Investing 5k or so

[Twentysack]

So ive made a little over 7k from playing poker, and i wanted to invest it. I dont want to put it in a stock market. I would like to put it in something like an IRA, but i'm not sure if thats the best idea because i dont know anything about how they work.
P.S. I am 19 and wouldn't mind keeping the money invested for up to 20 years, not in a rush to spend it. Thanks for your time.

[Zygote]

if you can gather 25k, which i'm pretty sure is the minimum investment, there is a really good oppurtinity in a car financing company. It was only open to credited investors but they are wroking to open it to the average investor. Basically it is a 14% return, not guaranteed, but your assets are guaranteed. I personally know the insides of the company and it is a very safe investment, even long term. If you want more details, and think you have that kind of money, let me know.

[parttimepro]

Ummm.... So it's a private company that makes loans for car financing? And it is supposed to return 14% with no risk to capital? And you're recruiting people on an internet bulletin board? Sounds like a scam to me, but please prove me wrong.

[parttimepro]

This is a good intro to investing basics:
http://www.fool.com/school/basics/basics01.htm
It'll tell you about stocks, bonds, money market funds, CDs, etc.

Shorter version: if you have a job where you pay taxes, you should put as much as you can into a Roth IRA. An IRA is not a type of investment, but a form of tax shelter, within which you can invest your money and you won't have to pay taxes on your gains. The downside is that it's difficult to withdraw that money before retirement.

Within that IRA, you should put most/all of your money into a stock index fund. This is a type of investment which buys equal amounts of lots of different stocks. For instance, an S&P 500 fund buys stock in the 500 biggest companies in the US. That way, if one company tanks, you don't get hurt that badly.

Is there a reason you don't want to buy stocks? The conventional wisdom is that stocks are more volatile than other investments, but deliver higher returns over the long run. If you don't need this money for 20+ years, I'd definitely put most of it into stocks.

[Twentysack]

Its not that i wouldn't want to invest in stocks, it's just that i'm not sure if i would know which to invest in and what not. I wont have the time to do research on which stocks are good picks and whatnot. P.S. what are peoples thoughts on Bonds?

[Maddog121]

Like any endeavor, read books and subscribe to publications. Two of my favorites are The Unemotional Investor by Robert Sheard and 24 Lessons for Investment Success by William J. O'Neil. Also, read the Wall Street Journal and use The Investor's Business Daily for research.

[Twentysack]

Anyone disagree?

[parttimepro]

This is the beauty of index funds. The reality is, lots of very smart people try to pick winning stocks as their full time job. And almost no one consistently beats the average return of the market. So, you just buy an index fund, and you are guaranteed to get the average return of the market. Very little research time involved.

Bonds. People tell you you should have a diversified portfolio, which means that you should have different investments whose prices don't correlate with each other. That way you never lose a whole lot of money. Generally bonds are anti-correlated with stocks, which is good for diversification. However, I think this is an extraordinarily bad time to buy bonds. Bond prices go down when bond yields go up. Think about it this way. I buy a bond that will pay 5% interest every year for 30 years. A month later, interest rates go up to 6%, so anyone could buy the same bond and get more money. Except I've locked up my money for 30 years in this lower-paying bond. No one wants that bond any more, so its price goes down.

Bond yields right now are near the lowest they've ever been. They're not likely to go any lower, so prices are not likely to go any higher. But, obviously, I can't be sure of that. I've convinced myself that that is the case, and I don't own any bonds now. If you're less certain, you may want to buy some bonds for diversification's sake. However, you're young enough that you don't really need to diversify that much. If you're going to hold your stocks for 20-40 years, you will almost certainly experience some viscious swings up and down, but come out ahead at the end. Diversifying will reduce these swings but also means that you probably won't be ahead by as much at the end.

[Twentysack]

Thanks for the Info, i will look into the stock market

[gvibes]

[ QUOTE ]
So ive made a little over 7k from playing poker, and i wanted to invest it. I dont want to put it in a stock market. I would like to put it in something like an IRA, but i'm not sure if thats the best idea because i dont know anything about how they work.
P.S. I am 19 and wouldn't mind keeping the money invested for up to 20 years, not in a rush to spend it. Thanks for your time.

[/ QUOTE ]

Look into Roth IRA's. They are funded with after tax earnings, and then the outflows are tax free. They are a long term investment vehicle.

You are limited to $4000 in contributions per year, but last time I checked, if you deposit before the April 15 filing date, you can deposit for this year and last year.

I'm a big fan of index funds (like a previous poster). I prefer Vanguard.

For a real easy portfolio, just dump it all into Target Retirement 2045 (a vanguard fund).

If you want to learn about the math behind indexed investing proponents, look at books like The Four Pillars of Investing , Common Sense on Mutual Funds, and A Random Walk down Wall Street.

