20 years old. Any good investment advice?

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But really, this is something you should research for a while, sit down, then make a smart choice.

Also, understand potentially ways to utilize company stock options, matching 401k, etc.

 

Roth IRA and index funds through a low-fee broker like Vanguard. Why 5 years? If you become an expert in retirement math you can retire so much earlier than you may think. If there is one thing II wish understood when I was twenty it is how attainable early retirement is if you save properly when young.

 

I would go talk to a financial advisor, however they'll lean you towards a long term plan. What's your expected return? A lot of these investments have penalties for pulling out early. Government notes are safe and you'll get guaranteed return and they fit your timeline budget.

 

I agree. A very sad situation all around.

 

If you're definitely planning to spend the money 5 years down the line:

a) Don't count on any significant returns in that time. The stock market is just coming off an incredible 6 year bull market, so market correction is highly likely and money invested in an index fund probably won't net much either over the next 5 years. You'd have to get real lucky on an individual stock pick to make real money.

b) Go with a safe investment that will at least blunt inflation.

That being said, as mentioned above, the value of compound interest is HUGE at your age. If you did something boring like putting $5k in a Roth IRA for 4 years in a S&P 500 and accrued 45 years of compound interest at 6% that $20k becomes something like ~$240k at age 65.

 

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Best investment you can make at 20 is not accumulate debt.

$20k over five years is nothing, in fact you could lose money.

 

This is the best advice you'll ever receive.

Look into the lowest fee index funds. One such fund is the Vanguard total stock market index fund. If you invest 10k+, the maintenance fee is only 0.05% or so per year, which is the lowest I have ever seen.

95% of fund managers don't beat the market over the long run. Even the ones that do eventually won't. The trick here is to get your money in funds with low fees that trend the stock market, which is exactly what the fund above does.

 

I have been wanting to do this also...once you make the initial investment...do you add to it monthly? yearly?

 

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Plus at 20 years old you are at the age where you are going to start spending money. Don't become credit card cool.

Just curious how much are you planning on turning the $20k into over the next 5 years?

 

The problem is most companies always give you funds with high fees. All the my finance professors said the same thing to invest in index funds. These guys went to the top schools like Chicago and MIT and they all say invest in index funds.

 

Why ROTH ira over traditional ira when early retirement is the goal?

 

If i have 10k in the bank and thats all i have as its my emergency fund, should i go ahead and put that into the vanguard total stock market index fund? Or should i max out my traditional or roth ira of 5.5k and just for every month keep adding money into the vtsmx until it reaches 10k?

 

Go to some discount broker like Schwab or Fidelity. Get some index funds that are either based on the S&P 500, NASDAQ or International indices. I personally avoid any IRA or 401K type accounts because you might need the cash later and penalties, whether or not they're large enough to wipe away your gains, can be a pain in the ass tax wise.

 

I've heard there ways to get around this. 72t or ira to roth conversion. Or SEPP method.

 

Go get yourself a good education. Sounds like you save nickels and dimes penny pinching your way thru life. I know your kind very well. Half a gallon of milk and tomato inside the refrigerator.

 

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Most personal finance blogs say having an emergency fund worth 3-6 months of expenses is the number 1 priority over anything else if you have liquid assets.

I wouldn't prioritize maxing out Roth/IRA contributions over an emergency fund. I've done it before but it was dicey and if I had had an emergency before the emergency fund was replenished I would have been screwed.