Investing

I'm looking for advice from GFFers who have investing experience. I know this is a gaming forum, but I want to get a wide variety of opinions. I'm looking more for general advice like what my options are instead of asking for what stocks I should buy. Here's my situation.

I have money in a low-interest savings account that has been sitting there since I opened it when I was 14 or so. That was almost 10 years ago, and as expected from that type of account, it hasn't grown much at all. I didn't open it with the intent of making money from interest so it's not a big deal. However, I've recently decided to put my money to work, but I'm not too sure where to begin. I began researching intestment opportunities for someone my age (23) and the most attractive option to me was opening a Roth IRA and investing it in an index fund. The problem with this is that money put into a Roth IRA needs to be from income; the money I'm looking to invest isn't.

I looked at buying stocks using a discount broker (etrade or a similar website), but I didn't want to go into the market without doing a little bit more research. I signed up for the investopedia stock simulator and invested the fictional $100,000 on stocks I would've invested in if I were to go into it. Currently, I'm down $23,000. It's obviously not a good time to invest with the steady decline the market is currently experiencing. So what are my other options?

Here are some more details about me that might help.
Age: 23
Occupation: 4th year college student (graduating Spring 2009)
Amount to Invest: $4000
Debt: none
Investment Plan: long term
Risk Tolerance: low-medium (from some website I can't remember at the moment)

I'm still doing research by reading books and articles online, but I thought it'd be a good idea to ask those who've had experience and maybe those who are in a similar situation as me.

Jam it back in, in the dark.

Originally Posted by lord-of-shadow

You say long-term, but how long-term are we talking here? You thinking that this will be the start of a retirement fund, or something else?

Yeah pretty much. Was looking to start an IRA, but since I can't at the moment, I'm looking for other options.

Originally Posted by Terminus

Uh, why not talk to an investment specialist at your bank and see how it goes from there?

Like I said, I'm doing a wide variety of research so I also want to hear people's personal experience with investing. Maybe someone on here is/was in a similar situation and could give me some pointers. Also, banks are no good since usually, they will try to get you to put your money in their bank and my bank's investment options aren't attractive to me. But yeah, I'm looking around for a financial planner.

There's nowhere I can't reach.

Originally Posted by Peter

Also, why the hell would a college student want to put money away for RETIREMENT? You don't want to start paying for that until you're 35 or older (at least that's how people around here do it).

Your mentality, which you share with a majority of the people in this world, is why people don't reach financial independence. And no, I'm not putting all my money into a retirement account. I'm putting $4000 in which is about 5% of my current savings account. I'm probably going to put more than $4000 since having it sit in savings isn't productive at all. Also, I live quite comfortably with zero debt and just having bought a new car so I'm certainly living the "carefree" life you're talking about.

I'm actually LATE in starting a retirement account. Most of my friends started theirs in highschool. But then again I come from an affluent area of California where people know how to handle their money. It may sound like I'm stroking my e-penis, but I'm simply doing this to show you how wrong you are with your assumptions. You obviously don't understand compound interest if you think a difference of 13 years of compounding interest equates to $10,000. Here's a calculation for you:

Assuming a retirement age of 55, and a yearly addition of $4000 (easily done if you know how to handle your paychecks), here are two scenarios. The first being what you suggested; starting a retirement fund at 35. The second is what you SHOULD do; starting a retirement fund in your late teens or early twenties.

Retirement Fund started at age 35
Initial Principal: $4000
Annual Addition: $4000
Years to Grow: 20
Interest Rate: 8% compounded annually
Account Size at 55: $216,335

Retirement Fund started at age 21
Initial Principal: $4000
Annual Addition: $4000
Years to Grow: 34
Interest Rate: 8% compounded annually
Account Size at 55: $740,027

That's almost a 350% increase with only an extra $56,000 invested. Are you telling me you wouldn't save $56,000 over 14 years to get a 350% increase? And yeah, who knows if you'll live long enough, but that goes with everything in life. No one's saying you have to live like a monk if you start an investment fund. The best time to invest is always when you're young. The second best time is now. I can afford to save $4000 per year while being able to live in a very nice area so why shouldn't I start saving now? If others can't save that much, then save less. Compound interest is one of the most powerful tools people can use to get wealthy. The only thing is, it takes time.

This thing is sticky, and I don't like it. I don't appreciate it.

Originally Posted by yevheniy

*Advice from a representative of Merrill Lynch who was a guest speaker at my school a while back.

The only reason someone should start saving that early in their life (20s) is if they have dreams of retiring at 40 or becoming a millionaire by age 65. As for those numbers (starting investing at 21 vs. 35) although they may seem impressive at first glance (even I was inspired when initially hearing similar figures from my finance professors) you need to take into consideration that the likelihood of being able to invest year after year like that is extremely slim. Paying for your children's education, medical bills, or any other number of unexpected events that are bound to happen will inevitably eat into your disposable income and possibly even your savings.

Again, $4000 is not a lot for me and I'll likely be able to invest more than that every year. I'm not saying that to brag. It's just that some of you don't seem to understand even after I explained it in my last post. I have a few different sources of cashflow and I don't even have a job yet. I imagine I'd be able to invest a lot more once I get my degree and get a job. I'm planning on investing a pretty small percentage of my income and the rest (after expenses) is going into my savings account.

Here's what I'm planning to do using percentages.
Annual Income: 100%
Amount to Investments: 5-15%
Amount to Savings: 35%
Estimated Expenses: 50%

Yes this is overly simplified and doesn't account for emergencies and unexpected occurrences, but this is to keep it simple. You can see that I'm planning on spending a very little amount of my money on investments.

As for children, I don't plan on having any any time soon. It confuses me why people have children when they can barely support themselves. But anyway, this thread wasn't meant to discuss if I should invest or not. I have the means to. I know it sounds like I'm investing a lot of money, but relative to my financial situation, it's not draining my cash like some of you are thinking. I appreciate all your suggestions though. Hopefully someone will be able to give more options rather than try to convince me not to invest.

I am a dolphin, do you want me on your body?