College student lacking investment experience: How to begin investing money?
"If you have wage income that is reported on a W2 form, you can contribute the maximum of your wages, what you can afford, or $5500 in a Roth IRA.   One advantage of this is that the nominal amounts you contribute can always be removed without tax consequences, so a Roth IRA can be a deep emergency fund (i.e., if the choice is $2000 in cash as emergency fund or $2000 in cash in a 2015 Roth IRA contribution, choice 2 gives you more flexibility and optimistic upside at the risk of not being able to draw on interest/gains until you retire or claim losses on your tax return).  If you let April 15 2016 pass by without making a Roth IRA contribution, you lose the 2015 limit forever.  If you are presently a student and partially employed, you are most likely in the lowest marginal tax rate you will be in for decades, which utilizes the Roth tax game effectively.   If you're estimating ""a few hundred"", then what you pick as an investment is going to be less important than making the contributions.  That is, you can pick any mutual fund that strikes your fancy and be prepared to gain or lose, call it $50/year (or pick a single stock and be prepared to lose it all).  At some point, you need to understand your emotions around volatility, and the only tuition for this school is taking a loss and having the presence of mind to examine any panic responses you may have.  No reason not to learn this on ""a few hundred"".  While it's not ideal to have losses in a Roth, ""a few hundred"" is not consequential in the long run.   If you're not prepared at this time in your life for the possibility of losing it all (or will need the money within a year or few, as your edit suggests), keep it in cash and try to reduce your expenses to contribute more.  Can you contribute another $100?  You will have more money at the end of the year than investment choice will likely return."
"Is investing a good idea with a low amount of money? Yes. I'll take the angle that you CAN invest in penny stocks. There's nothing wrong with that. The (oversimplified) suggestion I would make is to answer the question about your risk aversion. This is the four quadrant (e.g.,  http://njaes.rutgers.edu:8080/money/riskquiz/) you are introduced to when you first sit down to open your brokerage (stocks) or employer retirement account (401K). Along with a release of liability in the language of ""past performance is not an indicator..."" (which you will not truly understand until you experience a market crash). The reason I say this is because if you are 100% risk averse, then it is clear which vehicles you want to have in your tool belt; t-bills, CDs, money market, and plain vanilla savings. Absolutely nothing wrong with this. Don't let anyone make you feel otherwise with remarks like ""your money is not working for you sitting there"". It's extremely important to be absolutely honest with yourself in doing this assessment, too. For example, I thought I was a risk taker except when the market tumbled, I reacted exactly how a knee-jerk investor would. Also, I feel it's not easy to know just how honest you are with yourself as we are humans, and not impartial machines. So the recommendation I would give is to make a strong correlation to casino gambling. In other words, conventional advice is to only take ""play money"" to the casino. This because you assume you WILL lose it. Then you can enjoy yourself at the casino knowing this is capital that you are okay throwing in the trash.  I would strongly caution you to only ever invest capital in the stock market that you characterize as play money. I'm convinced financial advisors, fund managers, friends will disagree. Still, I feel this is the only way you will be completely okay when the market fluctuates -- you won't lose sleep. IF you choose this approach, then you can start investing any time. That five drachma you were going to throw away on lottery tickets? transfer it into your Roth IRA. That twenty yen that you were going to ante in your weekly poker night? transfer it into your index fund. You already got past the investors remorse of (losing) that money. IF you truly accept that amount as play money, then you CAN put it into penny stocks. I'll get lots of criticism here. However, I maintain that once you are truly okay with throwing that cash away (like you would drop it into a slot machine), then it's the same whether you lose it one way or in another investment vehicle." "There's several approaches to the stock market. The first thing you need to do is decide which you're going to take. The first is the case of the standard investor saving money for retirement (or some other long-term goal). He already has a job. He's not really interested in another job. He doesn't want to spend thousands of hours doing research. He should buy mutual funds or similar instruments to build diversified holdings all over the world. He's going to have is money invested for years at a time. He won't earn spectacular amazing awesome returns, but he'll earn solid returns. There will be a few years when he loses money, but he'll recover it just by waiting. The second is the