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Where to invest small sums of money?
I found a bank that gives something like 6% interest if you deposit at least $400 a month and take NOTHING out that month (if ya do, you lose the money)...
butbut...
What are really good ways to invest 2-3k at a time? Nothing much, but enough that it's easy to blow without investing it?
Are CDs really all that great? Keep it in a seperate savings? Buy a whopping 10 stocks?
:/
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Re: Where to invest small sums of money?
IRA, assuming you don't need the money for a while
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Re: Where to invest small sums of money?
^ Planned on not touching it for 5-10 years... that 'awhile' enough?
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Re: Where to invest small sums of money?
Personally I would go with a Managed Fund(s) or Term Deposits. It really depends on how 'easy' you want to access the money. TDs are good for my 'rainy day' sort of funds where you do need 'easy' access to the money.
When I say 'easy' I mean you won't have to wait more than 48 hours for the funds to clear into your current bank account and there are no fees involved in withdrawing the money.
In the end, it also depends on how much 'risk' you are willing to take with the money. Whether you want to invest agressively or take a more 'comfortable' approach - either is fine, you just got to do what you want to do with the money.
BTW, you may want to register on http://www.invested.com.au/forums
It's been very helpful to me.
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Re: Where to invest small sums of money?
You might consider establishing 'rolling' CD's i.e. buying a $2-3k CD with 6 month maturity every month for six consecutive months. At the end of the six months you can then just let the CD's 'roll over' as they mature, and you've basically established 6 months worth of 'unemployment insurance'. If you are willing to eat the CD early withdrawl penalties, you have also established a $12-18k emergency cash fund - which hopefully will never be needed but which is a lot easier to 'liquidate' than stocks or bonds would be if you're forced to sell them at the wrong time to raise emergency cash.
I agree with you that buying stocks in odd lot volumes of less than 50-100 shares usually results in broker commissions taking a noticeable bite. Depending on the stock share price, this means that the minimum dollar volume of an 'efficient' stock purchase is typically going to be in the $5k ballpark at least. I would therefore recommend that once you have the six rolling 6 month CD's established, the next move could be to start sending cash to the 'money market' account attached to a discount brokerage account. Once you have $5k or whatever accumulated in your brokerage account, then it will be time to go shopping for hot stocks.
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Re: Where to invest small sums of money?
Vee,
I don't want the money to be easily accessible. I'm looking for a good investment. I have set aside this money along with emergency money so that I don't need it at all and can let it accrue money.
Oh, and an IRA is kinda silly because I already pay into a retirement account - all Australians do. It's called a superannuation - and I even pay extra into it.
I think the rolling CDs are the best idea. I'm going to look into that. Thanks. 8)
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Re: Where to invest small sums of money?
Quote:
Originally Posted by
lilithmorrigan
Oh, and an IRA is kinda silly because I already pay into a retirement account - all Australians do. It's called a superannuation - and I even pay extra into it.
I know alot of people who do not or prefer to not put any money into their super funds (unless they have to do so). Why? It is only worth doing and doing so agressive when you are 50 years of age. Until then it is not only "invisible" money as you won't ever be able to access it til you are of "age" to access it... thus worthless in a way... so so so much can change in re laws/rules that you don't know what will happen to your money in that time.
Superannuation is not a good investment when you are under 50 years of age. This doesn't come from me, it comes from some of my mentors.
Anyway, if you do have a Super fund consider a SMSF (self managed super fund). It is a better way to manage your Super than load it off with some company.
I still vote for the Mutual Fund(s).
Have you registered @ http://www.invested.com.au/forums yet?
http://www.stripperweb.com/forum/sho...7&postcount=10
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Re: Where to invest small sums of money?
Any cash you put in yourself in your super is guaranteed. And I plan to retire at 50, so that notion to wait until then is silly. 8)
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Re: Where to invest small sums of money?
If you don't want the IRA, and want the money in 5-10 years, go with a mutual fund
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Re: Where to invest small sums of money?
Quote:
Originally Posted by
lilithmorrigan
Any cash you put in yourself in your super is guaranteed. And I plan to retire at 50, so that notion to wait until then is silly. 8)
The law regarding WHEN you can access your super isn't set by you. You can't access it before the age that the government deems is the acceptable age. I can be "retired" now (permenantly retired from the workforce) and still now NOT be able to access my super...
It is still invisible money. You will never be able to use it and/or touch it until you are "of age" thus it is useless as a way to invest.
