only $100. You can, but there's usually a trading fee for buying stocks, and one of the lowest available is $4 via Sharebuilder. But that's 4% expense, and it'll be another $4 if or when you sell it again.

Not that I would stop you if that's what you really want to to do. Methinks a savings account or CD is still the better way to go though.

Oh, WaMu. I think they're safe to bank with. Their stock, however, is an entirely different story.

**jIM_Ohio** · 08-11-2008, 03:49 PM

Originally posted by batman View Post

With that being said what would be a good investment with $100?

I am a risk taker but I do not just want to throw away 100 bux!

Any suggestions?

The question is this- is the $100 a one time investment, or can you plan to invest $100 regularly every month for the next 60-600 months?

A place like T Rowe Price will not want to take on the costs of managing your $100. But if you commit to invest with them regularly ($100/month) over an extended period of time, they will forgive the low balance to start with anticipating your account value will grow. I started with T Rowe about 8 years ago with $150/month. I now have 100k with them and wife has another 10k with them. My wife started at $250/month I think.

If the $100 goes down to $70 the day after you invest it, what will you do?

**jIM_Ohio** · 08-11-2008, 03:50 PM

Originally posted by Broken Arrow View Post

I wouldn't buy stocks with only $100. You can, but there's usually a trading fee for buying stocks, and one of the lowest available is $4 via Sharebuilder. But that's 4% expense, and it'll be another $4 if or when you sell it again.

Not that I would stop you if that's what you really want to to do. Methinks a savings account or CD is still the better way to go though.

Oh, WaMu. I think they're safe to bank with. Their stock, however, is an entirely different story.

It's $14.95 when you sell at sharebuilder- buying is cheap, selling is not (unless things changed since I last sold).

**batman** · 08-11-2008, 04:12 PM

Originally posted by jIM_Ohio View Post

The question is this- is the $100 a one time investment, or can you plan to invest $100 regularly every month for the next 60-600 months?

A place like T Rowe Price will not want to take on the costs of managing your $100. But if you commit to invest with them regularly ($100/month) over an extended period of time, they will forgive the low balance to start with anticipating your account value will grow. I started with T Rowe about 8 years ago with $150/month. I now have 100k with them and wife has another 10k with them. My wife started at $250/month I think.

If the $100 goes down to $70 the day after you invest it, what will you do?

I would be willing to invest $50-100 every month. I was browsing the website and I am still kind of confused what they do. Do you pick the risk your willing to take and they put your money into what risk level you pick. Or how does it work?

BTW Jim what part of Ohio are you in?

**Broken Arrow** · 08-11-2008, 04:23 PM

Originally posted by jIM_Ohio View Post

It's $14.95 when you sell at sharebuilder- buying is cheap, selling is not (unless things changed since I last sold).

Good grief, that's right! Now I remember why I passed up on Sharebuilder. Good for casual collectors, not active traders.

Originally posted by batman View Post

I would be willing to invest $50-100 every month. I was browsing the website and I am still kind of confused what they do. Do you pick the risk your willing to take and they put your money into what risk level you pick. Or how does it work?

I'm not Jim but with your current level of financial commitment, you really can't go wrong with T Rowe Price. Find yourself a nice little fund (of funds) to put your money into. Maybe even have it in an IRA account and away you go! (Since I'm lazy, I'll let Jim and others answer the rest.

)

**jIM_Ohio** · 08-11-2008, 04:50 PM

Originally posted by batman View Post

I would be willing to invest $50-100 every month. I was browsing the website and I am still kind of confused what they do. Do you pick the risk your willing to take and they put your money into what risk level you pick. Or how does it work?

BTW Jim what part of Ohio are you in?

I live in a cincy suburb.

You will pick a mutual fund which invests in something, then send the $50 or $100 to T Rowe via automatic deposit on a given day of the month (26th for me). You choose the investment and the day.

Choosing the investment requires some time on your part.

How long will the money stay invested?
What will you do if you send them $100 and the investment becomes $70 the next day? (choices: Buy more, do nothing, sell)
How aggressive do you want the money to grow
If the investment created taxable events (pays you dividends where you owe taxes on them) what will you do (choices: Buy more, do nothing, sell)
If You have $1200 in the account and get $200 in dividiends and owe $30 in taxes on the dividends, what will you do?

T Rowe has some financial calculators and questionaires on their web site- I would suggest taking 30 minutes and answering their questions. At end the questionaire will define your risk tolerance and suggest investments for you.

I own the following T Rowe Funds:
Equity Income
Diversified Mid Cap Growth
Mid Cap Growth
Diversified Small Cap Growth
New Horizons
Small Cap Value
International Growth and Income
International Discovery

wife owns these TRP funds:
Global tech
Developing tech
Health sciences
Financial Services
New Era
Africa and Middle East
Emerging Markets
Value
Growth

Each of these funds has a fund manager- I am choosing these funds to let the fund manager make most of the choices- the only choices I make are which funds (and fund managers) to invest with.

The fund manager is compensated by the expense ratio of the funds. For example if the fund has $1 M in assets with an expense ratio of .8%, the fund manager/fund company gets .8% of $1 M=$8000.

**edit**- it should be noted that some of the funds above are off close to 15% for the year and I bought more all year- in August my IRA is maxed out and then I am going to double up the wife's deposits to get her to max by November. Most of her new money is going to financial services which is down considerably ytd.

If you think this is foolish, then take advice from someone which thinks like you do and not me.

Investing: I dont know where to start?