Advice for a college student interested in investment opportunities.
2.5 years is a short period in the stock market. That means there is a significant chance it will be lower in 2.5 years, whereas it is very likely to be higher over a longer time period like 5-10 years. So if you want the funds to grow for sure then consider an online savings account, where you might earn 1-2%.  If you want to do stocks anyway, but don't have any idea what fund to buy, the safest default choice is to buy an index fund that tracks the S&P 500. Vanguard's VFINX is one example. "Put it in a Vanguard fund with 80% VTI and 20% VXUS. That's what you'll let set for 10-15 years. For somebody that is totally new to investing, use ""play money"" in the stock market. It's easy for young people to get dreams of glory and blow it all on some stock tip they've seen on Twitter." Over a period of time most mutual funds do not perform better that an index fund.  Picking and buying individual stock can be a great learning experience.
Just romped a competition my school had, won $100. I'm not participating in this, but the key is to trade options. I made 244% in 2 months off only 3 trades. Won another competition last semester in my investment analysis class as well The best way to invest in college for your kid is to buy an investment property and rent it out. You might think I am really crazy to ask you to you to buy a real estate property when everyone is running from real estate.  Go where others are running away from it. Look where others are not looking. Find out the need for a decent rental property in your city or county and start following the real estate market to understand the real activities including the rental market. I would say follow it for 6 months before jumping in with any investment.  And manage your property with good tenants until your kid is ready to go to college. By the time your kid is ready for college, the property would have been paid off by the rents and you can sell the property to send your kid to college. You should invest in that with the best possible outcome.  Right now that is in yourself.  Your greatest wealth building tool, at this point, is your future income.  As such anything you can do to increase your earnings potential.  For some that might mean getting an engineering degree, for others it might mean starting a small business.  For some it is both obtaining a college degree and learning about business. A secondary thing to learn about would be personal finance. I would hold off on stocks, at this time, until you get your first real job and you have an emergency fund in place. Penny stocks are worthless, forget about them. Bonds have their place, but not at this point in your life.   Saving up for college and obtaining a quality education, debt free, should be your top priority. Saving up for emergencies is a secondary priority, but only after you have more than enough money to fund your college education. You can start thinking about retirement, but you need a career to help fund your savings plan.  Put that off until you have such a career. Investing in stocks, at this juncture, is a bit foolish.  Start a career first.  Any job you take now should be seen as a step towards a larger goal and should not define who you are. For some ideas on investing priority guidelines, see Oversimplify it for me: the correct order of investing. Congratulations on being debt free!  My advice to you is to do what you can to remain debt free. You could certainly invest the money; it will earn much more over the long-term in a stock mutual fund than it would left in a savings account.  However, if you need any of this money in the next few years, it would be a shame if it lost money in the short-term. How much do you need to finish grad school?  Don't invest that money in the stock market, because you will need it over the next few years. Likewise, think about other expenses that are coming up.  Will your car need to be replaced in the next couple of years?  Will you have enough income to meet your living expenses while you are in grad school, or will you need some of this to money to help with that?   Finally, it would be good to keep some extra as an emergency fund, so you can easily pay for any unexpected expenses that come up. If you can make it through grad school debt free, you will be much better off than if you invest all the money but take out student loans in the process. After you've accounted for all of that, whatever is left of the money could definitely be invested.  If your goal is to start a retirement fund, an index mutual fund invested inside a Roth IRA is a great place to start. "I recommend you take a look at this lecture (really, the whole series is enlightening), from Swenson. He identifies 3 sources of returns: diversification, timing and selection. He appears to discard timing and selection as impossible. A student kinda calls him out on this. Diversification reduces risk, not increase returns. It turns out they did time the market, by shorting .com's before the bubble, and real estate just before the downturn. In 1990, Yale started a ""Absolute Return"" unit and allocated like 15 percent to it, mostly by selling US equities, that specializes in these sorts of hedging moves. As for why you might employ managers for specific areas, consider that the expense