Monday, January 30, 2006

I'm so scared and confused about what to do with my money:

Many people, not just college students, are too worried about what's going to happen with their money if they invest it that they just let it sit in a checking account all their life. This may be okay for people approaching retirement, but it is not okay for college aged people. Being young, you can afford to take risks, and if you make a bad decision, you will still be able to survive. Once you purchase a house, have children or do anything else that requires you to give a major chuck of your check to them, you will need to lower your risks a bit. Now however, its time to take a risk.

Many people read financial information, and it tells you that if you invest you can make tons of money with very little investment as long as you keep it in over a long period of time. Usually this information doesn't tell you what to invest in, or how to do it, in order to make all of this money. So let's use this entry in the blog to tell you what steps you need to take to start investing. You should already have a high interest savings account if you have been reading this blog for a while, almost every post I make, I discuss these accounts. This will be one of the last times I talk about them for a while.

So once you have a good chunk of money in one of these savings accounts (NOT YOUR EMERGENCY ACCOUNT!) it's time to open up a brokerage account. A good chunk of change means at least $500, but preferably $1000. But there are so many brokerage companies, I don't even know where to start you might say. Well hold on a second and keep reading! I would recommend going with ShareBuilder because it is only $4.00 for purchases. It costs more than that to sell, but that is good, because you should not be selling your stock anytime soon. Another good company is Scottrade, which is what I use. It is $7.00 to buy and sell stock with them.

So you have filled out all the forms for the brokerage saying you aren't an illegal person and you have your account open, transfer money into it! Make sure you find out if there is a minimum amount you need to trade at a specific brokerage. Scottrade, for example, requires at least $500 to invest. Don't just jump in and buy the first stock you find, or one that is mentioned in the Wall Street Journal, you need to do some thinking before you give a company your money. Your first investment should be an Index Fund, not a single stock. This makes it much harder for you to screw up and lose all your money get mad at me and never invest in the stock market again. This site has a list of Index Funds available, the site is a little old, but all the funds still exist as far as I have seen. You can open in Index Fund with as little as $1000, if for example, you chose the Kent Index Equity Fund. Pay close attention to the Expense Ratio Column, this tells you how much the Fund Manager charges you to hold a fund with them. Stick with a fund that is listed in the top half under S&P 500 Index.

How do I buy this fund you say? Well go to your brokerage website and go to the trade section. Then select the Mutual Fund option and say how much money you want to invest in it. Remember you need to invest at least the minimum in it in order to invest at all. Mutual funds are only bought and sold at the close of the market, 4 PM EST.

Sit back and watch your money grow. If it doesn't go up immediately, don't worry about it, don't even check it everyday, check it once a week at most.


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