case of the day trader. He attempts to understand ultra-short-term movements in stock prices due to news, rumors, and other things which stem from quirks of the market and the people who trade in it. He buys a stock, and when it's up a fraction of a percent half an hour later, sells it. This is very risky, requires a lot of attention and a good amount of money to work with, and you can lose a lot of money too. The modern day-trader also needs to compete with the ""high-frequency trading"" desks of Wall Street firms, with super-optimized computer networks located a block away from the exchange so that they can make orders faster than the guy two blocks away. I don't recommend this approach at all. The third case is the guy who wants to beat the market. He's got long-term aspirations and vision, but he does a lot more research into individual companies, figures out which are worth buying and which are not, and invests accordingly. (This is how Warren Buffett made it big.) You can make it work, but it's like starting a business: it's a ton of work, requires a good amount of money to get going, and you still risk losing lots of it.  The fourth case is the guy who mostly invests in broad market indexes like #1, but has a little money set aside for the stocks he's researched and likes enough to invest in like #3. He's not going to make money like Warren Buffett, but he may get a little bit of an edge on the rest of the market. If he doesn't, and ends up losing money there instead, the rest of his stocks are still chugging along. The last and stupidest way is to treat it all like magic, buying things without understanding them or a clear plan of what you're going to do with them. You risk losing all your money. (You also risk having it stagnate.) Good to see you want to avoid it. :)" Buddy I know how a student investment club works, my school had a great one but thanks for the explanation. Doesn't change the fact that a valuation by some college kids is meaningless, but you wouldn't understand that because you're still a 20 year old kid with no industry experience. I love that you're bragging about your college to someone who has already graduated and made it into the industry, shows you really have no accomplishments to speak of. "Most articles on investing recommend that investors that are just starting out to invest in index stock or bonds funds.  This is the easiest way to get rolling and limit risk by investing in bonds and stocks, and not either one of the asset classes alone.   When you start to look deeper into investing there are so many options: Small Cap, Large Cap, technical analysis, fundamental analysis, option strategies, and on and on.  This can end up being a full time job or chewing into a lot of personal time.  It is a great challenge to learn various investment strategies frankly for the average person that works full time it is a huge effort.  I would recommend also reading ""The Intelligent Asset Allocator"" to get a wider perspective on how asset allocation can help grow a portfolio and reduce risk.  This book covers a simple process." "Okay. Savings-in-a-nutshell. So, take at least year's worth of rent - $30k or so, maybe more for additional expenses. That's your core emergency fund for when you lose your job or total a few cars or something. Keep it in a good savings account, maybe a CD ladder - but the point is it's liquid, and you can get it when you need it in case of emergency. Replenish it immediately after using it. You may lose a little cash to inflation, but you need liquidity to protect you from risk. It is worth it. The rest is long-term savings, probably for retirement, or possibly for a down payment on a home. A blended set of stocks and bonds is appropriate, with stocks storing most of it. If saving for retirement, you may want to put the stocks in a tax-deferred account (if only for the reduced paperwork! egads, stocks generate so much!). Having some money (especially bonds) in something like a Roth IRA or a non-tax-advantaged account is also useful as a backup emergency fund, because you can withdraw it without penalties. Take the money out of stocks gradually when you are approaching the time when you use the money. If it's closer than five years, don't use stocks; your money should be mostly-bonds when you're about to use it. (And not 30-year bonds or anything like that either. Those are sensitive to interest rates in the short term. You should have bonds that mature approximately the same time you're going to use them. Keep an eye on that if you're using bond funds, which continually roll over.) That's basically how any savings goal should work. Retirement is a little special because it's sort of like 20 years' worth of savings goals (so you don't want all your savings in bonds at the beginning), and because you can get fancy tax-deferred accounts, but otherwise it's about the same thing. College savings? Likewise. There are tools available to help you with this. An asset allocation calculator can be found from a variety of sources, including most investment firms. You can use a target-date fund for something this if you'd like automation. There are also a couple things like, say, ""Vanguard LifeStrategy funds"" (from Vanguard) which target other savings goals. You may be able to understand the way these sorts of instruments function more easily than you could other investments. You could do a decent job for yourself by just opening up an account at Vanguard, using their online tool, and pouring your money into the stuff they recommend." "I get the sense that this is a ""the world is unfair; there's no way I can succeed"" question, so let's back up a few steps. Income is the starting point to all of this.  