Investment question

[Goodnews]

I have grinded enough winnings to want to invest. I am currently a student and will rack up about 30k of student debt in roughly two years after I graduate. Right now there is no interest on my student loans (as long as I am a full time student).

Of this 30k, roughly 18k is left for me to invest. What should I be looking for in terms of investments with this money? Please note that my first priority is to pay this laon off asap, and I can generate my tuition and book money over the course of the year, so its not like I need it now.

note that my risk tolerance is on the lower side of moderate.

[adios]

I notice you're from Canada but I doubt if the following advice would make a difference though. I would stay in something like 1 month CDs as surprising as that may seem. The Fed is tightening and short term interest rates will continue to rise. I saw in todays WSJ that you can get something like 4.05% on 1 month CDs. Might have to shop around a little to get it. But what I'm thinking is that as short term rates rise just go along with it. Given your time horizon and risk tolerance (at least what I perceive them to be) I wouldn't go near stocks or longer duration bonds. Why even go out 2 years when short term interest rates are on the rise?

[buffett]

what adios said

[Goodnews]

please explain the CDs and such as I am interested in how to obtain them. sorry if i am asking you to hold my hand but I really don't want to pay a 'tuition' in these matters (like i did with poker).

[DesertCat]

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please explain the CDs and such as I am interested in how to obtain them. sorry if i am asking you to hold my hand but I really don't want to pay a 'tuition' in these matters (like i did with poker).

[/ QUOTE ]

Banks sell CD's. They are a way of locking up your money for a lmited time (1 month to years) in exchange for a higher interest rate than you can get from a money market account.

Go to bankrate.com. It should show you where the best CD and money market rates are so you can compare options. Right now it looks like Andy Beal is offering a nice deal (3.75%) down in texas for one month CDs:)

And I disagree very slightly with some of the advice here. You should keep your money safe and short term. But one year CD's offer about a 1% higher interest rate than one month. Beyond that (i.e. 2 year, 3 year) the extra interest is minor. So you should consider a "ladder" of one year and less CD's.

A ladder is buying a group of CDs of different durations, so that you have them regularly maturing and can "roll them over" into longer term CDs.

An example in this case, you could buy a one month, a two month, a three month, a six month, a nine month, and a one year CD to make up your ladder. The one month CD pays 3.7%, the one year 4.7% and the others in between, pay something, well, in between.

One month from now, your first CD matures, and you replace it with a one year CD. Two months from now you do the same with your 2 month CD. Three months ditto with your three month CD, until at the end of the year all your CD's are one year CD's with different end dates.
Essentially you are increasing your yield to the 1 year level, but always have a new CD maturing every 1-3 months for emergencies or to be re-invested. In the end you have much of the financial flexibility of short term CD's, but the yield of a longer CD.

[Sniper]

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Of this 30k, roughly 18k is left for me to invest. What should I be looking for in terms of investments with this money? Please note that my first priority is to pay this laon off asap, and I can generate my tuition and book money over the course of the year, so its not like I need it now.

[/ QUOTE ]

I will approach this from a slightly different perspective, and ask... why is your first priority to pay off the loan asap???

It is likely that you student loan is at a very low interest rate... and that you could perpetually outperform that rate by even conservative investing. In general, you would want to pay thoe types of loans off as slowly as possible.

CD's are not a bad choice especially considering the low risk...i think one of the best equities you can put yourself in is google (goog)as long as they can continue its revenue growth....if you look at what the stock is trading at (89 times earnings), which is high compared to the avg. trading mulitple of stocks in the s&p 500..but if you look at it against its earnings in two, three, four years, it's a bargain...that is why sergey brin and larry page (the two founders of google) are growing their money the fastest out of anyone in the world..currently worth $12 bil or so, they are expected to become worth $20-$30 bil in the next couple years....and how are they making all that money, google's stock...i am only a 20 year old college sophomore and i have and continue to put every dollar i make in that stock...actually, i just lied b/c i picked up SIRI at $5.90/share and am riding that until after they blow away earnings est. for the fourth quarter b/c mel karmazin is an f-ing brilliant ceo...after that, i jump back into google until they fail to grow theyre revenue...just my two cents...

[CD56]

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Right now there is no interest on my student loans (as long as I am a full time student).

Please note that my first priority is to pay this laon off asap,


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i think its important for you to realize that simply being in debt is not a bad thing

if you have no interest on your loans and you pay them off immediately you are actually losing money that could have been earned in interest

as long as the rate you can earn by investing is greater than the rate you are paying, only pay the minumum on your loans

bad advice

[DesertCat]

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i think one of the best equities you can put yourself in is google (goog)as long as they can continue its revenue growth....if you look at what the stock is trading at (89 times earnings), which is high compared to the avg. trading mulitple of stocks in the s&p 500..but if you look at it against its earnings in two, three, four years, it's a bargain...that is why sergey brin and larry page (the two founders of google) are growing their money the fastest out of anyone in the world..currently worth $12 bil or so, they are expected to become worth $20-$30 bil in the next couple years....and how are they making all that money, google's stock...

[/ QUOTE ]

Horrible, horrible, advice. First, it's earnings in two, three, and four years haven't happened, so it's hard to say it's a bargain, esp. when those earnings are at risk. I prefer to take my google advice from Sergey Brin and Larry Page, who think GOOG is over priced and at risk. You know this because they sold a big chunk of the company in a secondary. They are giving up a big chunk of that future fortune to have more cash in the company now.