I just don't see the point of you doing it now when you have another good 25+ years before you will be able to use it/benefit from it.
You could do so so so much more in that time period that your super become redundant because you don't 'need' it as you have enough 'wealth' etc from what you have done in that time.
Anyway, I agree to disagree on the issue of contriuting to the Super until you are 5-10 years before you are "of age" to able to access it. 8);D
From http://www.superchoice.gov.au/employ...rly_access.asp
Can you get your superannuation out early?
Your superannuation can be paid out early only if:
* you die
* you suffer permanent incapacity, or
* you are in severe financial hardship or there are compassionate grounds.
Minimum ages for access to superannuation benefits
Your date of birth ...............................Minimum Age
After June 1964 ...................................... 60
July 1963 – June 1964 ............................ 59
July 1962 – June 1963 ............................ 58
July 1961 – June 1962 ............................ 57
July 1960 – June 1961 ............................ 56
Before July 1960 ..................................... 55
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Re: Where to invest small sums of money?
I'd rather save for my retirement for life so I'm not stuck up shit creek with no paddle thanks... and who's saying I won't retire at 50 with my OWN money? I never said I'd need the super at 50... I can last 10 years after that before I get it.
If I save $10 a month for 40 years I'll be much better off than $20 a month for ten... just saying.
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Re: Where to invest small sums of money?
Online savings accounts seem to be the new black these days. No minimum deposit rules, no restrictions on access or transactions and they pay interest of about 5.5% to 6% on the entire balance from the first $1. The only catch is you have to be comfortable dealing over the internet.
BTW I agree with you Lilith about superannuation. You're better off accumulating smaller amounts over a longer period of time than trying to catch it all up in one hit at the end.
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Re: Where to invest small sums of money?
^^yes, the wonders of compound interest.
Can you choose how your super is invested like with a ROTH?
I invest my ROTH on different types of mutual funds. I also have seperate MFs as well.
Variety is important. I have some CDs and I plan on a property investment this year.
So, with small sums that you do not need for your super you could invest in other types of MFs. You can choose a type of account that you can add to. Most kick back some cash seperate from the earnings. If you think you may want to use the cash you can let it sit in a money market account that you can draw from.
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Re: Where to invest small sums of money?
Oh my super is a completely seperate investment than my 'investments'. I already put money into that and work on that. Same with my actual savings. So I'm not putting it into my super for future investments.. just putting it there for when I'm 60. My 'future investments' are looking to be rolling CDs and perhaps online savings accounts... I also want to get stocks some time in the future.
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Re: Where to invest small sums of money?
Update: Apparently there's a different name for rolling CDs in Australia. It has another name and damned if I can remember it now... but it was at 4.5% with a minimum of $5,000... and it turns out that a super saver account at my bank was 6% with NO minimum, compounded monthly, calculated daily. So I just opened a higher savings account and it's linked to my regular and I put in half my income a week.
Also, about the superannuation above... if you put $1000 into your super this year, the government put in $1500. Yep, that's right. So both Michael and I have at LEAST $2500 each for this year just in our own investments.
'Invisible money' my ass! When that stuff comes back to me when I'm 60, I'll be a rich bitch!
I will continue to form money in my super even at the age of 20, for when I'm 60, I'll have 40 years of these bonuses PLUS that money in my savings plus I'm taking a course for share marketing this semester at uni.... on the right track!
... now if I could just finish my taxes... :x
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Re: Where to invest small sums of money?
No offense but CDs and 6% bank rates are for old ladies, someone who is extremely conservative or needs ready access to the cash in the short term. My understanding is that you don't need the money in the short term and want a long term investment. If I were you I'd go with a balanced stock mutual fund portfolio that will offer more risk but much higher potential return. If you're willing to accept the risk then you can make a bunch more money.
Consider this:
Scenario 1: You set aside $5,000 each year at 6% for 10 years. At the end of 10 years you'll have about $68,000. Not bad!
Scenario 2: You set aside $5,000 each year and earn 11% for 10 years. At the end of 10 years you'll have about $90,000. Much better!!!
The difference in earnings is over $20,000 which is quite significant. The US stock market has averaged over 11% since its inception. There will be years where you'll make much more that that and years when you don't. The trick is to be willing to ride out the hard times and not get too greedy when its going well. It sounds like you have a long term philosophy though so you should be fine.
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Re: Where to invest small sums of money?