ratio Wall Street charges you or me still represent a very nice salary when applied to the billions in Yale's portfolio. So they hire internally to reduce expenses, and I'm sure they're kept busy. They also need people to sell off assets to maintain ratios, and figuring out which ones to sell might take specialized knowledge. Finally, in some areas, you functionally cannot invest without management. For example, Yale has a substantial allocation in private equity, and by definition that doesn't trade on the open market. The other thing you should consider is that for all its diversification, Yale lost 25 percent of their portfolio in 2009. For a technique that's supposed to reduce volatility, they seem to have a large range of returns over the past five years." "Funds - especially index funds - are a safe way for beginning investors to get a diversified investment across a lot of the stock market. They are not the perfect investment, but they are better than the majority of mutual funds, and you do not spend a lot of money in fees. Compared to the alternative - buying individual stocks based on what a friend tells you or buying a ""hot"" mutual fund - it's a great choice for a lot of people. If you are willing to do some study, you can do better - quite a bit better - with common stocks. As an individual investor, you have some structural advantages; you can take significant (to you) positions in small-cap companies, while this is not practical for large institutional investors or mutual fund managers.  However, you can also lose a lot of money quickly in individual stocks. It pays to go slow and to your homework, however, and make sure that you are investing, not speculating. I like fool.com as a good place to start, and subscribe to a couple of their newsletters. I will note that investing is not for the faint of heart; to do well, you may need to do the opposite of what everybody else is doing; buying when the market is down and selling when the market is high. A few people mentioned the efficient market hypothesis. There is ample evidence that the market is not efficient; the existence of the .com and mortgage bubbles makes it pretty obvious that the market is often not rationally valued, and a couple of hedge funds profited in the billions from this." Great question and great of you to be paying attention to this.  Right now having the ability to save $2K per year might seem very out of reach.  However with the right career path and by paying attention to personal finance saving 2K per month will become possible sooner than you may think. As a student you are already investing in your future, by building your greatest wealth building tool:  your income.  Right now concentrate on that.  If you have extra money throw it in a boring old savings account and don't touch it other than emergencies.  An emergency is defined as something that will preclude you from completing your education.  It is not paying for the latest xbox game/skateboard/once in a lifetime trip. An important precursor to investing is having an emergency fund that sits in a boring old savings account earning almost nothing.  Think of it as an insurance policy that prevents you from liquidating your investments in case of and emergency.   Emergencies often come during economic downturns.  If you have to liquidate your investment to cover these times then you will lock in negative returns.    Once you are done with school, moved into a place of your own, and have your first job you will have a nice start on your emergency fund.  Then you can start investing.  Doing it in the right order you will be amazed how quickly your savings can accumulate.   I'd be shooting for that 2 million by the time you are 40, not 65. Chances are since college is your next likely step I would recommend saving up for it.  Start building an emergency fund. Recommended $1,000 minimum. To start building your credit rating (when 18) get a low interest low limit credit.  Pay off the balance every month. Starting to build your credit rating now can save you hundreds of thousands when buying a house over the course of paying it off.  ie. cheaper interest rate. As for investing, the sooner you can get started the better.  Acquire preferred/stocks/bonds/REITs/ETFs/etc that pay you to own them (they pay you dividends monthly/quarterly/etc).  Stick with solid stocks that have a history of consistently increasing their dividends over time and that are solid companies. I personally follow the work/advice of Derek Foster.  He's not a professional but he retired at 34.  His first book (Stop working - Here's how you can) is great and recommend it to anyone who is looking to get started. Also check out Ramit Sethi's blog I Will Teach You to be Rich. He focuses on big wins which save you a lot over the long term.  He's also got some great advice for students as well. Best of luck! "The power of compounding interest and returns is an amazing thing.  Start educating yourself about investing, and do it -- there are great Q&As on this site, numerous books (I recommend ""The Intelligent Investor"", tools for small investors (like Sharebuilder.com) and other resources out there to get you started. Your portfolio doesn't need to include every dime you have either. But you do need to develop the discipline to save money -- even if that savings is $20 while you're in school. How you split between cash/deposit account savings and other investment vehicles is a decision that needs to make sense to you." I wouldn't recommend trying to chase a good return on this money.  