Author Topic: Low Income Investing  (Read 12977 times)

kellmahon

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Low Income Investing
« on: April 18, 2013, 07:49:14 AM »
Hello! This is my first time posting so i hope it goes well.

I have been searching the MMM blog for a while to find the best means of investing for someone with a low income. I am a college student working part time and can not afford the $3000 Minimum vanguard nonsense. I really want to start investing but I do not feel educated enough to go out on my own. To be honest, I don't even know how to go about purchasing stocks/bonds. Does anyone know the most affordable method of doing this? Or somewhere i can learn how?

I have a couple hundred dollars  of expendable income that I am looking to invest. Any Suggestions?

Or even a previous forum I can checkout?

brewer12345

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Re: Low Income Investing
« Reply #1 on: April 18, 2013, 08:31:14 AM »
I'd start with a balanced fund.  Vanguard STAR fund VGSTX has a $1,000 minimum.  Slightly higher expense ratio Schwab Balanced SWBGX has a $100 minimum.  Either one would serve as an all-in-one investment vehicle until your balance gets big enough for anything more complicated.

Another Reader

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Re: Low Income Investing
« Reply #2 on: April 18, 2013, 08:37:14 AM »
Schwab also has an S&P 500 fund and a total market fund with the same minimums.  They also have bricks and mortar offices where you can attend beginning investment seminars and people at the offices of whom you can ask questions.

the fixer

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Re: Low Income Investing
« Reply #3 on: April 18, 2013, 08:53:16 AM »
I think you can buy ETFs with no minimum other than the share price (but I've never traded stocks or ETFs so I'm not sure)

AJ

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Re: Low Income Investing
« Reply #4 on: April 18, 2013, 09:05:58 AM »
Try Betterment. I used them for a while until I had the $3k minimum for Vanguard and liked it.

sheepstache

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Re: Low Income Investing
« Reply #5 on: April 18, 2013, 09:17:47 AM »
Hello! This is my first time posting so i hope it goes well.

I have been searching the MMM blog for a while to find the best means of investing for someone with a low income. I am a college student working part time and can not afford the $3000 Minimum vanguard nonsense. I really want to start investing but I do not feel educated enough to go out on my own. To be honest, I don't even know how to go about purchasing stocks/bonds. Does anyone know the most affordable method of doing this? Or somewhere i can learn how?

I have a couple hundred dollars  of expendable income that I am looking to invest. Any Suggestions?

Or even a previous forum I can checkout?

Some of your wording makes  me  a little nervous.  If you are not educated enough to "go out on your own," then that is the problem and not the fact that you have low income.  One thing you would probably decide with more education is that with such a small portfolio as you would initially have, you should not be pursuing individual stocks and bonds because you will not be diversified enough.  It makes me want to ask you about the rest of your financial situation to consider whether you should be investing at all.  What is your goal?  What is your timeframe?  How stable is your income?  What other assets and resources do you have?  What is your level of comfort with risk, but then we get into your needing to be more educated about how to assess risk.  Etc.  Maybe start here: http://www.bogleheads.org/wiki/Main_Page  Or other general reading around the web.  If you encounter terms and concepts you aren't familiar with, I like Investopedia for explanations.   

Reepekg

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Re: Low Income Investing
« Reply #6 on: April 18, 2013, 09:27:03 AM »
First of all, if you are new to investing, I know it can be overwhelming to get hit with all of the information and feel like your money is on the line but you don't have a handle on what exactly you're doing. I'd recommend you start by trying a "paper money" account where you go through the motions of buying funds, etc. using fake money like a video game. Then you can make mistakes and learn without consequences. I haven't used the one through my brokerage and you can find them at most companies, but here's a link anyway https://www.thinkorswim.com/tos/displayPage.tos?webpage=paperMoney

Second, you recognize you don't have much starting money. Minimum account balances prevent you from opening at some places, and paying a $10 commission every time you scrape together $50 to invest is a big deal. I invest a little bit at a time like this, so I really like commission-free exchange traded funds (etfs). A bunch of places have these, and I use TD Ameritrade (no minimum balance) where there's about 100 etfs to pick from including some vanguard funds. You can do all the usual things like index the S&P500 or the bond market. Pay attention to expense ratios and keep your fees down. Other than that, good luck out there.

tuomasj

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Re: Low Income Investing
« Reply #7 on: April 18, 2013, 09:50:44 AM »
I remember that my first investment was a total disaster, but I learned a lot. Before that, I was not that interested on economy. After I started to realize that my investment was not that great and I was losing money, I got interested.

