Author Topic: Investing beginnings - Every Journey of a thousand  (Read 3499 times)

UnleashHell

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Investing beginnings - Every Journey of a thousand
« on: December 31, 2014, 08:20:13 AM »
Dollars begins with a single step….

So whats step one.

This isn’t for me – its for my son.
He finally picked up some part time work and by the beginning of January will have 1,000 of his own hard earned dollars in a bank account. He graduates in May 2015 and is looking very hard at working a lot and saving as much as possible in order that he can retire very, very early (or more to the point have the financial freedom to do whatever takes his fancy!).
However – he’s 18 so who knows what will change in the next year/month etc… - that in mind I don’t think a Roth is the right move.. I’m prepared to be persuaded otherwise.
So what to do with his first thousand? My thoughts are:
a)   Index – find a fund that’ll let you in with 1,000 and throw it in there. Add in chunks as he earns and let it grow (so who and what fund).
b)   DRIP – find a company he can relate to and go for dividends and reinvestments.. Its only a thousand but could grow nicely.
c)   Go for it – do some research and throw the lot at some longer term options – or even warrants. The first thousand caould be lost – but easily replaced. On the other hand if they pan out they could grow very very quickly and establish a nice long term base to work from.
Any thoughts? Or other ideas? (or course I could just charge him rent and add it to my stash!!!)…



Cheers!

innerscorecard

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Re: Investing beginnings - Every Journey of a thousand
« Reply #1 on: December 31, 2014, 08:26:58 AM »
The first step is self-education and self-motivation. $1000 is enough to get started, but it won't matter unless he really cares about it and has the desire to properly learn about it and try to really build wealth.

I recommend A Random Walk Down Wall Street, but if he doesn't like books, there are many good videos out there as well on MOOC sites.

plainjane

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Re: Investing beginnings - Every Journey of a thousand
« Reply #2 on: December 31, 2014, 08:29:30 AM »
I'd push back on this assumption that he should start investing.  I'd keep that $1k as an emergency or launch fund for after he graduates.

Then throw the next thousand in an index.

UnleashHell

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Re: Investing beginnings - Every Journey of a thousand
« Reply #3 on: December 31, 2014, 08:36:01 AM »
The first step is self-education and self-motivation. $1000 is enough to get started, but it won't matter unless he really cares about it and has the desire to properly learn about it and try to really build wealth.

I recommend A Random Walk Down Wall Street, but if he doesn't like books, there are many good videos out there as well on MOOC sites.

We have made some moves towards that.. he's read a lot of the mmm blog plus JH collins. he's also gone through The intelligent investor. I do need to get him A Random Walk dDown Wall street (especially  - to my shame =- I haven't read it either!!)

I'd push back on this assumption that he should start investing.  I'd keep that $1k as an emergency or launch fund for after he graduates.

Then throw the next thousand in an index.
Thanks - he's got an emergency fund - me  :D!!   I thought it may be better for him to see how his money is working for him as he builds up the next 1,000 for an emergency fund. I'll think on this.

GGNoob

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Re: Investing beginnings - Every Journey of a thousand
« Reply #4 on: December 31, 2014, 08:58:14 AM »
With $1,000 he can open a Roth IRA at Vanguard and put his money into one of the Target Retirement Date funds (2060 maybe?). The TRD funds are made up of 4 index funds. Indexing is the way to go. He doesn't need to be investing for dividends and certainly doesn't need to try to pick stocks.

Here is a couple of books I'd recommend...
The Boglehead's Guide to Investing
The Elements of Investing

When I was 18, I had already been in the Army National Guard for a year and got a good full-time job right out of high school. I was then deployed overseas before coming home and going to college. I had a lot of money after my deployment and I wasted it. I look back now and wish I had gotten into investing sooner, especially in a Roth IRA. I highly doubt your son will ever look back and say "I wish I hadn't put money into my Roth IRA at age 18."

TomTX

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Re: Investing beginnings - Every Journey of a thousand
« Reply #5 on: January 01, 2015, 11:05:02 AM »
If he puts his money in a Roth, he can always take the original $1,000 out with no issues/taxes.

I started putting money in a mutual fund in High School. Eventually liquidated it in college. I didn't really have the "long term/retire early" thing down.

InternationalStache

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Re: Investing beginnings - Every Journey of a thousand
« Reply #6 on: January 01, 2015, 02:37:50 PM »
Investing wise, I think the best bet is to get him reading some books (others have given some useful suggestions) and start dumping money into broad based ETFs.

That being said, I think the income side of the equation is also critical to think about at his age--what does he want to do?

RyeWhiskey

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Re: Investing beginnings - Every Journey of a thousand
« Reply #7 on: January 01, 2015, 05:58:22 PM »
If you are his EF as you claim, then he should open the Roth. Use the space when you have it! Have him put the 1k in the appropriate TR fund and let the compounding begin early!