Saving Money...

[RONJON]

Okay so i am saving money for when i come back from graduate school and ill be having to find a place to live. I have about 8K saved so far and it is "no-touch" money for the next 3-4 years. What is the best way for me to save this money??? Should I put your money into a CD or put it into a savings account or something else??? I am a bit naive when it comes to how to make and save money so any tips or advice would be greatly appreciated

Thanks
RONJON

 

[bhumik]

me curious too

 

[bigdfk]

I dont have the "magic answer" for you but I do have a few questions that you should consider or at least clarify for us.

How much money are you looking to invest? (8k? will you be adding to this amount?)

How long are you looking to invest the money? (3-4 years? is this firm?)

What sort of liquidity do you require?

What sort of return are you looking for?


Honestly, 8k, while a good start, is not a lot of money when you are trying to put a portfolio together. I'd try to find a couple low fee funds (like the Vanguard funds) and try to put 2-3k in 3 funds looking at the global economy in addition to the US economy. Still, 3 funds, 3 years, 8k - shit man anything can happen.

Investing money is difficult in the sense that it requires a lot of time to not only research your strategy - but to allow your investment to actually work. Volatility is a fact of life. 3 years and 8k may not be enough time and money to be worth going through the hassle of putting together a portfolio of mutual funds. You may decide that you just want to try keep up w/ inflation and go with a CD or some bonds or something. Savings accounts will give you a very poor return. CD's will also give you a poor return. But they are easy and therefore may be worth collecting some token interest on your money by virtue of simplicity.

I'm curious to see what other more knowledgeable people have to say.

 

[mike1107]

put them on an account and dont touch them

 

[oldfella]

Term deposits are good, but you usually cannot withdraw from them for a set period of time and you must maintain a minimum balance at all times. We also have what we call rollover funds.....you deposit them in an account and leave them alone for a term, then when that term expires it rolls the funds into another higher interest bearing account with all the accrued interest from the first fund. These are all subject to interest rate fluctuations though.

Lots of options, some risky some not so risky. The ones with higher risk pay higher dividends!!

 

[fr8lnr01]

One word.... ING

**broken link removed**

I four years you'll have another grand.

 

[Shelby]

One word.... ING

**broken link removed**

I four years you'll have another grand.

ING is very good. There are some with slightly better rates now though (Zion, E-loan, etc.) Some require larger minimum deposits than others though.

This is a good site to compare different CDs and a host of other things:
http://www.bankrate.com/

 

[Kane]

If you want to play it safe, then put it in a money market account. They earn more than a regular savings account and there's no risk. If you need to access some of the funds because of an emergency or something, you can. If the balance dips below a certain amount ( I think with most banks it's $5k ) then you earn interest at the regular savings account rate.

The first $10k you use to start a portfolio should go into either mutual or index funds depending on how active you'll be in managing it.

 

[parrajm]

If you will not be actively managing your money, all your money should be in index funds. don't be tempted to jump on the next "hot" stock pick because by the time you find out about it, all the alpha will be sucked out of it. What level of risk are you willing to take on with this money? Just because you're investing doesn't mean you're going to stay in the black so you should have your assets mixed across classes so that your asset allocation matches the level of risk you are willing to take. the name of the game here is diversification. the more diversified your portfolio the less risk you will take on. avoid putting all or most of your eggs in one basket. and by that i mean avoid putting all or large chunks of your money in a single stock. that is how you lose big. index funds are an exception to this as they are actually many stocks so don't worry about over loading that way. The problem you can run into there with diversification is that most funds represent a certain chunk of the market: large cap, mid cap, small cap, growth, value, domestic,, stocks, bonds, etc. so try to get an array of different funds. Also, get funds from different companies as well. All companies use the same internal research done by their analysts to make their picks so by only going with one company's funds you open yourself up to the errors their individual analysts may make. if you have anymore questions, PM me.