That could be a job (or jobs), or running your own business. From there, you can do four things with your income: Obviously Spend and Give do not provide a monetary return - they give a return in other ways, such as quality of life, helping others, etc. Save gives you reserves for future expenses, but it does not provide growth. So that just leaves Invest.  You seem to be focused on stock market investments, which you are right, take a very long time to grow, although you can get returns of up to 12% depending on how much volatility you're willing to absorb. But there are other ways to invest.  You can invest in yourself by getting a degree or other training to improve your income.  You can invest by starting a business, which can dramatically increase your income (in fact, this is the most common path to ""millionaire"" in the US, and probably in other free markets). You can invest by growing your own existing business.  You can invest in someone else's business. You can invest in real estate, that can provide both value appreciation and rental income.  So yes, ""investment"" is a key aspect of wealth building, but it is not limited to just stock market investment. You can also look at reducing expenses in order to have more money to invest. Also keep in mind that investment with higher returns come with higher risk (both in terms of volatility and risk of complete loss), and that borrowing money to invest is almost always unwise, since the interest paid directly reduces the return without reducing the risk." Many good sources on YouTube that you can find easily once you know what to look for.  Start following the stock market, present value / future value, annuities &amp; perpetuities, bonds, financial ratios, balance sheets and P&amp;L statements, ROI, ROA, ROE, cash flows, net present value and IRR, forecasting, Monte Carlo simulation (heavy on stats but useful in finance), the list goes on.  If you can find a cheap textbook, it'll help with the concepts.  Investopedia is sometimes useful in learning concepts but not really on application.  Khan Academy is a good YouTube channel.  The Intelligent Investor is a good foundational book for investing.  There are several good case studies on Harvard Business Review to practice with.  I've found that case studies are most helpful in learning how to apply concept and think outside the box.  Discover how you can apply it to aspects of your everyday life.  Finance is a great profession to pursue.  Good luck on your studies! "The advice to ""Only invest what you can afford to lose"" is good advice. Most people should have several pots of money: Checking to pay your bills; short term savings; emergency fund; college fund; retirement. When you think about investing that is the funds that have along lead time: college and retirement. It is never the money you need to pay your bills.  Now when somebody is young, the money they have decided to invest can be in riskier investments. You have time to recover. Over time the transition is made to less risky investments because the recovery time is now limited. For example putting all your college savings for your recent high school graduate into the stock market could have devastating consequences. Your hear this advice ""Only invest what you can afford to lose"" because too many people ask about hove to maximize the return on the down payment for their house: Example A, Example B. They want to use vehicles designed for long term investing, for short term purposes. Imagine a 10% correction while you are waiting for closing." "This may be a great idea, or a very bad one, or it may simply not be applicable to you, depending on your personal circumstances and interests. The general idea is to avoid passive investments such as stocks and bonds, because they tend to grow by ""only"" a few percent per year. Instead, invest in things where you will be actively involved in some form. With those, much higher investment returns are common (but also the risk is higher, and you may be tied down and have to limit the traveling you want to do). So here are a few different ways to do that: Get a college degree, but only if you are interested in the field, and it ends up paying you well. If you aren't interested in the field, you won't land the $100k+ jobs later. And if you study early-childhood education, you may love the job, but it won't pay enough to make it a good investment. Of course, it also has to fit with your life plans, but that might be easier than it seems. You want to travel. Have you thought about anthropology, marine biology or archeology? Pick a reputable, hard-to-get-into, academic school rather than a vocation-oriented oe, and make