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    Recent Graduate Looking to Invest

    I just graduated from Iowa State a couple months ago and have started to get regular paychecks. I'm looking to invest. I know almost nothing about how or what to invest in, so I thought I would start here for ideas. Obviously I plan to research and talk with some people I trust.

    Basically I would like to hear your suggestions on where or what to do with money for a young, single person who is looking to invest $500 a month. Thanks.


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    Re: Recent Graduate Looking to Invest

    Quote Originally Posted by CycloneNorth View Post
    I just graduated from Iowa State a couple months ago and have started to get regular paychecks. I'm looking to invest. I know almost nothing about how or what to invest in, so I thought I would start here for ideas. Obviously I plan to research and talk with some people I trust.

    Basically I would like to hear your suggestions on where or what to do with money for a young, single person who is looking to invest $500 a month. Thanks.
    If you're company has a 401k and they match, I would start there. I would go up until their match and then if there is anything left over start a Roth IRA. The 401k will be limited in what you can invest in but the Roth will let you invest in about anything. At your age, I would be 100% in equities.

    I'm assuming here that you're wanting to invest for retirement and not for a house, vacation, etc.


    Last edited by dmclone; 06-28-2013 at 06:27 AM.

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    Re: Recent Graduate Looking to Invest

    Excellent idea to start the retirement bucket. But don't overlook the possibility of the need for a down payment on a house or some future college education. Make sure you create a mid-term bucket with income equities and some bond funds. Make this your 8-15 year bucket. And I like the way you say you want advice from your fellow CFers but will also ask someone you "trust"...


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    Re: Recent Graduate Looking to Invest

    Quote Originally Posted by cdekovic View Post
    Excellent idea to start the retirement bucket. But don't overlook the possibility of the need for a down payment on a house or some future college education. Make sure you create a mid-term bucket with income equities and some bond funds. Make this your 8-15 year bucket. And I like the way you say you want advice from your fellow CFers but will also ask someone you "trust"...
    bad idea - put as much as you can in retirement monies............so when you buy a house you can't afford with zero down, let the government bail you out or just file for bankruptcy. When you file those retirement assets you have are safe


    Ok, i was joking about the house you can't afford and the gov't bailout......but you should really try to put the $16K/year into your 401K, then do a Roth or Traditional IRA and protect as much money as possible. At your young age if you can max out your retirement dollars and still live, then you are way ahead of the game. Then future raises you can use to set money aside for homes, cars, wives/kids. Remember that $16K into your 401K is pretax dollars, so it might only be $8-900/month out of your pocket.

    sorry for ramble and probably poor use of the English language - i was up all night with a screaming baby.



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    Re: Recent Graduate Looking to Invest

    Make sure you focus on minimizing fees which could eat up a lot of your returns. While your balance is small you are especially vulnerable to transaction fees which will put you in the hole right off the bat - paying $30 to buy a $500 investment is a 6% loss just to get in the market. Once balances get larger these fees are easier to stomach. There are lots of types of fees and a quick Google search will help you out.

    Personally, until your balance gets a larger I would focus on some no load index funds which will minimize fees and help you diversify (which can also be a challenge with small balances).



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    Re: Recent Graduate Looking to Invest

    This is a tough question. Right now, all markets seem to be driven by what central banks are doing with monetary policy. Good economic news seems to be bad because it threatens the easy money policies.

    It is definitely a great idea to set aside some income and invest it, but where? Mine is split between real estate, metal and stocks with high dividends.

    I'm also leery of investing pre-tax because I think tax policy may change in the future as the government searches for ways to make ends meet.



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    Re: Recent Graduate Looking to Invest

    While it gets exciting to have that extra money to invest, make sure you have some money in a savings or money market account. You need a couple of months worth of paychecks that you can get access to. The bank can automatically transfer on payday from your checking to your savings. Plus this will help you figure out how much you can have withdrawn and still meet obligations like rent, car payment, etc.

    A lot of times recent college grads get excited to squirrel money away in retirement only to have to pull it out when they need access to it for some unforseen event. Then you pay the penalty on early withdrawal and end up losing money. Build an emergency fund first. Then put ot away.



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    Re: Recent Graduate Looking to Invest

    I highly recommend Vanguard index funds. For someone with limited investment knowledge (or even someone with a lot of investment knowledge but doesn't want to deal with it), they offer the cheapest way to invest which leads to better returns. Their S&P 500 or Total Stock Market Indices are great ways to get started.

    I agree with most of what's been written here. If there's a 401(k) match, make sure to take advantage of it. That's free money that a surprising number of people leave on the table. I would put the rest into a Roth IRA with Vanguard.