 

[Shelby]

If you will not be actively managing your money, all your money should be in index funds. don't be tempted to jump on the next "hot" stock pick because by the time you find out about it, all the alpha will be sucked out of it. What level of risk are you willing to take on with this money? Just because you're investing doesn't mean you're going to stay in the black so you should have your assets mixed across classes so that your asset allocation matches the level of risk you are willing to take. the name of the game here is diversification. the more diversified your portfolio the less risk you will take on. avoid putting all or most of your eggs in one basket. and by that i mean avoid putting all or large chunks of your money in a single stock. that is how you lose big. index funds are an exception to this as they are actually many stocks so don't worry about over loading that way. The problem you can run into there with diversification is that most funds represent a certain chunk of the market: large cap, mid cap, small cap, growth, value, domestic,, stocks, bonds, etc. so try to get an array of different funds. Also, get funds from different companies as well. All companies use the same internal research done by their analysts to make their picks so by only going with one company's funds you open yourself up to the errors their individual analysts may make. if you have anymore questions, PM me.

Who do you use for your index funds? I've been using Vanguard for a while now, they seem best (lowest fees).

 

[parrajm]

its not about the fund family, its about the fund manager. If you have the time, look into your funds and check their credentials and compare them to other fund managers who are dealing with the same sector. Don't go by last year's performance because people who are in the top 10 one year are almost never in the top 10 the next. if you can check a manager's return over a 5-10 year horizon, that would be a solid indicator of his competence. personally i think profunds have great managers and I enjoy using the ultra bull and ultra bear funds they have as hedges against the rest of my portfolio when I can. A great tool for screening funds is yahoo finance. believe it or not, they use yahoo all the time on wallstreet as it is a great tool and costs nothing. Also, don't rule out ETFs (exchange traded funds) as solid investment vehicles as well. ETFs are fantastic and theres pretty much an ETF for everything.

 

[abadseal]

For the love of god whatever you do stay away form Fannie Mae. Learned the hard way over the last 3 days.

 

[bdp]

my favorite

There are a few funds I like
Black Rock Global (MDLOX)
Hartford Capital Appreciation Fund (ITHAX)
Aberdeen Natural Resources Fund (GGNCX)

With your 8k I would pick one fund... Prob the Natural Resources.

Dont plan on touching the money for at least 3 yrs. All of these are down for the year, but their fund managers are very reputable and these funds are rated very high.

If you want to have "easy access" to this money I would stick with CD's. There are some banks who are offering 3.75% which is pretty high!

I wish you luck!

 

[Beta]

we need to know what the money is for.

does this mean in 3-4 years it is for a house? if my timeframe for the money was that low, personally I wouldn't put it anything but a money market or high yield account, I definitely wouldn't be buying securities.

I, like most people should, have short term, medium, and retirement money.

 

[morepain]

we need to know what the money is for.

does this mean in 3-4 years it is for a house? if my timeframe for the money was that low, personally I wouldn't put it anything but a money market or high yield account, I definitely wouldn't be buying securities.

I, like most people should, have short term, medium, and retirement money.

i agree...if you have to know it will be there in 3 years go money market or CD. I also have my long term retirement set up but that sure has looked sad during this short term downturn, i certainly wouldn't want to be retiring this year!

 

[RONJON]

okay guys here is a little more info

-Yes it is about 8K putting back a couple hundred every two weeks...
The money will prolly be for a place to live i.e. appartment unless I get a full scholarship then i would save it for a new truck or something like that.
-I plan on not touching it or needing it for the next at least 3 years.
-I dont know much about investing except that it is possible that i could lose my hard earned money which i just cant afford to do. Also i dont know anything about funds, cds, etc. except for what you guys are telling me.
-Im a pretty young guy who is new to the ways of money management so I really appreciate your advice. I will consider all that you guys have told me and keep yall updated

THANKS
RONJON

 

[parrajm]

K we'll start from square one then. Go stick your money in a 3 month CD asap. During the next 3 months while you wait for your cd to come to term, do research about investing. buy a couple books, read some internet sites, pick up a copy of the wsj every here and there and read,read,read. this way, in 3 months, you'll know exactly where you want to put your money. that would be the smartest way to go about it instead of just randomly taking our advice without any background knowledge. And from there, feel free to ask us questions as you read more.