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this weeks dilemma & responses
Most of us work or pursue some vocation or avocation that brings us money. We spend a good chunk of our waking lives working, and another chunk spending or trying to save the money we earn. And, unfortunately, work & money can bring us exasperating, frustrating, or otherwise difficult problems: ethical choices, unfair bosses or companies, ends that don't meet, worker-companions who rile, careers that get off-track..... But, hey -- you're not alone! In this forum Tripod members ask each other for help and advice; the results are often very enlightening (and always interesting).From the many very deserving questions we receive every week, we select one and post it so that Tripod members can help unstick their financial sticky wickets. How about giving us your two cents worth?
"I'm a college student working for the summer, so I'm earning enough through my job to live on comfortably during the school year. Quite unexpectedly I received a windfall of $1000. I don't need to use the money to buy anything right away, so I'm considering investing it in stocks, bonds, or a mutual fund. Given that I don't expect to need the $1000 in the next five years, how should I invest it?"
posted Tuesday July 2, 1996
jrmeyer: It depends on how valuable that money is to you. If it is not extemely valuable, you can put it in a medium to high risk mutual fund. If the money is valuable to you, play it safe and put it in a certified deposit in a bank. Ideally, since you're still in college, you should start an investment plan for your retirement. $1000 is an excellent start. Study mutual funds, there are hundreds, and deposit the money. Leave it there, and when you get other windfalls, you can add to it. Mutual funds are good because a portfolio can spread out your risk over several companies, sometimes several hundred companies. If one goes bust, others are still in good shape. Mutual funds are best for the long haul though. Individual stocks are OK if you have nothing better to do other than sweating over the ticker tape. Unless you look at utilities that are regulated by state or local governments like natural gas companies, etc., you'll have to ask someone else about bonds.
meganc: I don't know how helpful it is, yet, but my aunt just sent me a book called "Get a Financial Life" by Beth Kobliner. It is supposed to help people in their 20s and 30s plan their financial future.
moneyman: Invest the money in a mutual fund. There are several good ones out there.Check out Kiplinger's magazine -- it will give you a crash education and an idea of how long to invest, say for college, a home, etc. You may not have enough knowledge to invest in a single stock. I invest stocks directly through a drip program. A drip program is a direct reinvestment program -- go into Yahoo under finance and investments, type "drip." That will give you a list of companies. You should do the homework and take the time to read about companies you know and like.
GolfGizmo: Buy $500 of Starbucks stock and hang on to it until you get out of school; go buy a good set of used golf clubs for about $300, and put the remainder into a saving account.
jrmann2: Putnam Vista fund has been VERY good to me over the years. However, one might do better with a no-load fund -- in the small capitilization or medium capitalization area, agressive growth. I expect we will see the market two or three hundred points lower after the elections, and that is the time to invest. At your age you can take a much more aggressive stance, so check your many sources of information such as Mutual Fund Review, issues of Worth, Kiplinger magazine, etc. Forbes has good advice, occasionally, and requires more reading, but is solid. Don't be in a rush to invest your thousand until you have checked out past performance of funds -- after all, a thousand dollars is a thousands dollars and represents a lot of work -- don't blow it on your roommate or someone's sob story -- or promise of pie in the sky later on. And don't expect it to double in a year or so - you hear those that do, but always after the fact. Thanks for listening - good luck.
mokummer: In my humble opinion the smartest thing to do in this case is subscribe to the Mutual Funds Magazine (1-800-442-9000). They published a book titled BILLION DOLLAR FUNDS. The subtitle is "The Investor's Guide to America's Most Successful Mutual Funds." Read it thoroughly, request prospecti of the most promising ones that meet your taste for security and earnings potential, and pick one. Don't forget to automaticly re-invest dividends and capital gains. If you will not need the money until you retire by all means make it an IRA account!! WARNING: Do not forget that past performance is not a guarantee of future earnings.
abclosing: This situation presents an opportunity to have your money work for you as you work for your money (hopefully). Depending on your risk tolerance, I would look at some mid or small cap mutual funds where (in spite of the rise in the markets) the fund is relatively undervalued (no brainer). Also keep in mind that mutual funds are very liquid and should an emergency arise, you will have no probelms getting to your money. Good luck and good investing.
What you do depends on what you can stand. Rule of Thumb: risk tends to be rewarded in the long run. If you are totally risk adverse, invest in T-bills or mutual funds. Vanguard is a good one for you to look into, because it tracks the S&P; 500 index. Long term, it has beaten 80% of the funds. Get a no-load fund. If you don't know what that is, you have some research ahead of you. I tend toward risk-seeking. I buy small caps; my return over the last 2 years was about 315%. But this varies--returns on these bounce like a yoyo--you have to have the stomach for it. Before you do anything check out some of the online resources. Motley Fool is one of my favorites. Also, this month US News & World Report has a good article on investing. Or start a tiny business: this has the highest returns --and the highest risk.
millnchuck: The dividend-yielding companies such as NYNEX (which just merged with Bell Atlantic) haven't missed paying a quarterly dividend (about 6 percent annually) since before telephones were invented! Baby Bells are second in communications only to AT&T, and are into the Internet in a huge way. That is an attractive five-year place for your windfall. Or, try General Mills over the same five years...their dividend is a bit lower, but they are a solid company that knows how to NOT go "against the grain" of success !
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