A good example would be comparing the repayment of a $50,000 loan of 15 years at 7% and investing $100 per month at the same time.
While repaying the loan you invest $100 each month into an investment product that returns a dividend of say $.20 per share each quarter. The investment product is $20 per share. On month one you purchase 5 shares and there is no commission fee for this particular product. In month two and three you purchase a combined total of 10 shares equaling 15 shares. Company returns a dividend of $.20 per share yielding $3.00. The amount of shares you have each quarter builds as a combination of dividend reinvestment and ongoing purchases. If the investment product remains at $20/share and always returns a dividend of $.20, you’ll have a balance of close to 1200 shares after 15 years. Total is $24,000.
Now let’s say you withdraw and are hypothetically taxed at 15% ($3600)
One the day your loan is paid off you have a net of $20,400.
If you would compare to the amount of interest you paid over time obviously you’ll be net negative, but only if you compare it over time. On the day you withdraw, your net assets are $20,400 after taxes.
So now you can compare paying the loan off sooner and investing at different points in time at different amounts to see what would yield the best results. What if you paid the loan off in 8 years and invested $700 a month for 7 years?
The only wrench in the gears is risk. You have no idea what the investment price will be after 15 years or that the investment product will return a dividend every quarter.
I would start with a Money Market account that is FDIC insured. Barclays has a .90% annually and you can move $1000 a month if you choose to a dream account which is .95% interest annually. It's not much, but it's a safe way to get a little experience investing. The funds can be transferred between banks free and take about 4 days.
When you get more cash set aside, say $2,500, then look at mutual funds. Charles Scwab has funds that only require $100 from their brokerage and do fairly well. Other funds require as much as $2,500 to invest. Regardless of strategy, have at least one portfolio that grows and builds a position over time.
If you want to buy stocks you can look at a direct stock purchase program from Computer Share or AM Stock. These are long term investment programs not meant for day trading. If you want to day trade then use a brokerage.
And last, read, read, read and get as much education as possible.
The bare minimum is $500 as most brokers want that much to open an account (some want $1,000). The amount you should invest should be no more than you can afford to lose - if you have $500 and it is earmarked for tuition, you don't invest it since you cannot afford to lose it.
Mutual funds are not going to make you rick - however, because they can diversify their assets much better than the individual investor (much easier to buy a number of different socks when you have $1 billion versus $1,000) they are less volatile than your portfolio would be. Note that most MFs shoot to meet or somewhat beat the market - meaning if you can get 8% return annually, you are doing good. At 8% return, you would need say $1,000,000 invested to make $80,000 a year (and that assumes you want to re-invest nothing)...however, there will be down years that can hurt your performance and income. Don't plan on your investments providing an income now - better to invest for the long term - using these investments for your retirement income.
If you’re a beginner and your looking to make a return on your investment I highly recommend Cedar Finance. Because you'll receive great assistance as a beginner and it’s a really easy way to invest in the stock market. You want to at least invest $500 but I recommend investing a $1,000. If you get started now, you can start making money as soon as tonight! Cedar Finance - http://youtu.be/_MGFlMrR_Pw
At present, invest your surplus money in a Bank. After completion of the course think about various investments like in stock, in Mutual Funds, in Gold, Anyhow, the desire to save at this young age is good one.
pay off/down your debt first - the compounding interest rate effect works just as well on 'investing' as it does on your student debt load, and chances are that the interest rate on your debt is higher than any rate of return in today's marketplace.
mutual funds is not a *bad* choice - not by far - but it all depends on your appetite for risk and duration.
There are many considerations that you will have to think about before this question can be answered. The financial investment options are innumerable and each one is dependent upon your particular circumstances.
It depends what type of investment do you want to do and how much risk do you want to take. If you are looking for high risk and high return then go for stock marekt , for medium risk go for mutual funds and no risks go for fixed term deposit in bank
Start with self-education. Go get a copy of "Investing For Dummies."
Read Jim Cramer's books before you do any thing foolish.
Worry about college first, you need your money for that and paying off debt.
Background: I'm a college students who wants to start investing but don't know where to start. Ever since I was a little kid I love to save money I would save for months at a time and buy things that kids my age normally couldn't themselves (game systems etc.) Even now I'm currently in school but I don't have a job but since saving is routine for me by now I could make what little money I have stretch further then both my cousin and brother who both have a job.
But any who:
Where do I begin I don't much money so firstly I want to know what is like the bare minimum someone could begin to invest even if they aren't looking for a profit in the beginning but just want to get a feel. Also I want to what is a recommended amount someone should start with. My ultimate goal as of now is to just really make enough money where I would be comfortable and not have to work myself to death. Really i want my money to work for me and not the other way around. I don't really care for becoming rich through investing but just earn a decent living. I've talk to many people and read some things and they all say mutual funds is one the best ways to get started but i'm just not sure. So I would like to see what are your opinions and advice on where to start for something who is a complete beginner.
Thank You
You need to be a self starter, if you want to learn about stocks.
