Investing the first $5,000

[Anonymous]

What would you recommend for a 20 year old as a first investment? $2,500 is in a brokerage account but assume this would be needed in the 5-10 year time frame. And $2500 is in a Roth. Thanks.

[Anonymous]

I would probably go with an S&P 500 index fund or ETF.

[Anonymous]

Thanks I had the same idea, but I felt that the investment should be different for each account because the length of time for investing is so different (5-10 years vs 30-40yrs)?

[Anonymous]

It's only $5000 -- you can't diversify much with a small amount. I'd take PP's advice and do the S&P 500 or a managed fund that has good returns and mid-to-high risks (since you're only 20).

[Anonymous]

For the Roth you can go with fund like the fidelity freedom 2040 or whatever time frame you want. They manage the risk to suit your time frame. Index fund is fine for the other one. Not sure you need it in a brokerage account, I'd just open a vanguard index fund account.

[Anonymous]

I just want to say one word to you. One word.

Plastics.

[Anonymous]

Anonymous wrote:For the Roth you can go with fund like the fidelity freedom 2040 or whatever time frame you want. They manage the risk to suit your time frame. Index fund is fine for the other one. Not sure you need it in a brokerage account, I'd just open a vanguard index fund account.

I'd look at the fees for the Fidelity Freedom, though -- Fidelity tends to have higher fees and $2500 can get eaten up if there's bad returns and high fees. I'd recommend Vanguard for such a small amount, just starting out. Then switch to Fidelity once more money is involved and the higher management fees maybe make sense.

[Anonymous]

I-bonds, until they have at least three months of living expenses tucked away- more if saving for masters or mba. Followed by Roth IRA at Vanguard (VFIFX would be a great choice for a twenty year old), followed by 401k until it's maxed out. Make the most of your tax advantaged space while you have it.

The most important thing to do is: Write down your plan, and don't change it the first time the WSJ shouts "Bull!" or IBD shouts "Bear!". Staying the course is how you make the money grow.

[Anonymous]

Not the OP but I am in the same situation. I know nothing about money. How do I go about opening one of these accounts?

[Anonymous]

Vanguard Target retirement funds have a $1000 minimum and flavours from 60% bonds to 90% stocks for every risk tolerance level. The important thing is to max out your tax sheltered options before doing anything in taxable.

I'm the poster who keeps going on about I-bonds. They're guaranteed to keep up with inflation and if you use them for college the interest isn't taxed. You can't redeem them for a year past purchase, but they otherwise make excellent vehicles for emergency savings.

[Anonymous]

Anonymous wrote:Not the OP but I am in the same situation. I know nothing about money. How do I go about opening one of these accounts?

Just go on the Vanguard or Fidelity website.

[Anonymous]

Hookers and blow, Or mastercard

[Anonymous]

What's with the plastics comment?

[Anonymous]

Anonymous wrote:What's with the plastics comment?

it's a classic quote from a classic movie

[Anonymous]

As many have said before, Vanguard is usually the best because their management fees are the lowest. They have an ETF symbol VT which is a truly diversified global fund that pays an annual dividend of about 2.5%. That's not a spectacular yield but it is paid monthly so if you reinvest your dividends you'll have the compounding effect working in your behalf. Also the management fee could hardly be any lower at .20% annually. That's one fifth of one percent annually. Management fees don't get any lower than .20%.

Welcome to Capitalism!!! I am certain you are going to enjoy it here.