sure that they have at least some research program. That's one way to distinguish between the for-profit schools (who tend to be very expensive and land you in low-paying jobs), and schools that actually lead to a well-paying future. Or if your interest runs more in a different direction: start a business. Your best bet might be to buy a franchise. Many of the fast-food chains, such as McDonalds, will let you buy as long as you have around $300k net worth. Most franchises also require that you are qualified. It may often make sense to buy not just one franchised store, but several in an area. You can increase your income (and your risk) by getting a loan - you can probably buy at least $5 million worth of franchises with your ""seed money"". BTW, I'm only using McDonalds as an example. Well-known fast food franchises used to be money-making machines, but their popularity may well have peaked. There are franchises in all kinds of industries, though. Some tend to be very short-term (there is a franchise based on selling customer's stuff on ebay), while others can be very long-lived (many real-estate brokerages are actually franchises). Do be careful which ones you buy. Some can be a ""license to print money"" while others may fail, and there are some fraudsters in the franchising market, out to separate you from your money. Advantage over investing in stocks and bonds: if you choose well, your return on investment can be much higher. That's generally true for any business that you get personally involved in. If you do well, you may well end up retiring a multimillionaire. Drawback: you will be exposed to considerable risk. The investment will be a major chunk of your net worth, and you may have to put all your eggs in none basket. If your business fails, you may lose everything. A third option (but only if you have a real interest in it!): get a commercial driver's license and buy an 18-wheeler truck. I hear that owner-operators can easily make well over $100k, and that's with having to pay off a bank loan. But if you don't love trucker culture, it is likely not worth doing. Overall, you probably get the idea: the principle is to use your funds as seed money to launch something profitable and secure, as well as enjoyable for you." I think you need to understand the options better before you go around calling anything worthless...  $11k in a 1% savings account gets you just over $100 each year.  Obviously you're not buying Ferraris with your returns but it's $100 more than your checking account will pay you.  And, you're guaranteed to get your money back. I think a CD ladder is a great way to store your emergency fund.  The interest rate on a CD is typically a bit better than a regular savings account, though the money is locked away and while we seem to be on the cusp of a rate increase it might not be the best time to put the money in jail.  Generally there is some sort of fee or lost interest from cashing a CD early.  You're still guaranteed to get your money back. Stock trading is probably a terrible idea.  If you want some market exposure I'd take half of the money and buy a low expense S&P ETF, I wouldn't put my whole savings if I were you (or if I were me).  Many large brokers have an S&P ETF option that you can generally buy with no commission and no loads.  Vanguard is a great option VOO, Schwab has an S&P mutual fund SWPPX, and there are others.  Actively trading individual stocks is a great way to let commissions and fees erode your account.  There are some startup alternatives with lower fees, but personally I would stay away from individual stock picking unless you are in school for Finance and have some interest in paying attention and you're ready to possibly never see the money again.  You're not guaranteed to get your money back. There are also money market accounts.  These will typically pay some interest based on exposing your funds to some risk.  It can be a bit better return than a savings account, but I probably wouldn't bother. An IRA (ROTH and Traditional) is just an account wrapper that offers certain tax benefits while placing certain restrictions on the use of some or all of the money until you reach retirement age.  As a college student you should probably be more concerned about an emergency fund or traveling than retirement savings, though some here may disagree with me.  With your IRA you can buy CDs or annuities, or stocks and ETFs or any other kind of security.  Depending on what you buy inside the IRA, you might not be guaranteed to get your money back. First you need to figure out what you'd like to use the money for.  Then, you need to determine when you'd need the money for that use.  Then, you need to determine if you can sleep at night while your stock account fluctuates a few percent each day.  If you can't, or you don't have answers for these questions, a savings account is a really low friction/low risk place store money and combat inflation while you come up with answers for those questions. The most important thing is to keep in mind the deadline. If you want to have it count for 2016, you need to open the account and transfer the funds by tax day. Don't wait until the last day to do it, or you could run out of time. Setting up the initial account, and them verifying your information and transferring the money could take a few days. First decide how much of a lump sum you want to invest  initially. This will determine some of your options because the mutual fund will have a minimum initial investment. Many of the funds will allow subsequent investments to be smaller.  