Investing advice

March 22, 2005 11:27 AM

I'm a college student with about 500 dollars to invest. I was wondering what would be the best use of this money. Any advice would be greatly appreciated.
posted by sicem07 to Work & Money (27 answers total)

Ticket scalping? You could double your money after a couple of shows if you pick/predict well.
posted by fourstar at 11:30 AM on March 22, 2005

What is your time horizon and expectations?

Need more info.
posted by eas98 at 11:33 AM on March 22, 2005

I'd say invest it in experience: hookers and booze. You'll have some stories to tell, and those stories could make you famous, if they're written well.

America loves to spy on others' depravity.
posted by rocketman at 11:36 AM on March 22, 2005

If you have a credit card balance, put it towards that.
posted by ROU_Xenophobe at 11:36 AM on March 22, 2005

Response by poster: I would say the time would be about 2 years, and I would like a return anywhere from marginal to pie in the sky.
posted by sicem07 at 11:36 AM on March 22, 2005

$10 in jellybeans could get you $500 at Best Buy.?!
posted by sagwalla at 11:39 AM on March 22, 2005

Whatever you do with it, make sure it's in a form that is easily and quickly (I mean within one business day) converted back into cash if need be. Unexpected expenses can be killer without some sort of emergency fund to cover them. An ordinary savings account (or checking account with interest) may have pitifully low interest compared to other investments, but you can get at the money if you need it.
posted by DevilsAdvocate at 11:39 AM on March 22, 2005

2 years is too short for any meaningful, standard investment (stocks, mutual funds). ING Direct will give you 3.9% on a 2-year CD. 2.8% on a simple savings account if you think you'll need to access it sooner.
posted by crunchland at 11:40 AM on March 22, 2005

500.00 just isn't a lot to work with, when you think about the big picture. Sure, you could throw it at some cheap stock, but broker or service fees would eat up whatever small percentage you happened to make from the investment.

At that level, you could invest in a collectibles market in which you already dabble. When I was just out of college, Magic: The Gathering was just hitting it big time. I bought up a bunch of cards, and just sat on them. About 2 years later, I floated my little family on selling cards for 2 months while I was between jobs.

Of course, collectible markets carry a very high risk factor, and you have to know just where to look for the right buyers. Besides, with the advent of the internet, it's so very easy to capitalize on a collectible market with the right influx of capital.

On preview: What ROU_Xenophobe said: If you've got any debt at all that's gathering interest, put it toward that. Even low-interest student loans gather enough gravy to put a dent in your future prospects.
posted by thanotopsis at 11:41 AM on March 22, 2005

Don't invest you money in anything other than a savings account, where you'll have access to it in case of an unexpected expense, temporary shortage of income, or whatever.

As a rule of thumb, you should (ideally) have savings equal to about six months of expenses before you even start considering investing in anything that isn't liquid (like a savings account).

Besides - quite frankly - if you figure out some amazing way to invest that generates a 10% return is almost totally safe (unlikely), that's worth - what - $50 per year? Much better to spend all that time and worry on something more valuable: reading a book, talking to friends, going for a hike, etc.

Consider what you'd say if someone came up to you and said "I'm a car owner whose car needs a repair about every two or three years. I was wondering what would be the best technical school to go to, in order to learn how to do car repairs so that I can save money by fixing my car whenever it needs a repair."
posted by WestCoaster at 12:00 PM on March 22, 2005

If you are the responsible sort then throw the money into a US Treasury bond (assuming you are in the US). Then give the money to your children when they go to college. You can tell them the sacrifice you made when they were your age. Think of what a role model you will be.

If you're like me, I would put the money aside as my entertainment reserve for the year. Be creative. Buy a round of drinks at a bar. Get a dozen roses for the girl or guy you want to ask out. Rent a car and go on a road trip. You're in college - save the serious investing for when you have your nose to the grindstone.
posted by quadog at 12:05 PM on March 22, 2005

correction: "when you were their age". But you're in college so you understood anyway.
posted by quadog at 12:09 PM on March 22, 2005

Take the money and travel somewhere. You'd be surprised how far you can get on $500 if you do it right. That's what I did with all my spare cash during school. Now that I'm mired in the post-college daily grind, I'm glad I went and saw some interesting stuff before having to make sure it was okay with my boss first.
posted by makonan at 12:30 PM on March 22, 2005

what was the post last year where someone had $20 and was going to turn it into a thousand? Or something?
posted by o2b at 12:32 PM on March 22, 2005

Still time to invest in a Roth IRA, but that is long-term planning.
posted by terrapin at 12:34 PM on March 22, 2005

I'm with crunchland. Also, check out bankrate.com for CD and money market rates. For example, somebody's currently paying over 3% on a 1-year CD. But remember that interest rates will probably continue rising ... and maybe you'd rather just take ING's 2.8% and the knowledge that you can access that money in an emergency if necessary.
posted by pmurray63 at 12:34 PM on March 22, 2005

If you want to cap your risk at breaking even then you're going to be stuck with a few percent interest. Over a two year period and with only 500 dollars there aren't any purely investment approaches that will do any better than that. You could invest in penny stocks but while the potential payoff might be large you'll probably lose most of it. You'd be better off in investing in your favourite beer.