Even though I made a mistake, it was actually one of my best investment. You suddenly start learning much faster once you have some skin in the game :)

the fixer

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Re: Low Income Investing
« Reply #8 on: April 18, 2013, 03:01:46 PM »
I remember that my first investment was a total disaster, but I learned a lot. Before that, I was not that interested on economy. After I started to realize that my investment was not that great and I was losing money, I got interested.

Even though I made a mistake, it was actually one of my best investment. You suddenly start learning much faster once you have some skin in the game :)
I was trying to think of something like this to say. Contrary to some of the others who say "you're not ready," if you truly feel that your extra couple hundred is money you don't need and don't hold an irrational attachment to, just jump in. Keep track of what you're doing and how it impacts the money's value over time, and you'll learn what makes sense and what does not. It's not that hard; just buy 2-3 shares of VTI with your money and you're set.

tylerherman

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Re: Low Income Investing
« Reply #9 on: April 19, 2013, 05:24:12 PM »
If you are still in college you may want to hold off a few years. You may not know what you are going to be doing after school and may need to buy a car or relocate or some other major expenses could come up. I know saving isn't sexy but it might be the right time to sit on the sidelines and watch the market, read up on investing and see what happens before you take the plunge.

Read these posts. Really simple introduction that should get you started investing smartly.
http://www.mrmoneymustache.com/2013/03/07/how-about-that-stock-market/

If you haven't noticed the market is real high right now. Trying to predict the market isn't smart but the market is still at record highs.  It could continue to go up, but if it doesn't, you may be getting in at not the greatest time in the world.

If you want to take some risk, you can get into Prosper.com for just $25 and Lending Club for I think $250.

P.S. Don't buy individual stocks. 1) You don't know what you are doing 2) Few people do 3) The fees will eat any returns you get and then some

Also head over to the http://www.bogleheads.org/forum/ and read up on the basics. Smart people here.
« Last Edit: April 19, 2013, 05:27:05 PM by tylerherman »

arebelspy

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Re: Low Income Investing
« Reply #10 on: April 19, 2013, 11:18:43 PM »
Now's not a bad time to make mistakes either.  I learned some powerful lessons by investing incorrectly in college.

Hopefully you can learn from other's mistakes, but if you think investing in individual stocks, timing the market, etc. is a good strategy (not saying you do, but if), now would be the time to learn it isn't, when you only have a little at risk.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

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Re: Low Income Investing
« Reply #11 on: April 20, 2013, 12:46:32 AM »
- Live below your means and contribute (direct monthly deposits) the max to tax-advantaged retirement plans.
- pay off student debt ASAP
- Invest into a Vanguard Roth IRA Like a Target Fund (minimum is $1,000) (I personally switched my target to get higher returns but I am an aggressive investor, you can be safer if it's more comfortable for you)
- Once you start making more money, then you will have more opportunities to invest in individual stocks/ETF's or mutual funds you like.

What you decide to do with your free time now will define how your future will like it. Use it wisely, you will never get it back, ever!

Recommend Investment books, "The Only Investment Guide You'll Ever Need" by Andrew Tobias and "Millionaire Teacher" by Andrew Hallam

Left

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Re: Low Income Investing
« Reply #12 on: April 20, 2013, 04:06:56 AM »
I think you can buy ETFs with no minimum other than the share price (but I've never traded stocks or ETFs so I'm not sure)
This, I just bought some of vanguard's ETFs, 3 different ones, this is second time I've done this. The first time I did it, it went well. They even mailed me something that tells more info on what the ETFs were about. No other stocks did this, but I haven't bought ETFs before either so it may apply for all ETfs and not just vanguards. Then sell them at end of semester to pay for the next one.

