Money managing/investing advice!

[hembergler]

So I've decided that rather than buying frivolous stuff, I'd rather put my money into an account that'll get me more money than what I have now! Wow! Neat!

Here's my current situation: I have $1,500 in a CD making a mediocre 2.80%, and I have about $900 in an epic 0.00% interest checking account. However, I'm happy with the checking account, because it's the only one available for someone under 18 that I've found (I'm 16). I'd like to keep my checking account balance relatively low to use as spending money, and move the rest into something a little more interesting. By the end of the summer, I'll probably have $1000 more to play with, and if I choose wisely my investments wisely, my parents might chip in. So between the soon-to-be-made money and most of my checking account, I have at least $1600 to use immediately. The CD frees up in six months, which I'll put into something else.

One of my teachers recommended putting most into a Roth IRA, which seems like a very good idea, but I'm not sure if that's the only thing I should be looking at. The compounded interest does sound nice...

My teacher also recommended looking at mutual funds, which are definitely intriguing.

A few things: I have no problem with waiting. I never touch money that I've put away to buy anything, and I hate spending money that isn't put away. It aggravates me to lose the money that I've worked to build up. Also, I'm also not too worried about something high risk. I'm young, if I lose a fair portion of money, well, I won't consider it a straight up loss (it'll still be painful though

). Losing money through investment and through stupid purchases are entirely different in my mind.

So with all of that said, I guess my question is, if you were 16 with a modest amount of money, what would you do (or rather, now that you aren't 16, what would you advise a teenager to do)? I'm definitely interested in a Roth IRA, but that is a long-long term choice (not that I have a problem with that). It seems to me that supplementing it with something advantageous in the short term (5ish years) would also be a good idea, but I really don't know enough yet. And, I don't have all that much money.

Thanks a bundle you guys, I hope this made sense (it's about 4 hours past my bedtime which always leads to sloppy writing (and I completely overuse parenthetical statements as it is (even more so when I'm tired))).

Paul

 

[breakfastchef]

You have a very long investment horizon so you would generally be looking to invest more aggressively. Many things your teacher told you are good. I recommend that you take advantage of free investment advice from the brokerage division of your bank. This is the easiest and least expensive way to evaluate your invewtment goals under the direction of a professional investment person.

Also, read everything you can consume on economics, business and investing; peruse business related websites; paper trade stock, ETFs and mutual funds for fun; and think about your investing goals over the next 5, 10, 20 and 50 years. Good luck.

 

[GreatBug]

Roth IRA is most certainly your best bet for long-term saving, (i.e. for retirement). I'd suggest checking out sharebuilder.com for its ability to automate recurring investments. Tax-free interest is brilliant over decades.

For something that will be available more in the near-term, index funds or mutual funds are alright, or check out prosper.com for high-interest micro loans.

Roth IRAs are such a good idea, at least put some of your money there!

Good Luck!

 

[meat01]

Open an online savings account like ingdirect, hsbcdirect, Emigrant and earn 3% with no minimum balance.

Check Out blogs like

My Money Blog - Personal Finance and Investing Blog

The Simple Dollar

Get Rich Slowly

 

[texashorn91]

How much longer do you have on that CD??? I have a $2k CD working for me right now @ 5.0%. Check the buisness section of the newspaper daily, and you will find many advertisements for CDs. Once you find one with a high rate, take it in to your local bank and see if they will match it. I have done a lot of CDs in the past, and I am young too. They are a very safe way to make a little money. Good Luck!

 

[SiBurning]

At your age, the best investment you can make is in yourself. Three things come to mind.
1. College. That should be your time frame for saving, so unless you're sure you'll have that paid for, I'd stay out of an IRA for now.
2. Learn to invest. Right now is an incredibly tricky time to invest. You can ignore that fact and just learn, but it means that most of what you read will be upside down. It's called a bear market, and things work exactly upside down in a bear (down) market than they do in a bull (up) market.
3. One safe but interesting thing you can do meanwhile is to set up an account with treasury direct. The minimum is $1000. I'd suggest building a ladder in short term notes, say 6 months. Do this while you read and learn. I don't know if you need to be 18 to join. http://www.treasurydirect.gov/

Your first assignment is to find out what a ladder is and how to build one from scratch.

If you're set on doing something more risky, I suggest you read Gerald Loeb's The Battle for Investment Survival. Heck, you should read it even if you want to play it safe. The book is a bit spotty, being a collection of things he wrote over the years, but he gives advice so basic that noone else bothers with, a lot of which is more essential than any tip or strategy. But it and hold onto it forever. While there's plenty of other good books, none of the others really start at the right place.

 

[juniperlater]

Remember an IRA is just like a bucket - nothing in it unless you fill it. By this I mean, it is a tax vehicle. For a Roth you are paying in at your current tax rate (meaning you are putting in money that has already been taxed via income tax) and will be able to remove your money - income on that money and all - tax free. However, if you don't place mutual funds, stocks, gold, whatever the heck else, into that 'bucket' it is just a bucket and has no interest-bearing value.

 

[hembergler]

Thanks for the advice/explanations thus far. I'll take a look at those websites meat01, and continue to do lots of research. Lots of reading to do...