For more discussion of Vanguard in particular and indexed investing in general, see the Vanguard Diehards at diehards.org

[Zygote]

i dont really care to prove you wrong. I don't work for the company and have no vested interest in you investing. I'm not advertising on the net and only mentioned it because he asked, how can i invest my money. This company is how i would invest my money, therfore, i gave my advice accordingly. My father owns a wealth management and investment banking firm that owns most of the company is raising funds for it. They first offered this to their investors, then to public credited investors, and soon to anyone credited or not.
Also, I never said your capital was guaranteed, I said your assets are guranteed. It is absolutely not a scam, and the money is as good as guaranteed, IMO.

[wickedgoodtrader]

with you only being 19 I would say put that 5k into an aggressive company that you like.

[TStoneMBD]

if i were you, id learn how to play poker and add that money to your bankroll so that you can progress through limits faster. however, if you do want to invest that money i would agree with the other posters here and put it in an index fund.

[Kenrick]

[ QUOTE ]
This is the beauty of index funds. The reality is, lots of very smart people try to pick winning stocks as their full time job. And almost no one consistently beats the average return of the market. So, you just buy an index fund, and you are guaranteed to get the average return of the market. Very little research time involved.

[/ QUOTE ]

The more evidence I see of this, the more true it is. There are some smart guy fund investors out there who beat the index every year, but they are apparently rare, and the rest of the smart guys apparently are just guessing as good as you could, except they are getting paid ridiculous amounts of money for guessing.

[GeorgeF]

At 19 your most important financial decision is maximizing earned income. Do things that will increase you future earnings, learn a trade or improve your education.

Go to China with the intention of learning Chinese. Learning Arabic might be another possibility that could lead to a cushy government job.

Use the money to learn a usefull trade, contact electrical/plumbing/ect unions to see if they have any apprentiseships.

I do not believe that 'paper' assets are the way to go for a 19 year old. Once you have a big income, then scrunging for ways to invest the excess income you have make sense.

Vanguard.com is a sensible place to park your money.

[VBM]

[ QUOTE ]
This is the beauty of index funds. The reality is, lots of very smart people try to pick winning stocks as their full time job. And almost no one consistently beats the average return of the market. So, you just buy an index fund, and you are guaranteed to get the average return of the market. Very little research time involved.

[/ QUOTE ]

I agree 100% and would also add:
1. the fees are usually much lower for not-actively managed funds.
2. you're not going to run into a fund manager who's got shady deals going on.

[eggzz]

At your age bro, Ive never ever regretting getting a DRIP account with ExxonMObil (Dividend Reinvestment Program).

With XOM there are NO fees to deposit and purchase more shares. You get your dividends automatically reinvested and they will purchase partial shares for you etc... If you deposited $100 they would purchase 1.76 shares for you, etc... you don't need to purchase in round units.

Anyway, it is a solid, solid blue chip company (in fact, the share price is actually up around 20% since the begginning of the year, I'm wondering if it may stay stable for a while because of that, but if you are in it for the long haul, you can't beat a company and program like this.

[gvibes]

[ QUOTE ]
At your age bro, Ive never ever regretting getting a DRIP account with ExxonMObil (Dividend Reinvestment Program).

With XOM there are NO fees to deposit and purchase more shares. You get your dividends automatically reinvested and they will purchase partial shares for you etc... If you deposited $100 they would purchase 1.76 shares for you, etc... you don't need to purchase in round units.

Anyway, it is a solid, solid blue chip company (in fact, the share price is actually up around 20% since the begginning of the year, I'm wondering if it may stay stable for a while because of that, but if you are in it for the long haul, you can't beat a company and program like this.

[/ QUOTE ]

All eggs should not be in one basket. Diversification is the key to a long term investment strategy.

[ QUOTE ]
2. you're not going to run into a fund manager who's got shady deals going on.

[/ QUOTE ]

This isn't quite true. I forget the details, but Spitzer has recently sued some mutual funds for some sort of illegal trading.

[wickedgoodtrader]

[ QUOTE ]

I do not believe that 'paper' assets are the way to go for a 19 year old. Once you have a big income, then scrunging for ways to invest the excess income you have make sense.


[/ QUOTE ]
Well I consider myself a fairly smart person, but very smart business person. I dropped out of college, which I would have had no problem finishing, to run my lawn biz. I think cold hard cash is the best asset you can have, as opposed to being able to speak chinese. Now granted, you can't be an idiot, but it is sooooooo ez to make money with money. The key is to get off to a good start. People skills, a born business attititude, and cash will make you rich.

[Big Limpin']

[ QUOTE ]
Learning Arabic might be another possibility that could lead to a cushy government job.


[/ QUOTE ]

This could just be the biggest growth job market over the next 10-20 years

[TN_POKER_MAN]

Open a Roth IRA and purchase a good U.S. Large Company Stock mutual fund. Find one that has been open for at least 10 years. With the Roth IRA, you can always pull out the original amount you invested (although you'd be foolish to give up the tax free growth of a Roth IRA)