I am in college and have $2,500 to invest in my Roth IRA. How do you suggest I invest this money?

Question

I want to diversify if possible, but I realize with $2,500 it may not be possible to totally diversify without a mutual fund of some sort. I have an account with E*Trade for my roth IRA. I am willing to take some risk, but I don't want to lose my money. Do you have any suggestions, or any specific funds that would be good for me? Thanks

Answer 1

You can invest in a balanced mutual fund, such as the Vanguard STAR fund or a target-date fund.  Remember that you must have earned income to contribute to an IRA.

Answer 2

Mutual funds, mutual funds, mutual funds!  Stick with Morning Star 4 & 5 Star rated funds and you should be in pretty good shape.  Remember...this is for the long term, and if you are in college you are still young and can ride out market fluctuations...such as what we are experiencing right now.  Don't flip out and sell for a loss if you investments start to go down...only rebalance once a year.

PS-good for you for thinking about retirement this early in your life...the sooner you start investing for retirement, the less you will have to save overall.  Check out choosetosave.org and play around with their "Ballpark Calculator" for motivation to save early!

Answer 3

I would recommend putting it in a low cost S&P  500 index fund.  

If you want to invest in individual stocks, I would suggest blue chip stocks with histories of consistent dividend payouts and DRIP them.  Stocks like GE, PFE, JNJ, PG, BMY, KO etc..

Answer 4

Warren Buffet buys for the long term...Mister Buffet is a BILLIONAIRE.

Think like a rich man... after you graduate from college.

The last generation was able to pay/work for their education and graduate ...out of debt.

Not so anymore.

Grads can expect to be saddled with tremendous amounts of college debt for years... then comes a car, an apartment...life.

As much as you wish to invest your money now...you gain

nothing by being in debt.

Use that money to pay off a bill or put it in the bank,because you have not graduated yet...you will need it for books..lab fees...unexpected expenses.

Once you have graduated...learn how to invest..be free of crushing debt.

dg

nyc

Answer 5

You're young you should be somewhat aggressive. I'd suggest 2 or 3 mutual funds. Maybe a growth and income fund, an international fund and an aggressive small cap growth fund. My favorite mutual fund family is T. Rowe Price. Good luck.

Answer 6

You aren't willing to take risk if you can't accept that you may lose money. (Risk is the chance that you will lose money.) There is one critical question you didn't answer. When will you need this money?

If this money is your emergency fund, or your likely to need it unexpectedly in the next 2 or 3 years, you should be investing it at the bank level in high interest savings accounts or GIC's. (In fact that's all any professional will recommend for you, because your little blurb would put you into a very conservative investment category.)

On the other hand, if your in college and just want to get into the stock market, play with it a bit and have some fun... I would recommend you take a look at Ishares.com . These are stocks you can buy on E*trade, but they actually track entire stock markets. They work a lot like a mutual fund, except you get way more diversification for less money, and 80% of the time index funds get higher returns than professionally managed mutual funds. Split your money into 5 portions.

20% into a broad US market fund (ISI-the S&P 1500 index fund)

20% into a US bond fund (AGG)

20% into a global index fund(IOO)

20% into a sector bet (Agriculture- KXY, clean energy -ICLN, canada-ECW) These are areas I feel might do good, you could choose one of them or pick a different sector like healthcare, check out ishares to find more.

20% into the hot sure fire stock of your choice (Choose a company you feel has good long term potential and please no penny stocks. Anything under $10 is going to be way too volatile for you.)

This will make you a portfolio that's diversified globally, and across market sectors. If your serious about wanting to play the market, and gutsy enough to last for the next 3-5 years, you'll do really well. (We are in a bear market and in the short term if thats your focus, your going to lose on 75% of the stocks you pick, so make sure if your jumping into the market now your going long term and you'll make lots of money)

Good luck, and remember that all the markets may drop in value a lot, but your getting a heck of a better deal than someone who bought a year ago and in the long run the markets will recover.