Focus short term? Or look for the longer haul?
Investments While In College
Investing while in College
My question is about investing while still in college and/or grad school. I'm a college student about to graduate in December and go to grad school next fall. I expect to have a tuition waiver and teaching/research assistantship to support me through grad school. Currently, I don't have any student loans, credit card debt, or a car payment and I live at home for the time being.
What would you advise me to do with my savings? Should I keep investing in short term accounts like CDs and money markets or begin investing long term in stocks and bonds? I'm already thinking about saving for retirement and I've had an IRA for two years. Should I wait until I'm out of grad school or should I begin even now?
Investing While in College: It's Never Too Early!
It's never too early to start saving! Max out IRAs whenever possible and use Roth IRAs when you can. The little bit of tax you save now with a traditional IRA is not worth the taxes you'll pay years from now. For money you'll need in the next five years, use CDs and other short-term savings vehicles. For money you won't need for five to ten years, consider a conservative mutual fund. If you have money you won't need for over ten years, you might want to try a more risky fund that has a good track record. It's that simple. The rest is detail.
Barbara in Wallingford, CT
Investing While in College: When Will the Money Be Needed?
While in college, this person needs to be investing in a good money market account or CD since he will more than likely want to buy a house, etc. after college. Then he should start socking the money away in good long-term mutual funds. Don't invest in mutual funds or any stock market related activity unless the money can be left untouched for longer than five years.
Glenna in Broken Arrow, OK
Investing While in College: Read These Books
Great start! Begin now by converting your current IRA to a Roth IRA at a discount broker or good mutual fund, such as T. Rowe Price, Vanguard, Fidelity, or American Century. Your tax bracket is never going to be better for doing this than it is this year and next year.
Second, put as much of your grad school earnings into that Roth IRA for this 2006 tax year and then 2007 as you can, but not more than is allowed each tax year. (Remember that your contributions, not conversions, made to your Roth IRA before April 15, of one year can count for the year before.)
Within your Roth IRA, begin investing in a no-load, broad, stock based mutual fund such as one which tracks the Standard & Poors (S&P) 500.
In your spare time, read a good book on investing. I think that reading either of Mutual Funds for Dummies or Investing For Dummies would be time well spent.
Investing While in College: What Does Dave Ramsey Have to Say?
The sooner you start long-term investments in good mutual funds, the sooner you will reach your retirement goals. A person who invests $2000 at age 19 and continues to invest $2000 each year until he is 26 will at age 65 have $2,288,996 without any further investments. On the other hand, a person who waits to start investing until age 27 will have to put $2000 in his mutual fund every year until he is 65 to achieve $1,532,166! This is contingent on a good mutual fund that grows at an average 12% per year, which has been the average growth over the past 70 years or so. The Dave Ramsey Financial Peace University program has helped my family learn about safe long-term investments and dumping debt along with many other financial matters.
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