Help 18yr old invest 15k

**elessar78** · 01-07-2011, 05:48 AM

I'd go to the library and grab a couple of books on personal finance before you meet with that financial adviser. Maybe even postpone the meeting for a few months. I say that because you need to come with your own knowledge base on the subject before you go and seek advice. How do you know you'll be getting credible advice from this financial planner? Plus, you'll ask better questions and can ascertain if this advisor is worth his fee?

$15,000 is what we call your principle, your starting investment. You have a horizon of 47 years, with an average annual return of 6% (conservative, but very realistic) your 15K would only grow to about $250,000. But at 8% you're looking at over $600K. I'm not trying to be condescending but do you understand how that is possible/works?

If you're new to investing, I would strongly suggest you STAY OUT of the Chinese stock market. For now, leave that to the pros. There's a way to incorporate international/emerging markets into your portfolio but what you're describing doesn't seem sound.

BTW, how did you decide on this particular financial advisor? Not all are the same and, while not cheats, they all have different motivations.

Honestly, and I don't mean to be a wet blanket, but $15K is a great sum but it's also not a lot of money in the grand scheme of things. You have the right mindset and can have a considerable head start by putting this money into a sound investment vehicle. For example, the 2011 maximum contribution to a Roth IRA is $5,000. What would you do with the other $10K?

Basic ideas for investing:
-Investing is for the long term. Long term meaning money you don't intend to use anytime soon. For me, that means money I don't need for say, the next 30 years. There are other time periods for investing, like short or medium term, but for what I'm describing.

-Familiarize yourself with the concept of an Emergency Fund and why it's important. $15K would make a nice emergency fund for an independent 18 yr old or twenty something starting out.

-Try reading Dave Ramsey's Total Money Makeover or The First Book of Investing by Samuel Case. The latter was one of my first primers into investing. It'll introduce you to the basic concepts of investing. But remember investing is only one piece of the personal finance pie.

-Learn to hate debt.

**disneysteve** · 01-07-2011, 06:07 AM

Originally posted by Robert Gordon View Post

I have a meeting scheduled with a financial advisor

Who is the advisor? How much are you paying him for his advice? Does he work for or represent a particular company or is he independent? What are his credentials?

If you can't answer all of these questions, I would cancel that meeting. Understand that most "advisors" are actually salespeople. They are in business to sell financial products and earn commissions by doing so. There are planners who are independent and don't sell anything. They typically charge an hourly fee to give advice. Those are the kind you want to use if you use any at all. With only $15,000 at stake, I don't think I'd recommend spending $200-$300 to get advice as that takes a big chunk out of your relatively small principle.

**littleroc02us** · 01-07-2011, 06:21 AM

Do you plan on going to college? If not then my advice would be to slow down, cancel the the appoinment and take your time to educate yourself before making a decision. You don't need a commissioned financial planner when your only talking about 15k. Good luck.

**jpg7n16** · 01-07-2011, 07:39 AM

Originally posted by Robert Gordon View Post

Hello,
I recently inherited (after taxes and all) $15,000. Best part is I am only 18.

Well 1st things 1st. Before investing, you need to make sure the rest of your financial picture is okay for you to invest.

You should be free of any debt charging over 5%
You should have an emergency fund of likely 3 months expenses (3-6 suggested)
and you should have no upcoming need for that money that may cause either of 1 or 2 to be in jeopardy

So if you're planning to go to college (as littleroc02us pointed out) - you may need that $15k to keep you from acquiring student loan debt that charges 5% or more.

If you are going to be moving out, and need a car you will need some cash available to not get a car loan. To determine how much car you can afford, take your yearly income times 30% (30k * 30% = 9k). If you are hourly, take your hourly rate times 600. ($15/hour * 600 = $9k) $15/hour is about 30k/year.

But if you're clear on all those things, you are ready to invest.

My assumption is that I'll just end up locking it up in CD's.
What's your advice?

If you're investing long term, you want an investment with a long term timeframe. CDs are usually short term investments of 1 month- 5 years.

My personal suggestion would be, find out what year you want to retire (65-18=47 years away; 2012+47= 2059) and invest in a target date fund around that date. Something like: VFFVX Vanguard Target Retirement 2055 Inv, mutual funds, quote, price - Morningstar

That will give you a very easy well allocated portfolio for a moderate investor. And then if you're really concerned about it, make it your mission to learn about investing. Take a course, check out books from the library. There is a ton of info out on investing.

**Robert Gordon** · 01-07-2011, 11:07 AM

Hello,
I should add a few details... The financial advisor works for Citi Bank, he was supposed to do the advising free as my parents have very large accounts in Citi Bank, my assumption was that he was basically a salesman for ways to invest with Citi Bank.
I should have an additional $13,000 coming in at some point this calendar year, the other $15,000 was from last year.

