Your Questions About Investing Tips

Lizzie asks…

Tips to a 17 year old for investing.?

I am 17 years old and i am in economics in summer school to get ahead for my senior year.
I was wondering what I should invest in for the future.

For example:
Federal Savings Bonds
Real Estate (when older)
Treasury Bonds

Those are a just a few of them.

Thank y’all.

John answers:

That’s a pretty good breakdown of different investment options. I’ll give you a list of common broad categories and short explanations.

In general though – stocks and real estate are great for long term investing – real estate does require more work and more money to start, but can offer higher returns. Bonds and bank savings are better for specific short term investment goals. Gold and other commodities can be fun, but tend to barely keep up with inflation over the long term. Here are some more details:

1 – Bank savings accounts and certificates of deposit (CD’s)
2 – Bonds and bond mutual funds or exchange traded funds
3 – Stocks and stock mutual funds or exchange traded funds
4 – Real estate
5 – Commodities and collector’s items
6 – Small business ownership
7 – Tax certificates

Bank savings accounts are the easiest to establish and are the safest as your investments are FDIC guaranteed against default. Unfortunately bank savings interest rates tend to be extremely low and over the long term barely keep up with inflation.

Bonds are a step up from bank savings accounts in that they tend to earn higher rates of return. Since they are not FDIC guaranteed, the returns depend on how risky the bonds are. US government bonds are considered extremely safe, while a corporate bond in some shady startup internet company might offer really high returns – but also a good chance that you will not get your money back. If you invest in bonds you should hire a stock broker for advice and/or purchase a diversified bond mutual fund that is appropriate for your objectives.

Stocks and stock mutual funds are a convenient way to invest for the long term. Given a 25 year period or longer, they have also historically proven to generate much higher returns than bank investments or bonds – however make sure you have at least this long to invest – be prepared for a roller coaster ride, and diversify or buy a mutual fund if you don’t know how to pick stocks.

Real estate is a great investment with a lot of potential for high returns. Donald Trump became a billionaire investing in real estate. Buying and renting property however is a business – it requires a lot of money, time, and knowledge to be successful and even then there are risks. Make sure you are prepared to do a lot of work to invest in real estate.

Small business ownership is very similar to real estate ownership as far as risks/rewards go.

Commodities and collector’s items such as gold, stamps, baseball cards, classic cars, etc. Can be a lot of fun. Typically however returns do not exceed inflation over time – this has been the case with gold, although you can get lucky if you buy and sell at the right times. I personally prefer the safety of inflation linked government bonds as an inflation hedge. Also, long term I would prefer the additional returns offered by “productive assets” such as stocks or real estate. Stocks and real estate give you steady growing income as they increase in value over time. Gold just sits there and does not provide any additional cash payments. This is why commodities are considered “non-productive”.

Tax certificates are available at county auctions. They tend to earn high interest but carry a lot of risk and can be quite confusing – a lawyer is recommended.

Paul asks…

at 16, how EXACTLY do i start a portfolio for trading stocks?

are there any books for young people on how to start investing? tips? advice? thank you

John answers:

Here’s a suggested reading list for beginning investors of any age:

“Learn To Earn” , “One Up On Wall Street” or “Beating The Street” by Peter Lynch

“Common Sense On Mutual Funds” by John Bogle

“Buffetlogy”, “The Warren Buffett Way”, or any of the books on Warren Buffett by Hagstrom

And if you have some patience, the best stock market book of all time: “The Intelligent Investor” by Benjamin Graham (get the new edition with notes by Zweig)

Nancy asks…

What where you surprised to see in college/what should Expect? Tips?

I’m still a Highschooler. What are some things to research or talk about with my counselor and parents? What would be some good tips and expectations? What are some things right now I should invest in? Like: community service? Scholarships? Any tips would help as long as they actually would help. Thanks!

John answers:

I’d research what schools offer different programs, and the ability to go from one program to another. I stayed with Architecture for three years, and decided to go to Computer Science. It was easy in my case, but some schools aren’t too keen on the idea.

As far as investing, just save your cash for spending in college. Don’t buy any of the sheet and pillow sets the school gives either (they are 2x the price and definately not worth it). Since you are in high school, you might be applicable for the Coke scholarship – don’t know much about how to enter though.

Each school is different. If you want to be in the middle of nowhere, you can. If you want to be in a city, you can. Just be sure to be careful of fraud (people offering loans not administered by the school, etc.

Also, not sure if you are ‘straightedge’ or not, but if so, be prepared. RA’s and school faculty and staff can only oversee so much, the rest is up to your floor community / school atmosphere.

I’m sure you’ll do well, most people do, and the real world is pretty sweet. Way better than high school for sure 🙂

Robert asks…

Always wanted to invest in stock the market? Any advice or tips?

Totally a babe in the woods here and I’m talking the minimum investment amount allowed.

Thank you all so much for your advice and tips. I’ll definitely be doing some “research and learning” prior to doling out any cash, but the feedback here has been extremely intelligent and useful. It is also good to know that I got realistic viewpoint that that sooner or later, I’m bound to lose a little something which is to be expected when taking embarking upon this type of financial endeavor. Again thanks much everyone!

John answers:

The way things are today i wouldn’t bother.

Daniel asks…

Why is college education going to be so expensive?

My husband and I have been saving for both of our boys. We put away around $250.00 for them every month. I decided to calculate [using an online banking tool] how much we should be saving thinking we’re probably on the safe side. I was very wrong. The financial planner said we should be putting away $700.00 [!] a month if we would like them to be able to continue on to a four year public college. I just couldn’t believe it. How much are you saving for your child’s college fund? I’m beginning to think we’re going to be in a heck of a lot of debt when the time comes. I’m sure we’ll gradually increase our payments but I’m really worried now!

What are your plans for your children’s college education?

Do you have any tips on good investing tips to create larger college funds?

Why does the cost of college education keep rising?

Does it honestly cost 131,330.00 for a child to attend and get a good education?

John answers:

You are doing fine something is better than nothing. You will be able to help them but they will have to work and or get student loans. I know you are trying to avoid that but education goes up everyyear or two just like everything else. They have to pay the rasies for the teachers, bulid new bulidings, etc so it cost more and more. Just do what you are doing and put more away later but don’t forget to save for your retirement that, sad to say, is more important than their college. YOu don’t want to be a finicial burden on them when you get older

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