How to actively invest your savings?

Discussion in 'Business, Careers & Education' started by BlacKidLA, Mar 22, 2012.

  1. BlacKidLA

    BlacKidLA Senior member

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    Out of college, entry level position so I'm not making much. I am tucking $600 away a month into a savings account but I was wondering if there is a way I could increase my returns by doing something active with my money.

    I do not mind taking risks or spending a couple of hours a day before/after work to manage the money.

    I'm not trying to do this so that I can "ball on the weekends" but simply to have a larger safety net and potentially be able to start a business in a few years.

    Any suggestions are welcome. Thank you in advance! [​IMG]

    P.S: I've purchased a few books: "Personal Finance for Dummies", "Investing for Dummies", and "Rich Dad, Poor Dad" all of which I have just started to read. Are these good books to follow?
     


  2. deepitm

    deepitm Senior member

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    Meh, "Rich Dad Poor Dad" really just preaches the benefits of ownership of assets that offer cashflows (small biz, rentable real estate). Obviously, that has been a poor model for the last 5 years.

    The others are a good place to start. In addition, The Intelligent Investor by Benjamin Graham, Common Stocks and Uncommon Profits by Fisher, and some people like Greenblatt but I haven't read any of his stuff.

    Just reading Bloomberg.com everyday will be a good way to get you acclimated to terminology and the general lay of the land. It will also help you stay informed with what is moving markets.

    For people that don't know what they're doing, I recommend they dollar cost average (purchase the same $ amt of stock on a regularly defined interval) into a major index ETF (like SPY, IWM, QQQ, etc.). If your employer has a 401k and a match, then max that out. That's free money.

    If you aren't making too much money yet (sub ~85k, IIRC), you should look into opening an IRA which you can actively manage. There are tax benefits for funding your own IRA if you aren't above the income threshold (which is higher if you're married).

    Also, always do your own homework regardless of the recommendations of others.
     
    Last edited: Mar 22, 2012


  3. otc

    otc Senior member

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    Try reading "I Will Teach You to Be Rich"

    The kindle version is on sale for like $2 and even if you can only read it on your computer or phone, that's probably good enough since its a to-the-point book on how young people should manage their money...(though the dead-tree version is $15 or so otherwise).

    Like any advice writer, not everything he says is going to be the best for you, but he's got a pretty solid, no nonsense guide to what to do with your money in your 20s.
     


  4. CYstyle

    CYstyle Senior member

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    Lol type in rich dad poor dad scam in google.

    Anyhow google DRIPS and take a look at that.

    edit: note i have no experience in drips, just something a broker at a local branch was talking about, didn't listen or research really at all
     
    Last edited: Mar 22, 2012


  5. asdf

    asdf Senior member

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    "A Random Walk Down Wall Street" should be required reading.
     


  6. norcaltransplant

    norcaltransplant Senior member

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    As stated before, "Rich Dad, Poor Dad" was a racket.
    "A Random Walk" and "The Intelligent Investor" were my first two books that helped guide my own investing strategy. I've since realized that I do not have the time nor intellect to trade individual stocks, let alone options, so I've opted to spend more time reading about tax efficiency/decreasing my tax liability. In your situation, I would spend less than concentrating on increasing the yield of $600/month in short term savings, and exert more of your energies on advancing your career.

    For the ~$7200/annum that you are saving, I would first exam your debt situation. If you carry any credit card debt, I would pay it off ASAP. Secondly, as a recent college grad, student loans should be around 6.8%. You still qualify for the interest rate deduction but that still settles at >4.5%. A GUARANTEED 4.5% return is tough to find in this market. If you prefer to maintain the liquidity, and want to open a business in the near future (<3) years, I would not advise taking on more risk. IBonds, with their 10k annual limit, might be a decent option since you live in a high tax state (California). Ibonds are exempt from the state and local income tax, but must be held for a minimum of 1 year before redeeming.
     
    Last edited: Mar 25, 2012


  7. BlacKidLA

    BlacKidLA Senior member

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    Thanks for all of the help guys! I'm already halfway through "I Will Teach You..." and will read the others afterwards.

    I have no credit card debt (although I do have a couple of cards), and I do not have any student loans that I need to pay off.
     


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