I am going into college, but my parents are paying for that. Otherwise I have no debt. I also have a separate account with about $5,000 in it currently, plus whatever I make from my job, that I do not plan to put in a longterm investment. Right now I have no expenses... food, clothing, etc. are all being paid for by my parents.

Cheers!

**disneysteve** · 01-07-2011, 11:16 AM

Originally posted by Robert Gordon View Post

The financial advisor works for Citi Bank, he was supposed to do the advising free as my parents have very large accounts in Citi Bank, my assumption was that he was basically a salesman for ways to invest with Citi Bank.

The bolded part is exactly right. He is a salesman. He is not doing it for free. He is doing it to get you to invest your money with him for which he will earn a substantial commission. Stay away.

**Petunia 100** · 01-08-2011, 08:56 PM

Originally posted by Robert Gordon View Post

Hello,
I should add a few details... The financial advisor works for Citi Bank, he was supposed to do the advising free as my parents have very large accounts in Citi Bank, my assumption was that he was basically a salesman for ways to invest with Citi Bank.
I should have an additional $13,000 coming in at some point this calendar year, the other $15,000 was from last year.

I am going into college, but my parents are paying for that. Otherwise I have no debt. I also have a separate account with about $5,000 in it currently, plus whatever I make from my job, that I do not plan to put in a longterm investment. Right now I have no expenses... food, clothing, etc. are all being paid for by my parents.

Cheers!

Congrats for thinking long-term! Open a Roth IRA and fund it for 2010 (5k if you have at least 5k of earned income). Fund it every year so that your money is growing tax-free. Choose low-cost index funds (both inside the Roth and out). Read a few books about asset allocation. Avoid commissioned salespeople. If you want to work with a financial planner, then seek out a fee-only CFP. Google "Garrett Financial Network" and choose one in your area. Best of luck to you!

**Petunia 100** · 01-08-2011, 09:00 PM

Originally posted by littleroc02us View Post

Do you plan on going to college? If not then my advice would be to slow down, cancel the the appoinment and take your time to educate yourself before making a decision. You don't need a commissioned financial planner when your only talking about 15k. Good luck.

You don't EVER need a commissioned financial planner.

**jpg7n16** · 01-08-2011, 10:47 PM

edit: misread post.

**elessar78** · 01-10-2011, 06:12 AM

So you said you're getting another 13K this year. Is this an annual payment you expect to receive?

**snafu** · 01-10-2011, 03:26 PM

There is no need to rush your decisions, the money can temporarily sit in a savings a/c for the time being. At present CDs are paying very low rates and the risk is high since interest rates are likely to increase and leave you behind in purchasing power.

Your brother is very lucky to have done so well in the Beijing property market. Unless well connected, the vast majority who speculate in Chinese markets like BJ, Shanghai, Guangzhou, ShenZen, Dongfen etc. have nothing but tears left.

Your strong suit is the wonders of compounding over 47 + years. Realistically, people don't liquidate their investment portfolio just because they are 65 y/o. They just take out sums as needed. Contributing the allowable maximum to a tax sheltered a/c is a smart 1st step. Have a look at Vanguard's low fee Index [Equity] Mutual Fund. Although you put money into an investment for the long term, you can move segments around [called Asset Allocation] as you become more knowledgeable and more confident. Personally, I would put about 20% in a low cost Bond Mutual Fund. You will discover the market changes nearly daily and often there is no logical reason. You will need to steele yourself to keep from creating a disaster by buying high and selling low...that is the major mistake of new investors. If you want to try something different I like American Exchange Traded Dividend Fund [EFT DVY]

**Phineas** · 01-11-2011, 01:04 AM

It is better to have some knowledge before visiting your financial advisor . As there are many things you can invest in but you should go for the thing which is relevant to your future to , help you in your future . For example if you want to be a property dealer or agent , why not buy a property with it .

**yulianisakov** · 01-19-2011, 02:13 PM

definitely not CDs

Definitely stay away from the CDs right now, because they don't pay anyting right now and you will be locking the almost 0% interest rate during the period where it will remain so. That's not very sensible. If you are completely scared of risk, then consider placing your money in large-cap stocks of the S&P 500. Granted right now growth is slow, but consider this almost 50% of the stocks in the S&P 500 are receiving a major portion of their profits from emerging and developed markets overseas. So what does that mean? If you invest in some S&P stocks you will get the comfort of knowing that you have conservative steady growing stable companies in your portfolio, but at the same time be take advantage of where the growth opportunities are today which is in markets such as India, China, Brazil and so on. Remember many companies are multinational these days so if there is a bull market in Brazil, the people will be buying a lot of McDonald's burgers.

Hope this helps think about things in a different way for you.

Yulian Isakov

**moneyclass** · 02-05-2011, 08:51 AM

i would open a stock portifilo account with that advisor (or actually should do it yourself online at like etrade or one of those) that will save you money there.

but id say put like 12,000 into some stocks and then dollar cost average like $100 into that account every single month.

Help 18yr old invest 15k