If you're willing to invest some sweat equity you might be able to get a greater return on your investment through a variety of legal and illegal activities.

1. Are you decent at crafty stuff? Invest it in supplies and write off your time and find a craft show where you can peddle your wares, preferably for cheap.
2. Are you known for hosting the campus' killer parties? Spend the money on kegs, cups and entertainment and charge admission.
3. Follow the liquidators like woot and when a spectacular deal comes up buy it, sell it on eBay.
4. There's always a subset of students who need a little extra cash. Loan it to them, charge usury rates. Only do this if you're willing to be tenacious in collecting.

posted by substrate at 1:07 PM on March 22, 2005

From an investing standpoint $500 is not a lot. If it were more like $2,000 I would say open up an online trading account and invest in a few stocks and don't make too many trades to eat up your principal in trading fees. With $500, I would invest in a mutual fund or two. Find a couple of well performing no-load funds and invest directly through the fund owner rather than through a broker. If you pick a big fund manager like Fidelity you can trade in and out of their funds if you like.
posted by caddis at 2:25 PM on March 22, 2005

As has been said previously: if I had any outstanding credit card debt, I'd shovel the $500 at balance reduction first and foremost.

After that? Assuming I was concerned about not losing my original investment, a vanilla savings account or money market account would be the path I'd take. Were I more of a risk-taker and willing to chance that I wouldn't need to touch the money for emergency purposes, I'd go for the marginally improved interest rates of a CD. (Not that you can't liquidate a CD in a hurry; it's just that there are early-withdrawal penalties to endure.)

If I were less concerned about potential losses, I'd engage in one of the ideas outlined above - ticket brokering, buying and reselling goods, and other fun and exciting adventures into the world of arbitrage. (I've done both ticket-flipping and buy-low-sell-less-low internet finagling myself. It makes for a fun hobby but usually isn't worth it on an hourly pay basis. YMMV, 'course.)
posted by youhas at 2:44 PM on March 22, 2005

One word: plastics.
posted by majcher at 3:19 PM on March 22, 2005

You might be surprised at how many kids our age are making decent money playing poker, online or off. It's kind of a trend lately (though I get the impression that it's on the outs), so there are a lot of easy marks out there playing for fun and losing money in the process. I've got one friend that made $14k online out of a couple hundred, which is obviously atypical, but a few other friends are reliably grinding through games at about minimum wage ($6-$10/hr, usually) because the stakes are low. I briefly considered bankrolling one of my friends in local and online games, since his net returns are reliably in the black, but eventually decided against it.

I think the last person that suggested gambling as investing advice was mildly crucified here, but if you know the right people in the right situation, it can make sense. Most of the time, it's a bad idea, but if you were looking for some flighty endeavor, it's safer than drugs.

Though I would agree that $500 can get you a lot of social capital. Do you have a car? No? Offer the guy driving you home some money for gas. Buy coffee for the people you're about to study with. Pick up something for a friend like a book, (~$10 and some thought, is the idea), and just give it to them saying "I thought of you." Get on thefacebook and make sure you get people small somethings for their birthdays. Things like this can have pretty big effects in the long run, and it's not really disingenuous if you actually like the people.
posted by rfordh at 4:15 PM on March 22, 2005

If you haven't started an IRA, do. Think of it as time traveling to give your (future) self a gift. However much you appreciate that $500 now is nothing compared to how glad you'll be for the IRA when you're 60.

If you examine how much of a difference you'll see between an IRA started at age 21 and an IRA started at age 43...well, see for yourself.
posted by cribcage at 5:53 PM on March 22, 2005

Pay off your credit cards. 15-20% interest gain right there.
posted by countzen at 5:53 PM on March 22, 2005

Credit cards, student loans, car loans.. Any outstanding debts you have. $500 isn't a lot to play with, but putting it on your debt now saves you $500 worth of interest on that debt.
posted by dirtynumbangelboy at 7:09 PM on March 22, 2005

I wouldn't pay off the student loans. At 2.9% interest, tax deductible, I'd rather keep the money.

Emigrant Bank
posted by sockpuppet at 10:38 PM on March 22, 2005

To complete that thought, Emigrant Bank has 3.25% FDIC insured savings account. They do better than even my short term bond funds whose net asset value keeps falling by a few pennies every week (but that wipes out any advantage the short term bond fund has over a savings account).
posted by sockpuppet at 10:39 PM on March 22, 2005

If you start that IRA, don't use ING Direct as someone mentioned above; their fees are too high for index funds. You can set on up with Vanguard and their maint fee is about 0.2%.

A straight index fund, historically, will get just shy of 11% annually. You can check the writeups about mutuals over on fool.com. At your age it should be a ROTH IRA so the index is not taxable and you're likely not dodging any taxes with an IRA anyway.
posted by phearlez at 7:48 AM on March 23, 2005