Saw someone mention peer-peer lending, while the returns look good on it, I'm not too sure you'll want them in college. Even with the high returns on them, it's still 3 years away from a completed loan. Unless you want a small trickle coming in every month for spending cash. But this might affect your scholarships if you are getting any if they are income based/some other requirements. At least with ETFs, you can let them grow and make no income on them while you are in school.

Honest Abe

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Re: Low Income Investing
« Reply #13 on: April 20, 2013, 07:29:15 AM »
Try Betterment. I used them for a while until I had the $3k minimum for Vanguard and liked it.

+1 for Betterment

nirvines88

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Re: Low Income Investing
« Reply #14 on: April 21, 2013, 07:41:03 AM »
The best investment you can make at your age is to read a good book on investing.  See this list: http://www.bogleheads.org/wiki/Taylor_Larimore%27s_Investment_Gems

The Bogleheads' Guide to Investing is a great overview.  It talks about stocks, bonds, mutual funds, asset allocation, rebalancing, tax efficiency, etc.

If you really want to go ahead and get started with a relatively fool proof choice, just go to Vanguard and open up a Roth IRA (this assumes your part-time work is taxed income and not under the table) and fill it with Target Retirement Fund 2055 (VFFVX).  It only has a $1,000 minimum, and, in my opinion, is a much better choice than STAR, although both will be fine performers over the long run.  With this fund, you will own the whole world in little pieces!  Here's some more information on the fund: https://personal.vanguard.com/us/funds/snapshot?FundId=1487&FundIntExt=INT

If you really want a lot more information about Vanguard's retirement date funds, here's some more information: http://www.bogleheads.org/wiki/Vanguard_Target_Retirement_Funds

murphyrulez

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Re: Low Income Investing
« Reply #15 on: April 21, 2013, 08:49:44 AM »
Try Betterment. I used them for a while until I had the $3k minimum for Vanguard and liked it.

+1 for Betterment

+1 for +1 for Betterment. You can get a $25 bonus if you deposit $250, which is a quick 10% return. Plus you can use the time that your money is growing there to learn about how investing works, and your money isn't sitting in a savings account getting you nothing. Once you have over $1000 you can withdraw it if you want and move to Vanguard, or just stay with Betterment.

sheepstache

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Re: Low Income Investing
« Reply #16 on: April 21, 2013, 07:57:50 PM »
Contrary to some of the others who say "you're not ready," if you truly feel that your extra couple hundred is money you don't need and don't hold an irrational attachment to, just jump in.

That's the part I was worried the OP might not get.  I am a bit biased by recent discussions with my MIL who, for some reason, put $15,000 into mutual funds last year and was asking for help understanding her statement.  She saw the number $14,000 and wanted to know if that was the interest she'd earned.  We explained that was her current balance.  She wanted to know how that was possible since the principal she put in was $15,000...  She honestly doesn't get that she can lose principal in this investment; she's confused by the term because she's used to "principal" in a savings account sense.  So that is the sort of thing, the level of ignorance, I worry about when people say they want to get into investing.

However, re-reading the OP's post I realize they did say the money was "expendable", so now I am less worried.

daymare

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Re: Low Income Investing
« Reply #17 on: April 23, 2013, 10:17:48 AM »
I second the suggestions to find an index fund or target-date fund with a low minimum, and put all of your money into that fund.  If I recall, some companies waive or lower the minimum amount required to invest if you set up a monthly direct deposit.  If you expect to consistently have money to invest, that would be a good option.

I feel really strongly that you (general & specific) can invest smartly -- and most of all, simply and without a lot of time/work necessary.  Too many people have been intimidated by the finance industry into thinking investing is above their heads and they need a professional to manage their own money.  So not the case!  Glad I didn't fall for that BS.

Would also recommend going to the library and checking out Bernstein's Investor's Manifesto.  I am someone who rarely reads books multiple times, but this book I both own and look forward to reading many times over the course of my life.  It's the best, most rational book about investing that I've read, and I have read a TON of books about investing.  It's also extremely readable, clear, and avoids confusing & intimidating jargon.  (Amazon link: http://www.amazon.com/dp/1118073762)