Mutual Fund Help?

When you receive an inheritance, you really need to think about the intentions of the person who gave you the money.

Mutual funds can have substantial risk, but the risk of not meeting inflation and the opportunity cost of not investing in the stock market can be a greater risk over the long haul. That's why looking at your time horizon is critical. There are also stock and real estate funds, bond funds, and money-market funds. Even bond funds can be risky if the duration is large, especially since we are in a low interest rate environment.

Buying a car might have been a good idea, but it would be responsible to make sure that the car was well-maintained and you keep it at least 10-12 years or 150,000 miles. Having bought a car before college wasn't a good idea unless you plan on commuting as it significantly adds to the cost of college; a car's depreciation and insurance is your primary cost, but the money is spent so you cannot do anything about it. Good luck.

You are going to need a savings slush fund. I think 3 months of an emergency fund is adequate in your case, but you must build on it during college (ideally to 8 months). That means you should have at least $9,000 in savings, but by the time you end college, you need $24,000 in savings. You should put $3,000 into savings, T-Bills, or a money-market account. I really like you to check out bankrate.com for savings account options. With the other $6,000, you have several options.

One option is to try a lattered CD approach. You could put $1,500 in a 1 year CD, $1,500 in a 2 year CD, $1,500 in a 3 year CD, and $1,500 in a 4 year CD. When you need to renew, you simply select a CD that will last until you intend to graduate. A second option may to buy either a short-term or intermediate bond fund. I don't think a bond fund with a duration of greater than 4 is acceptable. FTHRX is a great example of a bond fund that's a good option. That would minimize your interest rate risk. A third option is to simply add it to your high-yield savings account since those are currently paying better than CDs and don't have the interest rate volatility.

With the remaining $36,000, I think $15,000 has to go into a balanced fund. A balanced fund is essential for the 5 year time horizon on this money since you're going to need an emergency fund when you graduate at 22 or 23. For balanced funds, I really like T Rowe Price (RPBAX), Fidelity (FBALX), Vanguard (VGSTX), or ValueLine (VALIX). This is a great option that is a hybrid between being in the stock market completely and being completely on the sidelines in either bonds or cash.

So now you have $21,000 or slightly less than half that can be invested in all stock or all real-estate funds. You might want to invest $3,000 into REITs so that leaves you with $18,000 to put into diversified equities. If you earn income, I'd also put as much as you earn (up to $5,000) in a RothIRA.

So what to invest in with the $18,000? I really like index funds like VTI, DIA, SPY, and IOO. Examples of funds I like are: VTSMX, FIGRX, FDVLX, and FIVLX. I also like a small part of the portfolio going to something like VWO or EEM (emerging markets) (0-15%), gold or other commodities (0-10%), QQQQ (0-10%), sector funds (0-10%), or individual stocks (0-20%). That means I find it unacceptable to invest more than 20% in total for all of these categories. So that means if you invest 7.5% in GLD, you should invest no more than 12.5% in a portfolio of individual stocks. The key to the Harvard Endowment was to take on risk, but to be very well diversified. Another option would be to have a portfolio of 15-25 stocks that you trade after having done the research and really having understood what you're getting into it.

How much should you own in Southern Company or Bristol Myers? Well, I think owning more than $1,800 (or 10%) in any one stock is taking on too much risk. I think they might be great dividend stocks, but that it's vital to stay diversified. I think having a $720 maximum in any one stock is a great limit to follow such that you can buy 5 stocks or $3,600 (or put the $3,600 in any of the investments listed above) and put the remainder $14,400 in an index fund and follow the principles of modern-portfolio theory. It suggests that only 18% of investors beat the market and thus why try.

Asset allocation is very important.