I'd just put it into a savings account of some sort.  If you can get a better interest rate with an online account, then feel free to do that.  I'd recommend using this money to pay for as much of college out of pocket as you can.  The more student loans you can avoid, the better. As @John Bensin said, trying to make money in the stock market in such a short time is too risky.  For this money, you want to preserve the principal to pay for school, or to pay down your loans when you get out. If you find you have more money than you need to finish paying for school, then I'd suggest setting some aside for an emergency fund, setting aside enough to pay your loans off when you're out of school, saving for future purchases (house, car, etc), and then start investing (maybe for retirement in a Roth IRA or something like that). Most likely economics then. What I'm looking to gain is an understanding of how the market works so that I may take that knowledge and use it to make investments, buy stocks, or possibly start a business.  I have a very large amount of time between my studies for my classes and I think it would be a waste to not learn these tools (to give you a reason for my interest in this). Your attitude is great, but be careful to temper your (awesome) ambition with a dose of reality.  Saving is investing is great, the earlier the better, and seeing retirement at a young age with smooth lots of life's troubles; saving is smart and we all know it. But as a college junior, be honest with yourself.  Don't you want to screw around and play with some of that money?  Your first time with real income, don't you want to blow it on a big TV, vacation, or computer? Budget out those items with realistic costs.  See the pros and cons of spending that money keeping in mind the opportunity cost.  For example, when I was in college, getting a new laptop for $2000 (!) was easily more important to me than retirement.  I don't regret that.  I do regret buying my new truck too soon and borrowing money to do it.  These are judgment calls. Here is the classic recipe: Adjust the numbers or businesses to your personal preferences.  I threw out suggestions so you can research them and get an idea of what to compare. And most importantly of all.  DO NOT GET INTO CREDIT CARD DEBT.  Use credit if you wish, but do not carry a balance. It's really a calculated risk. The most you gain is for the growth to be tax free, the downside (for the excess funds)is the growth is taxed plus the 10% penalty. I'd suggest a simple strategy. Deposit as much as you can, early on, until the balance approaches the current 4 yr college cost. Then, just add enough to match the current cost, i.e. If college costs grow more than the account, just make up that difference. "The raw question is as follows:  ""You will be recommending a purposed portfolio to an investment committee (my class). The committee runs a foundation that has an asset base of $4,000,000. The foundations' dual mandates are to (a) preserve capital and (b) to fund $200,000 worth of scholarships. The foundation has a third objective, which is to grow its asset base over time.""   The rest of the assignment lays out the format and headings for the sections of the presentation.  Thanks, by the way - it's an 8 week accelerated course and I've been out sick for two weeks. I've been trying to teach myself this stuff, including the excel calculations for the past few weeks." "That depends, really. Generally speaking, though - Roth IRAs are THE PLACE for Stock-Market/Mutual-Fund investing. All the off the wall (or, not so off the wall) things like Real Estate investments, or buying up gold, or whatever other ideas you hear from people - they may be good or bad or whatnot. But your Roth IRA is maybe not the best place for that sort of thing.  The whole philosophy behind IRAs is to deliberately set aside money for the future. Anything reasonable will work for this. Explore interesting investment ideas with today's money, not tomorrow's money. That being said - at your age I would go for the riskier options within what's available.  If I were in your situation (and I have been, recently), I would lean toward low-fee mutual funds classified as ""Growth"" funds.  My own personal opinion (THIS IS NOT ADVICE) is that Small Cap International funds are the place to be for young folks. That's a generalized opinion based on my feel for the world, but I don't think I'm personally competent to start making specific stock picks. So, mutual funds makes sense to me in that I can select the fund that generally aligns with my sense of things, and assume that their managers will make reasonably sound decisions within that framework. Of course that assumption has to be backed up with reputation of the specific MF company and the comparative performance of the fund relative to other funds in the same sector. As to the generalized question (how else can you work toward financial stability and independence), outside of your Roth IRA: find ways to boost your earning potential over time, and buy a house before the next bubble (within the next 18 months, I'm GUESSING)."