Investment Question

[airbornflght]

If I had $5-6k sitting around what would the best thing to do with it be?

Right now I have $4500 in a one year CD that is about to mature in mid august. And I expect to have a little more left over time I get through paying all my college stuff (hopefully) What would be the best thing to do with it? I really don't want to put it into savings because 1: its just sitting there doing pretty much nothing (ok.. a whopping 1.5% interest).

[Nomad]

Money sitting in a savings account is money wasted.

[Shorty]

Invest in my house :D

[macdude425]

Put it in an IRA/towards your retirement. Depending on how much interest they're pulling in ATM (and how young you are), that could turn out to be quite a bit of money when you retire, and you won't have to worry about Social Security (which is dying anyways).

[RWB]

Roth IRA is nice.... I have one, I put $100 in every month and will continue to do so. The earlier you start, the more you'll have when you retire... don't depend on the government to be there for you when you need money after you retire.

[airbornflght]

There's no way I'm counting on SS, I think you should be able to opt out if you don't want it. It looks like a broken system in so many ways. I would love to put it into something longterm, but I don't want to do anything like that until I've been in college at least a couple years and make sure my finances are stable. Until then is there any thing relatively short term (1-2 years) that offers a good return? My CD is only at 5% yearly compounding monthly, which isn't very much

[Lincoln]

Drop it in a 5-year CD. Don't touch it.

[macdude425]

Money markets? Don't know how stable that is, but it's worth a look-see.

[airbornflght]

Well, here's a my calculations for my current cd, keep in mind mine will be mature at the 12 month mark, I just took it further to see how much 5% interest sucks.

[a2jfreak]

Look into KDKN (http://finance.google.com/finance?q=KDKN).

[airbornflght]

They look to have remained fairly stable, are their shares expected to jump way up if they hit oil?

[Leonardo]

Your question is tantamount to asking, "What computer should I build?" It all depends.... Please answer some questions:

+ time horizon: when do you anticipate needing the money, or part of it?
+ risk tolerance: how much risk can you tolerate? do you absolutely require a gain over a six month, one year, five year, 10 year span? which? are you willing to risk the principle (original money invested)
+ liquidity: do you foresee a time in the future (if so, when) when you'd like to sell off/cash in your investments?
+ what is the purpose of the investment? to 'park' money while you don't need it? to accumulate money for a home down payment? to build a nest egg for your retirement? to fund college for children or grandchildren?
+ discipline: do you have the discipline to leave your money alone when the market (mutual funds/stocks/bond) goes up and down in its normal cycle?
+ contributions: will this be a lump sum (all at once) investment purchase or will you be adding to it?

Money sitting in a savings account is wasted. I agree. Traditional savings are good, if: you cannot tolerate any risk whatsoever, you know you will need the money in only a few weeks, or you wish to remove money from a jar buried in the back yard but are clueless to investing but want to get started with 'just something'

General principles:

- single issue investments (single stocks) tend have the greatest risk, but also the greatest reward potential - eggs in a single basket
- stock-based growth mutual funds tend to have the best balance of low risk and returns (appreciation plus dividends)
- short term investments, wherein you know you will need the money withing six months or a year should be in very conservative instruments such as certificates of deposit or money market

[Leonardo]

Andy, I want to compliment you on starting your investing now. With investing, the most important component is time. The sooner you start the more time your investments can compound. Compounding is the most powerful element for building wealth through investing.

[airbornflght]

Basically I would like a potential for a high return, but I want to keep my risks as much as possible. Another thing is that while I would love to put this money away, forget about it and then get it back 30 some years from now, this will probably have to be considered a short term investment.

This money is money that I got paid for farming a wheat crop for my grand dad when I was about 14 years old. He gave/promised the money to me to help pay for college (I'll be the first out of five grandchildren). But I don't think I'm going to need it this year.

Here's my outlined costs for next year, let me know what you think.


Tuition and books are paid for through ohlap and other grants.
I have a work study grant for $3k. Since I already have all tuition covered this could go towards room/board.
I have ~$3200 in the bank right now, and I'm making around $400 a week without overtime.
I have around 10 more weeks to work, so I expect to earn about $4000 after taxes, but I don't know. $3600-$3800 would be a more conservative estimate.
I also have $400-$600 coming from a web design project I'm trying to finish up.
So all in all I have $3600 from work, $3000 for work study, $450 from the website, and $4800 from wheat.


All in all that is $11,850. The expected room and board is $6360 if I stay in a frat house, and $5600 in a dorm. If I stay in the frat house that ends up around $5490 left over. I also plan on looking for a part time job at one of the print shops as pre-press or maybe as a freelancer. So I think I should have everything covered. This is just kinda scary having to worry if I'll have money to pay rent or eat. up until now I took for granted I'd have a bed and a hot meal at night.

I just don't want my money sitting around, but then again I'd rather it not evaporate overnight. Do you recommend that I just stick with CD's, or is there something with a higher return/interest rate than 5% that is relatively safe?

Oh yeh, can't forget my donation to the local men in blue's donut fund as a result of last nights debauchery, though I think I have that covered. My wallets going to be empty and my last check from the print shop is getting cashed instead of deposited :(

[Leonardo]

If this is short term, withdrawal/cash-in less than four or five years after investing, and you need the money and can't risk the principal, you need to invest conservatively. For now, since you will NEED the money for college, go with something safe, like CDs. Start plunking down a percentage of your available cash at one or two-month intervals into CDs. It's up to you whether you want 6-month or 1-yeard CDs. It depends upon when you need to cash out.

Short term investing in mutual funds or stocks is just too risky. You could end up with loss of principal. You don't have enough money to absorb a loss like that.