I'd take a look at the following sites:

http://www.mfea.com/

http://www.morningstar.com/

http://www.smartmoney.com/

http://finance.yahoo.com/ - to look up balance sheets and other information on stocks.

http://www.vanguard.com/ - low cost mutual funds; passive-management

http://www.zecco.com/ - free trades; low cost ETFs; self-management

http://www.fidelity.com/ - low cost broker; active-management

http://www.troweprice.com/ - low cost broker; active-management

Good luck. I hope you invest well and do well over the next 5 years. I always look at the Fed Funds rate and if it gets too high, I slash my stock concentration and take on more fixed income. Dollar-cost averaging is a great strategy since you get more shares of stock as the market falls.

When the market falls, it's a good thing as long as you are able to continue investing. There are real bargains. When the market is exuberant, it's not good; while everyone is "making" money, there are no bargains out there and when it comes to an end, it's extremely easy to lose money. The risk premium is very low (if not negative) in a time where the market has explosive growth year after year after year.

I agree with the subsequent poster; it's a great idea to buy when the masses are selling.

So some research first. Check on history, performance and fees.

I'd but a bunch in Vanguard Total Stock Market. I get the whole blooming market and won't lose more than the whole market does. Perhaps an emerging markets fund might do well but recently it appears that all markets are down.

If you can get into dividend paying stocks/funds that's an added bonus.

You could also go "safe" and put it in a high-interest savings or money market account for a while until you find what you're really comfortable with.

Try to go with a company that has low fees as that can eat away your profits fast.

It's called dollar cost averaging. Buy a certain stock that you like in a company that does fairly well. I'll use me for example. For the past several years I bought Pepsi (ticker PEP). I opened an account at Edward Jones. (But any other broker will do). I bought whatever $100 would buy every month. Some months Pep was down so I bought more. Some months it was up so I bought less. But I kept on buying until I had 100 shares. Then I moved on to my next investment. Now I'm buying Johnson and Johnson (JNJ). In the end, companies like Pepsi, Johnson and Johnson, Coke (KO), McDonald's aren't going anywhere. Buy and HOLD. The market may be down but it will rebound. And when it does, all your stocks will go up, too. Oh, and be sure you get a stock that pays dividends. And ask the broker to have those reinvested.

Good luck.

Look at all suggestions closely and maybe ask your father or grand pa to help you make a final decision. They will have your best interest at heart.

Your first option, should be to open a retirement account. This is always a good investment, regardless

of who you are.

If you have fully funded your retirement account and would like other options, you should consider a DRIP Plan.

They are seldom recommended by brokers due to the low rate of commissions received. However, these

reinvestment plans can be very powerful long-term investments. Studies have shown that DRIP's are one of

the best strategies on Wall Street.

They are inexpensive and easy to start. New investors to the stock market should definitely consider a DRIP Plan.

Companies like Toyota, Royal Canadian Bank, Sony, Bank of America, General Electric and many other Blue Chip

Stocks can be purchased through your DRIP Plan, with as little as 1 share in most cases.

These long-term plans are great for beginners as well as veterans. Check them out.

Best of Luck

Go for a well run mutual that pays a reasonable dividend & the manager has a long term track record - another idea is go for something contrarian that say invests in financial stocks ( I like some property investment trust funds although you dont have these in the U.S ) remember you want to buy when the masses sell & vice versa..... Oh & forget any get richer quicker ideas you have a higher chance of losing it all

I do not like American funds. They are team managed and many are loaded funds. I like to put my money with a manager who I know what kind of manager I am getting to take care of my money. You are 100 % correct on banks. They are bad places to invest. The URL below is a simple road map to investing. Remember you have a lot of choices. I like no load mutual funds. Why pay a commission when you can get something better for free?

Take your time and read at least two books on Mutual Fund investing. Add a couple of general books on investing (after).

Learn terms like;

Asset Allocation

Position Sizing

Exit Strategies

Risk tolerance

Time horizon

Dollar Cost Averaging

No Load

This stuff is not hard...... but ignore it and you'll make some very expensive mistakes.

Most important;

Don't take specific investment suggestions from strangers whose qualifications and motives can never be known.

well what i have learned in finical literacy class is that if your going to invest in a mutual fund then they are mostly safe but you should keep your money in it for a long time like for retirement and should keep adding money

safety first, you better invest in C.D