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  1. #1
    Puppy LabsN'Hounds's Avatar
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    Talk to me about banking and investments......

    I'm a physical therapy grad student so I have pretty much no knowledge of how to safely invest money. I'm asking family members for their input but it's always better to hear more options.

    So let's just say you have a little under $20,000 to do with as you wish. My plan is to touch it as little as possible until I am in a location where I want to buy a house. What is the best way to get return on the money in a safe manner? The stock market scares me a bit.

    There is a local bank with a high yield checking with a 0.75% interest rate and a A.P.Y. of 0.75. It says it is compounded monthly and there is a maximum balance of $25,000. Sounds pretty good to me. Is there a downfall to this? I assume I have to make a minimum number of transactions per month with this one. This is the highest interest rate I have found so far.

    What about mutual funds? Could I make more with these? I need these explained to me in a really dumbed down way.

    Any other ideas would be greatly appreciated!

  2. #2
    Senior Dog doubledip1's Avatar
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    If you have student loans, use the money to pay them off. If you have any other debt (credit cards, car), pay it off.

    Mutual funds are good. You want a diversified balance. Vanguard is good.
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  4. #3
    Puppy LabsN'Hounds's Avatar
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    I forgot to mention that I have no other debt. I'm very lucky in that sense.

  5. #4
    Senior Dog voodoo's Avatar
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    you want to max out your roth IRA every year. max is based on income. reason for roth is not taxable when you withdraw in future. investors with lots of money buy stock in companies that have been around a while. research warren buffet. stocks like coca cola, GE, Intel, exxon, etc...stocks are just a way to invest in a company that will make you money. If you are nervous, invest in bigger companies that have been around a while.
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  7. #5
    Best Friend Retriever emma_Dad's Avatar
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    Check out reddit sub personal finance. and the related Subriddits. I've learned a lot of stuff browsing there and asking questions

  8. #6
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    Banks or credit unions are the only places your money is insured to not have a loss, but the returns (interest rates) are very low. Look online for investment risk tolerance surveys. These will help you determine how much risk you are willing to accept as an investor. You can then match up mutual funds with your investment style. Also, I think mutual funds are easier for beginning investors since someone else is managing in versus you needing to be on top of buying and selling stocks or bonds.

    Low cost investment firms like Vanguard, Fidelity, etc are good places to start. They also have a lot of information on investing to help educate you. Beware of free investment seminars put on by investment firms, they are mainly trying to sell you their services. You can also find educational programs through community education, libraries, etc. that would be helpful.

    As for the checking account you mentioned, find out about any and all fees. A higher interest rate means nothing if the fees for the account are more than what you earn in interest. Also find out if this is a teaser rate that is only for short time.

    What I would do is make sure to contribute to a 401k if you have one that matches (make sure to get the full match), set up an emegency fund where the funds are safe and easily accessible, do a Roth IRA, put money aside for your house down payment in something low risk, then invest any additional funds in higher yield/higher risk options. These can be done in parallel, I would just not buy a house until I had a solid emergency fund to cover unexpected expenses.

  9. #7
    Senior Dog Snowshoe's Avatar
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    Congratulations on graduating debt free, quite an accomplishment these days. I'm a Certified Financial Planner but I'm in Canada so I suggest you seek out a CFP in your area. No reputable CFP would give you investment guidance over the internet. We are required to do an in depth analysis of your current situation and assess your risk tolerance and objectives. I would not charge a fee for such an initial assessment. However many would not take on such a small account. And some do charge a fee for service but then no other fees. Some, not all, will place your investments for you as well.

    There is information here on CFP in the U.S.

    CFP Board

  10. #8
    Senior Dog Jeff's Avatar
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    I would agree with Voodoo, I know it is a hard thing to think about however I would look into a retirement account with an aggressive portfolio. Aggressive portfolio makes riskier investments but you get a much higher return over the long turn, around 10% interest. You won;t make that every year and some years you will lose, but some year you will make 20-25% that's why it is a long term investment, over say 20-30 years it averages out to about 10% interest. When you get closer to retirement you can slow down the aggressive portfolio and go to a conservative one, you may get 2-3% return but your pretty much always going to get 2-3%, no losses but no real high returns. Retirement is something you want to start investing in now and for the long term. The more you invest the sooner you can retire. There are a great many people working well into their 70's because these didn't start saving enough in time. I wish I would have started sooner myself. I started when I was in my late 20's and I am still looking at being 67 when I can really retire.

    Check also when starting a retirement account if you can take a loan against the retirement account. So like when I went to buy my house, I took a loan out of my retirement account, no penalty, and I paid myself back with interest. The cool thing really your money stays in there still making more money. Also the interest then goes back into my retirement account as well. Allowing me to save more money for retirement.

  11. #9
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    I can't really imagine a financial planner advising a grad student on $20,000 without there being some way to make a fee from you (whether directly or from commissions), and there's just not enough there to make it worthwhile for either side.

    I think your best with a deposit account, like the 0.75% account you mentioned. It's only going to earn you $150/year, but hey that's $150 you did not otherwise have. $20,000 is a nice cushion to have for a younger person in case of some emergency situation, so keep that locked up tight and not subject to the fluctuations of the stock market (or in an inaccessible retirement account).

    If you build up more savings that you don't need in the foreseeable future, I have done well with simple index funds. They track an index (say S&P 500, but there are tons of different indexes), and since they are not managed, they have very low fees. It's basically set it and forget it. The S&P 500 index has gone up around 20% in the last year. There's been a lot of literature out there lately about index funds and why they've been working well for a lot of regular joe investor types.

    One idea is to put, say, $18,000 in the deposit account at .75%, and open an investment account with $2,000 and stick it in a fund and watch what happens. That would help you learn how the market fluctuates on a daily basis, without betting the whole farm. I use Charles Schwab to manage my accounts online and find it very user friendly with lots of low-fee or no-fee funds to invest in.

    In the long run, over the course of a career, there is just no way to beat the market unless you are actively doing something else with your money. You'll have to get into it some day but now might not be the time to put all your money in it, especially since the finance news is full of buzz about being due for a serious correction a la 2008 where people lost 20% of their money in a matter of days.

  12. #10
    Senior Dog Snowshoe's Avatar
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    Quote Originally Posted by charlie'sdad View Post
    I can't really imagine a financial planner advising a grad student on $20,000 without there being some way to make a fee from you (whether directly or from commissions), and there's just not enough there to make it worthwhile for either side.
    .
    I bolded the key word. You are imagining. Such an account might well be of interest to a newly minted CFP, a friend. The potential client might be the child of a friend or client or be someone assessed as having the potential to grow their account or to network through to gain other clients.

 



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