Where should I invest $3,000?

[skives]

Soon I will have $3,000 to invest. Any ideas where to invest it?

[bjl584]

We need a lot more info about your situation and goals to be able to answer that.

[jpg7n16]

Just stick with federal bonds, at least they are tax free.

No they're not.

And how do you know bonds are right for OP? What liquidity does OP need? How long should it be locked up? Does OP need the funds in 1 year or in 30 years?

Maybe try one apple stock, its down a lot today.

What if OP needs the funds in 3 months? Should he really gamble his need on the short term performance of one stock? What percent of his total portfolio does that $3k make up?



I think you've jumped straight to picking the investment, and skipped over all the steps needed before that. You're on step 4, without knowing anything about steps 1-3.

From: Certified Financial Planner Board of Standards Inc. - Financial Planning Process

The Financial Planning Process consists of the following six steps:

1. Establishing and defining the client-planner relationship.

2. Gathering client data, including goals.

3. Analyzing and evaluating your financial status.

4. Developing and presenting financial planning recommendations and/or alternatives.

5. Implementing the financial planning recommendations.

6. Monitoring the financial planning recommendations.

[Petunia 100]

Only 3000? Probably don't wanna do that much trading yourself. Commission alone will kill you! Just stick with federal bonds, at least they are tax free. You shouldn't trade yourself unless you have at least 5000 and even then your pushing it. If you wanna play around put all 3k in your ameritrade accounts and play around with it. They are offering 200 free trades so you can purchase 1 stocks and see how it does without worrying about commissions. Maybe try one apple stock, its down a lot today.

You know it's funny, I don't read anything in the OP about trading. I think it's great though that you're clairvoyant. Without knowing anything about the person, their age, their income, their risk tolerance, what the money is for, or when they will need it, you're able to determine that federal bonds and 1 share of Apple are appropriate.

[skives]

The $3,000 is from my tax refund. We have $10,000 in a savings fund and our annual household income is $50,000. The only debt we have is $36,000 in student loans that we are paying minium of $1,000 a month on right now. I just want to build my savings by investing.

[jpg7n16]

I just want to build my savings by investing.

Savings for what? What do you see yourself using the savings for, and when? <This will help establish the goal and timeframe for your need>

If you're saving for a European vacation next year, or a home purchase in 5 years, you would invest different than if you're saving for retirement in 25 years.

What's the interest rate on your student loans? <This will help determine if you should be paying down debt or investing -- not just with the $3k, but with your $1k/month too>


Have you done any savings at all for retirement? 401k? IRAs? Do you have a pension through work? How old are you? <These questions all help identify if you are on pace for retirement, and thus what priority it should be in your savings hierarchy>

[Petunia 100]

The $3,000 is from my tax refund. We have $10,000 in a savings fund and our annual household income is $50,000. The only debt we have is $36,000 in student loans that we are paying minium of $1,000 a month on right now. I just want to build my savings by investing.

So is this retirement money? Or part of your emergency fund? Or saving towards a home down payment?

It's important, because long-term money is best invested in stocks and bonds. That is where you can expect the highest return over time. If you will need the money in a short amount of time, it should not be invested, it should be saved. Stocks are volatile, as likely to go down in the short-term as to go up.

Whether this money is for a short-term or long-term goal, you could use it to open a Roth. The Roth will shelter all income and growth on this 3k from tax permanently. You can put it in cash, just choose an online savings bank for the custodian. You can invest it in a diversifed portfolio of stocks and bonds by choosing a single good mutual fund, just choose a fund family for the custodian (Vanguard, Fidelity, T. Rowe Price).

With a Roth, your contributions are available to you at any time for any reason, no taxes or penalties. If you had to, you could get your 3k back.

And once it is open, you have a ready place to stash money in the future.

[skives]

the $3,000 is just from my tax return and just for saving. nothing planned for it but say in the next 5-7 years I need it.

Interest rate on student loan is 5.125%

[skives]

So is this retirement money? Or part of your emergency fund? Or saving towards a home down payment?

It's important, because long-term money is best invested in stocks and bonds. That is where you can expect the highest return over time. If you will need the money in a short amount of time, it should not be invested, it should be saved. Stocks are volatile, as likely to go down in the short-term as to go up.

Whether this money is for a short-term or long-term goal, you could use it to open a Roth. The Roth will shelter all income and growth on this 3k from tax permanently. You can put it in cash, just choose an online savings bank for the custodian. You can invest it in a diversifed portfolio of stocks and bonds by choosing a single good mutual fund, just choose a fund family for the custodian (Vanguard, Fidelity, T. Rowe Price).

With a Roth, your contributions are available to you at any time for any reason, no taxes or penalties. If you had to, you could get your 3k back.

And once it is open, you have a ready place to stash money in the future.

Are you talking about a Roth IRA? Don't those have fees for withdrawing money if you don't meet certain qualifications?

[Petunia 100]

Are you talking about a Roth IRA? Don't those have fees for withdrawing money if you don't meet certain qualifications?

Yes, I am talking about a Roth IRA. No, there is no tax, penalty, or fee to withdraw your contributions. There are no qualifications either. Just the contributions, earnings are a different story.

[Petunia 100]

the $3,000 is just from my tax return and just for saving. nothing planned for it but say in the next 5-7 years I need it.

Interest rate on student loan is 5.125%

5 - 7 years falls into an "iffy" range, IMO. Investing it may work out well, or it may not.

You could consider two things:

1. Invest in a moderate balanced fund, 60% stocks/40% bonds.
2. Prepay your student loan for a guaranteed return of 5.125%.

The advantage of the first is your money remains liquid, though it is subject to changes in value. The advantage of the second is the return is guaranteed, though you lose liquidity.

If you choose to invest, I suggest you open a Roth. I also suggest a good quality diversified fund such as Vanguard's Life Strategy Moderate Growth.

[skives]

Yes, I am talking about a Roth IRA. No, there is no tax, penalty, or fee to withdraw your contributions. There are no qualifications either. Just the contributions, earnings are a different story.

So only the earnings and not the contributions are subject to the penalties on the Roth IRA?

[Petunia 100]

So only the earnings and not the contributions are subject to the penalties on the Roth IRA?

Yes, you've got it.

[skives]

If you choose to invest, I suggest you open a Roth. I also suggest a good quality diversified fund such as Vanguard's Life Strategy Moderate Growth.

Sounds like you know that fund pretty well. What fees are associated with it?

[Petunia 100]

Sounds like you know that fund pretty well. What fees are associated with it?

In

The expense ratio is .16%. There is an annual custodial fee of $20 for accounts with less than 10k. You can avoid the annual custodial fee by electing to receive all statements and communications electronically.

It is made up of 3 broad indexes (which I do own): Total US Stock Market Index(42%), Total International Stock Market Index (18%), and Total US Bond Market Index (40%).


Here is the Morningstar fund snapshot:

VSMGX Vanguard LifeStrategy Moderate Gr Inv Fund VSMGX Quote Price News