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    Re: Recent Graduate Looking to Invest

    Quote Originally Posted by erikbj View Post
    bad idea - put as much as you can in retirement monies............so when you buy a house you can't afford with zero down, let the government bail you out or just file for bankruptcy. When you file those retirement assets you have are safe


    Ok, i was joking about the house you can't afford and the gov't bailout......but you should really try to put the $16K/year into your 401K, then do a Roth or Traditional IRA and protect as much money as possible. At your young age if you can max out your retirement dollars and still live, then you are way ahead of the game. Then future raises you can use to set money aside for homes, cars, wives/kids. Remember that $16K into your 401K is pretax dollars, so it might only be $8-900/month out of your pocket.

    sorry for ramble and probably poor use of the English language - i was up all night with a screaming baby.
    The IRS max for 401k this year is $17,500. The IRS has been upping the contribution limits yearly for a while now. When I first started, it was $15K per year. Take advantage of any employer match! Make sure you understand how any profit sharing contributions work.



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    Re: Recent Graduate Looking to Invest

    Good question. I started investing right after college with Vanguard. Their fees are the cheapest in the industry, their website is easy to use, and I have been absolutely pleased with the personal service I get even though my portfolio is small potatoes. I have not paid one cent in transaction fees when I buy Vanguard funds. That's a huge savings.

    I have a pension at work so much of my retirement is done through them but I also max out ($105/week) a Roth IRA in a Vanguard Target Retirement 2050 account. This is as simple as it can get. Others may say the returns are not the best but I cannot complain.

    In addition I do another $100/week into a Vanguard money market fund and when I get about $3000 in there I buy one of the Vanguard ETFs, such as energy, REIT, consumer staples, utilities, etc. Since you are young shoot for something with a higher yield because you have time to recoop it. Case-in-point: I started investing in 2007 after collegte and then lost about 50% of my value within a year. I was ****** and almost to the point of tears because I didn't understand this was the worst market in a generation.

    As others have said, do some in retirement (you don't need to max out if your work offers a separate policy like mine, and keep some that is easily accessible. Your furnace will die, your shingles will fall off, etc. You'll need some liquidity.

    Good luck!


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    Re: Recent Graduate Looking to Invest

    Quote Originally Posted by CycloneNorth View Post
    I just graduated from Iowa State a couple months ago and have started to get regular paychecks. I'm looking to invest. I know almost nothing about how or what to invest in, so I thought I would start here for ideas. Obviously I plan to research and talk with some people I trust.

    Basically I would like to hear your suggestions on where or what to do with money for a young, single person who is looking to invest $500 a month. Thanks.
    That's good chunk of money for a recent grad to invest per month. Good for you.

    I'll echo what's been said here. Contribute to your 401k, then an IRA of some sort, then if you have more to invest then more index funds.

    I'd stick with index funds. Starting out go with the S&P 500 index fund from Vanguard (I'm a big fan of Vanguard).

    Also, don't start pulling big chunks of money out or in based on recent news. No one can time the market.


    Last edited by canker2323; 06-28-2013 at 08:26 AM.

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    Re: Recent Graduate Looking to Invest

    Quote Originally Posted by CycloneNorth View Post
    I just graduated from Iowa State a couple months ago and have started to get regular paychecks. I'm looking to invest. I know almost nothing about how or what to invest in, so I thought I would start here for ideas. Obviously I plan to research and talk with some people I trust.

    Basically I would like to hear your suggestions on where or what to do with money for a young, single person who is looking to invest $500 a month. Thanks.
    Invest in your debt..... Your housing has to be affordable and set up so you can eventually own. Your student loans have to be paid off as quickly as you can.

    Lack of debt is power. There is plenty of time to start your retirement fund 10 years from now.



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    Re: Recent Graduate Looking to Invest

    Quote Originally Posted by william View Post
    Invest in your debt..... Your housing has to be affordable and set up so you can eventually own. Your student loans have to be paid off as quickly as you can.

    Lack of debt is power. There is plenty of time to start your retirement fund 10 years from now.
    His most important asset right now is time (compound growth). He shouldn't wait 10 years.



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    Re: Recent Graduate Looking to Invest

    Quote Originally Posted by william View Post
    Invest in your debt..... Your housing has to be affordable and set up so you can eventually own. Your student loans have to be paid off as quickly as you can.

    Lack of debt is power. There is plenty of time to start your retirement fund 10 years from now.
    This depends on your situation. I'd rather invest than pay off my small balance of 1.6% student loans.



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    Re: Recent Graduate Looking to Invest

    Share most sentiments with those already listed. Look into your employer's retirement plan. It could also be a Roth-401K. The decision to make will be would you rather pay tax on your earnings now & then the investment is made or would you rather pay taxes on when you withdraw your earnings in retirement.

    Bonds have taken it on the chin over the past month and have enjoyed a bull market prior to that for nearly 20 years. While diversifying is, most of the time, a good thing to do, someone young at the beginning of their career should normally want most of their retirement going into equities. Given the markets today, I think this is more evident. There should be a much better entry point into bonds later in your career.

    Finding a good financial advisor is wise. Key is finding someone who has your best interests in mind and not simply luring you in to solely purchase products from them.


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