The beauty of a IRA or Roth IRA is that if the fund you want is out of reach for this initial investment in a few years you can transfer the money into another fund or even another fund family without having to worry about tax issues. Now decide on your risk level and you time horizon. Because you said you are student and you want a Roth IRA, it is assumed that you will not need this money for 4+ decades; so you can and should be willing to be a little more risky. As NathanL said an index fund is a great idea. Many also advise an aged based fund. My kids found that when they made their initial investments the age based funds were the only one with a low enough initial investment for their first few years.  Then pick a fund family based on the general low fees, and a large mix of options. The best thing is that in a few years as you have more money and more options, you can adjust your choices. "The statement ""Finance is something all adults need to deal with but almost nobody learns in school."" hurts me. However I have to disagree, as a finance student, I feel like everyone around me is sound in finance and competition in the finance market is so stiff that I have a hard time even finding a paid internship right now. I think its all about perspective from your circumstances, but back to the question. Personally, I feel that there is no one-size-fits-all financial planning rules. It is very subjective and is absolutely up to an individual regarding his financial goals.  The number 1 rule I have of my own is - Do not ever spend what I do not have. Your reflected point is ""Always pay off your credit card at the end of each month."", to which I ask, why not spend out of your savings? plan your grocery monies, necessary monthly expenditures, before spending on your ""wants"" should you have any leftovers. That way, you would not even have to pay credit every month because you don't owe any. Secondly, when you can get the above in check, then you start thinking about saving for the rainy days (i.e. Emergency fund). This is absolutely according to each individual's circumstance and could be regarded as say - 6 months * monthly income. Start saving a portion of your monthly income until you have set up a strong emergency fund you think you will require. After you have done than, and only after, should you start thinking about investments. Personally, health > wealth any time you ask. I always advise my friends/family to secure a minimum health insurance before venturing into investments for returns. You can choose not to and start investing straight away, but should any adverse health conditions hit you, all your returns would be wiped out into paying for treatments unless you are earning disgusting amounts in investment returns. This risk increases when you are handling the bills of your family. When you stick your money into an index ETF, the most powerful tool as a retail investor would be dollar-cost-averaging and I strongly recommend you read up on it. Also, because I am not from the western part of the world, I do not have the cultural mindset that I have to move out and get into a world of debt to live on my own when I reached 18. I have to say I could not be more glad that the culture does not exist in Asian countries. I find that there is absolutely nothing wrong with living with your parents and I still am at age 24. The pressure that culture puts on teenagers is uncalled for and there are no obvious benefits to it, only unmanageable mortgage/rent payments arise from it with the entry level pay that a normal 18 year old could get." "Consultant, I commend you for thinking about your financial future at such an early age. Warren Buffet, arguably the most successful investor ever lived, and the best known student of Ben Graham has a very simple advice for non-professional investors:  ""Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard’s.)"" This quote is from his 2013 letter to shareholders. Source: http://www.berkshirehathaway.com/letters/2013ltr.pdf Buffet's annual letters to shareholders are the wealth of useful and practical wisdom for building one's financial future. The logic behind his advice is that most investors cannot consistently pick stock ""winners"", additionally, they are not able to predict timing of the market; hence, one has to simply stay in the market, and win over in the long run." "First, I applaud you for caring.  Most people don't!  In fact, I was in that category.   You bring up several issues and I'll try to address them separately. (1) Getting a financial planner to talk with you.  I had the same experience!  My belief is that they don't want to admit that they don't know how things work. I even asked if I could pay them an hourly fee to ask questions and review stocks with them.  Most declined.  