Few if any equity investments fits the risk profile the OP described. If the OP decides to keep the loans open, and wants to invest over longer periods, he'd be best off with an index fund.

[Ed Miller]

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CD's are not a bad choice especially considering the low risk...i think one of the best equities you can put yourself in is google (goog)as long as they can continue its revenue growth....if you look at what the stock is trading at (89 times earnings), which is high compared to the avg. trading mulitple of stocks in the s&p 500..but if you look at it against its earnings in two, three, four years, it's a bargain...that is why sergey brin and larry page (the two founders of google) are growing their money the fastest out of anyone in the world..currently worth $12 bil or so, they are expected to become worth $20-$30 bil in the next couple years....and how are they making all that money, google's stock...i am only a 20 year old college sophomore and i have and continue to put every dollar i make in that stock...actually, i just lied b/c i picked up SIRI at $5.90/share and am riding that until after they blow away earnings est. for the fourth quarter b/c mel karmazin is an f-ing brilliant ceo...after that, i jump back into google until they fail to grow theyre revenue...just my two cents...

[/ QUOTE ]

I'm going to be honest with you, I really think you should reconsider your plan to put every dollar you have in GOOG and SIRI. Being 20, you may be a little young to remember 1998-2001... but you should definitely read up on that period before you put another cent into either of these stocks.

actually ed, when i was 13 and 15, i lost everything had...granted, i lost $2,000 when i was 13 and $3,000 when i was 15, i was the only person i know that young trading in the market.....october 1998 was probably the worst month ever b/c i got killed int he market when i was 13...so i actually remember those days.....i bought companies with no earnings b/c i didn't really know what i was doing.....but unlike those days (where the market is much more sensitive to those sorts of stocks), google has earnings and sirius will, mostly likely in Q4 06 or maybe Q1 07...and sirius has this real bright guy running that company...his name is mel karmazin and he has been brilliant at managing its cash....it's time to start actually looking at the financials of a company before making rash judgement calls

[Ed Miller]

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it's time to start actually looking at the financials of a company before making rash judgement calls

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Ok, I just looked at the financials. SIRI has lost money every year for the last decade. And it's basically losing more and more each year. I'm not saying that they won't turn it around and make a business out of it. Maybe they will. MAYBE they will. But to be so certain of it as you are strikes me as a bit... hopeful.

ed ed ed ed ed ed ed....i know sirius hasn't made any money.....they had to launch satellites into space, which is very expensive....as previously stated, they will mostly likely break profit in late 06, early 07.....that is why i mentioned mel karmazin and his brilliance managing its cash flow....please become informed...that's all i ask

[Ed Miller]

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ed ed ed ed ed ed ed....i know sirius hasn't made any money.....they had to launch satellites into space, which is very expensive....as previously stated, they will mostly likely break profit in late 06, early 07.....that is why i mentioned mel karmazin and his brilliance managing its cash flow....please become informed...that's all i ask

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*shrug* I hope your plan comes to fruition and SIRI makes a lot of money. My only point is that you are taking FUTURE earnings for granted, which is, IMO a dangerous thing to do.

[DesertCat]

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ed ed ed ed ed ed ed....i know sirius hasn't made any money.....they had to launch satellites into space, which is very expensive....as previously stated, they will mostly likely break profit in late 06, early 07.....that is why i mentioned mel karmazin and his brilliance managing its cash flow....please become informed...that's all i ask

[/ QUOTE ]

[ QUOTE ]
"Our conclusion is that when a management with a reputation for brilliance tackles a business with a reputation for poor fundamental economics, it's the reputation of the business that stays intact" Warren Buffett

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I'm a Sirius owner. I also think Mel is very smart (but not brilliant, or he wouldn't have got booted from Viacom). But Sirius is in second place in a business that requires mass to survive. With the arrival of Howard I think they might get to critical mass in time to save the company, but it's very risky. And XM is the leader, which means it has the economies of scale Sirius doesn't.

Lastly, Sirius is trading for more than 50x REVENUES (TTM). Assume they double those revenues every year for the next three years. That's almost $1.5B in revenues in 2008. And let's say Mel produces a wonderful net margin of 20%, after taxes even. Today's price would translate into a 33 PE (assuming you haven't been massively diluted as the co. desperately raises more money). And with over 10M in customers at that point, growth will have to be slowing rapidly (esp. since XM will have 20M or so). So the stock price might be no higher than it is today in the best "dream scenario".

Sirius might be worth taking a gamble but at today's prices you ain't getting compensated for it.

[Sniper]

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I'm a Sirius owner.

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Just for clarification... are you saying you own the sirius sat radio device, or the stock?

Given your analysis, I can't see that you see a margin of safety in owning the stock, so I'm going to presume you meant the first /images/graemlins/smile.gif

[DesertCat]

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I'm a Sirius owner.

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Just for clarification... are you saying you own the sirius sat radio device, or the stock?

Given your analysis, I can't see that you see a margin of safety in owning the stock, so I'm going to presume you meant the first /images/graemlins/smile.gif

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The radio. My wife's a Stern junkie...