As a youngster, I can remember vividly doing my chores for what seemed like a lot of money. I would religiously wash the dishes, clean the bathroom, dust furniture, or whatever else I was asked to do in order to earn a buck. And what did I do with my earnings you ask? The answer is absolutely nothing. I would just accumulate dollar bills and then spread them out on my bed as if these green pieces of paper were part of a great discovery, and count them as many different ways as I could think of counting the same sum.
The truth is I was only making about five dollars a week for all of my hard work and what I considered a lot of money was probably no more than forty dollars, but when you’re seven years old that’s a lot of money! For years I continued this trend as I went on to get real jobs with actual paychecks. I spent some money but my savings account was mighty healthy. Then one day my father introduced me to the stock market. I thought it was a wonderful idea; your money can make even more money.
It is true that the stock market can also lose you money, lots of it…quickly. However, playing things smart can help ensure safe investing. The great investor Warren Buffett believes strongly in a buy and hold strategy with the belief that most stocks will go up over time. As young adults, this should be a sign to us that we have enough time to make some money off the markets, even if we lose money in the short term.
Some people view the stock market as gambling and would rather stay away from it. I can sympathize with that. The stock market isn’t the only way to put your money to work. A certificate of deposit is a wonderful option for those who do not want to worry about where their money is but understand the value of gaining a return on your savings. CDs can be taken out for periods ranging from as short as three months to as long as five years. Your money is accrued on a set interest rate and at the end of the term, you have more money than you had before with which you can either renew the CD or move your money however you see fit. The interest rate may not be huge, in fact it won’t be. But it will be more money than if you had let it sit in the bank for that given period.
For those who like to focus more on their finances there are also other ways to invest such as gold, silver, copper, and bonds just to name a few. Having a savings account is a good thing and I believe they are necessary. But that doesn’t have to be the big box where all your money sits when you aren’t paying bills or making purchases. Take that money and spread it around. Have a hand in the stock market, buy a CD, add to your money market funds, AND maintain that savings account. Diversification is the name of the game.
A gold investment is seriously one of the best investments one can find thanks to the reckless monetary expansion by the Federal Reserve. The more the Federal reserve prints money, the more they deflate the US dollar and the more alternative commodities such as gold increase in value.
If you are a working professional with a 401(k) or an IRA, you can still invest outside of your retirement fund. If you are a college student or younger with no retirement plan these are valid opportunities to have a leg up once we get into the workplace, whether it be as entrepreneurs or members of larger companies.
Not investing would not be the end of the world, but why shouldn’t we? We are young, full of life, and probably more tolerant to risk than the average person. We are the perfect candidates to take a chance. Besides, none of us like to kick ourselves after the fact for not getting in on a great idea sooner. Don’t be a self-kicker.
Great article, however I recently pulled most of my money out of the market. It’s a suckers market anyways. They’re won’t be any new Warren Buffets until the dollar changes.
I like the fact that you mentioned gold and silver. It’s solid and never goes down, and is a perfect place to protect your money from a dollar collapse. I personally have been engaged in some Forex trading recently, trying to hedge against the declining dollar.
With the health care now passing and this current administrations spending, I expect the dollar to continue to further deprecate which could lead to hyper inflation in the states. Not good, especially if you have money in the market.
I think a lot of people need to be educated about how to protect their money and investments, because 99% of people don’t realize that their money could become worthless real fast and most don’t even understand inflation and how it makes their purchasing power less and less.
Those are great comments Mike. While I do believe that there is money to be made in the market right now I can’t disagree with anybody who would rather not be in it right now. I agree that the dollar will be in further decline in the pending future. You are also right in regards to purchase power. I did not think about that while I was writing this but it fits right in with all the things I mentioned as diversification strategies.
Anyone under the age of 35 shouldn’t be putting everything into CD’s. You need at least 30 years of savings and investment, starting at 35 means you have until retirement 65 to save enough. In your 20’s, invest, get aggressive. If you don’t know what you’re doing, just buy index funds. Chip in as much as you can. Aside from your rainy day fund, which should be save in a high yield savings for easy access instead of locked up in a CD. If you go aggressive, lose some money in your 20’s, you still have 30 more year to recover.
Daniel I like your thinking. I am an advocate of taking a couple of chances. But some people just don’t have or want to put in the time to monitor their money. CDs are far from my favorite form of investments but for some people it may be all they can manage to do.
There’s always lifecycle mutual funds that expose your investments to decreasing risk over time based on a target date. Your investments are managed, assets allocated automatically.
The Internet has made investing so much more accessible than say 10 years ago. Tools like sharebuilder.com and zecco offer virtually free trading and automatic investments. No need to even think about it, just set it and forget it. I think it’s just as easy, if not easier to open one of these accounts and setup automatic fund transfers than to get some convoluted CD with lock out and maturation dates.
Very true. The ‘home gamers’ as Jim Cramer calls normal investors have many more tools to manage their own investments without professional help or extensive knowledge than we had years ago. The question is how many casual investors know how many advantages are at their disposal to use?
That fiver I have saved is being moved right now…towards beer
Do whatever makes you happy man!
I like long term CDs yielding 4%. It matches the draw down rate others recommend.
Why not smile in your picture Jason? 🙂
Best,
Sam
Haha it was a photo shoot and I struck various poses! That one was the tightest profile shot so I use it for Avatar/Twitter and whatnot.
But yea CDs are a nice safe way to invest. I think if it is one of the ways you are diversifying your money it can be very useful. For the investor who wants to be conservative and not have to worry about where their money is it is a good play.
Haha it was a photo shoot and I struck various poses! That one was the tightest profile shot so I use it for Avatar/Twitter and whatnot.
But yea CDs are a nice safe way to invest. I think if it is one of the ways you are diversifying your money it can be very useful. For the investor who wants to be conservative and not have to worry about where their money is it is a good play.
The article isn’t about stocks are bonds, it is about the diversification of your assets and getting your money to work for you. However you choose to do that is your choice. But some action with your money is better than no action with your money. All you are doing at that point is losing out on possible gains.
I would advise that investing isn’t just about stocks, bonds and related financial instruments. Think about investing in *yourself*. For instance, I’ve recently spent a fair amount of money on several books that teach me untemplater skills. I consider this far more valuable than some random stock or bond.
The article isn’t about stocks are bonds, it is about the diversification of your assets and getting your money to work for you. However you choose to do that is your choice. But some action with your money is better than no action with your money. All you are doing at that point is losing out on possible gains.