College Student Looking to Invest - Where to Put My Money?

Hello Lenny:

You have a lot to learn. In the meantime, you should let somebody else manage it for you. I don't disagree with your plan. You CAN learn to invest and beat the market - but you're not there yet.

excon

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I didn't drink the koolaid

Hm - not as in-depth an answer as I was looking for, but thanks none-the-less. Can anyone give me a little more specific advice as to where I should be looking to put this money? Even investing IRA's with Fidelity, Vanguard, or TRowePrice requires me to pick what Mutual Funds and such I want the money to be invested in.

Would it really be best if I just hand my money over to a financial adviser and have them manage it? With the small amount of money I'd be investing ($10,000), wouldn't their fee's basically offset any gain I would be looking at short term (3-5 years)?

Given that it will be a few years before you need to buy a house, you might consider a broad stock market index mutual fund. Index funds attempt to match the return of whatever market index they're set up to follow, e.g., Standard & Poors 500 or whatever. Expense ratios are typically lower than for actively managed funds because less trading is required. Vanguard has several to choose from, and I like them because of their relatively low overhead, no frills style. Very few actively managed funds end up beating the broad market indexes over the long haul.

As far as being a stock picker yourself and trying to manage your own portfolio, I guess it depends mostly on how much time and effort and attention you're willing to devote to it. If you think it's something you'd be willing to devote A LOT of energy and focus to, I wouldn't tell you it's impossible to hold your money together and get a decent return, but it's a pretty big gamble, and realistically, your chances of doing better than a market index are slim, especially while you're learning. Most college students have more interesting things to do than pore over company financial statements and follow the business press. There'll be plenty of time for that later. I'd say study hard, have fun, and let the market float your boat without having to pay too much attention to it.

You're absolutely right about giving your money to a manager to invest for you. If you're going to take that big of a risk and incur those kind of expenses, you at least ought to get some education for yourself out of it.

Hey there,
First of all, congrats on your savings!
If you are interested in long-term gains, take about 50% of your investment and place it in an index fund. These are managed funds which do not place their stake on a few stocks, but rather the whole market. An example is an index fund that follows the growth of the S & P 500. This way, you are guaranteed to make money in the long run. Despite the fact that the market may crash, historically it has always rebounded. If you placed money in an index fund in 1900, despite the Great Depression and Black Monday (in 1987), you still would have made 7% (inflation-adjusted) per year. Indexing is a safe bet. Make sure to choose a fund with low expenses. And, most importantly, once you put your money in the fund, do not touch it.

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