You'll find that very few people actually take the time to get trained to evaluate stocks and the stock market as a whole.  (See later Investools.com). After looking, however, I did find people who would spend an hour or two with me when we met once a quarter to review my ""portfolio""/investments.  I later found training that companies offered.  I would attend any free training I could get because they actually wanted to spend time and talk and teach investors. Bottom line is: Talking to their clients is the job of a financial planner.  If he (or she) is not willing to take this time, it is in your best interest to find someone who will spend that time. (2) Learning about investing! I'm not affiliated with anyone.  I'm a software developer and I do my own trading/investments.  The opinions I share are my own. When I was 20 years away from retirement, I started learning about the stock market so that I would know how it worked before I retired so that (a) I could influence a change if one was needed, and (b) so I wouldn't have to blindly accept the advice of the ""experts"" even when the stock market is crashing. I have used Investools.com, and TDAmeritrade's Think-or-Swim platform.  I've learned a tremendous amount from the Investools training.  I recommend them.  But don't expect to learn how to get rich from them or any training you take. The TDA Think-or-swim platform I highly recommend BECAUSE it has a feature called ""Paper Money"".  It lets you trade using the real market but with play money.  I highly recommend ANY platform that you can use to trade IN PAPER money! The think-or-swim platform would allow you to invest $30,000 in paper money (you can have as much as you want) into any stock.  This would let you see if you can make more money than your current investment advisor.  You could invest $10K in one SPY, $10K in DIA and $10K in IWM (these are symbols for the S&P 500, Dow 30, and Small Cap stocks).  This is just an example, I'm not suggesting any investment advise! It's important that you actually do this not just write down on a piece of paper or Excel spreadsheet what you were going to do because it's common to ""cheat"" and change the dates to meet your needs.  I have found it incredibly helpful to understand how the market works by trying to do my own paper and now real money investing. I was and you will be surprised to find that many trades lose money during the initial start part of the trade because it's very difficult to buy at the exact right time. An important part of managing your own investments is learning to trade with rules and not get ""emotionally involved"" in your trades. (3) Return on investment. You were not happy with $12 return.  Low returns are a byproduct of the way most investment firms (financial planners) take (diversification).  They diversify to take a ""hands off"" approach toward investment because that approach has been the only approach that they have found that works relatively well in all market conditions.  It's not (necessarily) a bad approach.  It avoids large losses in down markets (most riskier approaches lose more than the market).  The downside is it also avoids the high returns.  If the market goes up 15% the investment might only go up 5%. 30K is enough to give to multiple investment firms a try.  I gave two different firms $25K each to see how they would invest.  The direction was to accept LOTS of risk (with the potential for large losses or large gains). In a year that the market did very well, one lost money, and one made a small gain.  It was a learning experience.  I, now, have taken the money back and invest it myself. NOTE: I would be happy with a guy who made me 10-15% year over year (in good times and bad) and didn't talk with me, but I haven't found someone who can do that. :-) NOTE 2: Don't believe what you hear from the news about the stock market being up 5% year to date.  Do your own analysis. NOTE 3: Investing in ""the market"" (S&P 500 for example) is a great way to go if you're just starting.  Few investment firms can beat ""the market"" although many try to do so.  I too have found it's easier to do that than other approaches I've learned.  So, it might be a good long term approach as well. Best wishes to you in your learning about the market and desires to make money with your money.  That is what is all about." Investments earn income relative to the principal amounts invested. If you do not have much to invest, then the only way to 'get rich' by investing is to take gambles. And those gambles are more likely to fail than succeed. The simplest way for someone without a high amount of 'capital' [funds available to invest] to build wealth, is to work more, and invest in yourself. Go to school, but only for proven career paths. Take self-study courses. Learn and expand your career opportunities.  Only once you are stable financially, have minimal debt [or, understand and respect the debt you plan to pay down slowly, which some people choose to do with school and house debt], and are able to begin contributing regularly to investment plans, can you put your financial focus on investing. Until then, any investment gains would pale in comparison to gains from building your career.