^^^ or ...
you set aside $5,000 each year for three years and earn 11%. Then during the 4th year you set aside another $5,000 but wind up losing 20% on the value of ALL of your stock investments both for the current year as well as for previous years. It happened in 2000-2001, it could very well happen again.
I'm not trying to rain on anybody's parade here - however, like US housing prices, US stock prices also go in cycles.
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Re: Where to invest small sums of money?
Also, in this specific case, there is also the issue of home currency vs the US dollar. It's not extremely helpful to earn 11% in a year on US dollar denominated investments when the exchange rate between the Buck and the Aussie backtracks 10% leaving you with a net 1% gain in terms of home currency !
http://www.x-rates.com/d/AUD/USD/graph120.html
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Re: Where to invest small sums of money?
Quote:
Originally Posted by
Melonie
Also, in this specific case, there is also the issue of home currency vs the US dollar. It's not extremely helpful to earn 11% in a year on US dollar denominated investments when the exchange rate between the Buck and the Aussie backtracks 10% leaving you with a net 1% gain in terms of home currency !
http://www.x-rates.com/d/AUD/USD/graph120.html
Biiiiingo! Which is why currently the 6% savings account was my best bet. At least until I actually take my Share Marketing course next semester, when I know what I'm doing!
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Re: Where to invest small sums of money?
ok....everyone has an opinion about investing money. There is no such wrong or right way. But personally, this is what i'd suggest--DIVERSIFY. All you $$$ in a cd--good idea..but only 5-6% growth each year. All $$$ in mutual funds/stocks--good idea..about 10-11% return..and every 5-8 years the market crashes, and god forbit you got the wrong stock--you're toast. Not to mention, the way US currency is falling and inflation is rising..you're $$ may not be worth much.
SO--here is my suggestion.
1. 25% in CDs (just for safety..and in case you really need the money, you can take a loan out on the CD)
2. 25% in stocks (you'd make quick money if you pick the right ones..and keep track of the stock. You can go to E-trade, open a brokerage account, and set sell limits. ie: say you buy a stock for $10, and you see its value growing, and say it grows to 15. you set a sell limit to $14. Once the stock price falls to 14--they system will automaticly sell off your stock--read up on e-trade).
3. 25% in mutual funds--same logic as above..except they're safer. Look into index funds or ETFs(exchange traded funds--these are funds on comodities like OIL, real estate etc). Now value of oil or real-estate can never fall to 0. So ETFs are quite safe.
4. 25% in comodities--ie: buy silver or gold. They never loose value, and silver has been growing like crazy. This offsets your no. 2. ie: if inflation is on the rise--stocks may fall, and silver will rise.
my 2cents :)
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Re: Where to invest small sums of money?
1. CDs aren't in Australia and the version of them we have has a 4% return. Not worth it compared to a basic savings account!
2. I already stated I planned on doing this 1. When I felt I had enough money to invest and 2. After I take my Investing in the Share Market course next semester in uni.
3. Looking into that, thank you.
4. Already doing that. My partner and I buy 4 ounces of gold per year for christmas/birthdays and any extra when we have the spare coinage.
Thank you.
Also, title.. SMALL sums of money. I'd like to see all four of those options take $500! Considering my 'CD' won't even take less than $5,000!
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Re: Where to invest small sums of money?
Quote:
Originally Posted by
Melonie
^^^ or ...
you set aside $5,000 each year for three years and earn 11%. Then during the 4th year you set aside another $5,000 but wind up losing 20% on the value of ALL of your stock investments both for the current year as well as for previous years. It happened in 2000-2001, it could very well happen again.
I'm not trying to rain on anybody's parade here - however, like US housing prices, US stock prices also go in cycles.
Melonie, 11% is the average which takes into account all of the 20% downmarkets and such. As a matter of fact it takes into consideration the great market crash in 1929 and all of them since then. I was reviewing my 401k yesterday and my 1 year return is 25%. Saying you have 3 years of 11% and then one -20% is not accurate. You'll gain 15% one year, lose 5%, gain 22%, etc and the average over time should equate to 11%, at least that's what the past 75 years of the market has averaged. Of course you have to be willing to ride out the bad markets. The worst thing to do would be to pull your money out as soon as the market goes down and then wait to get back in when it improves. I heard someone once say that the stock market is the one commodity that people have the reverse logic of buying when the price is high and selling when the price is low. You have to fight that urge.
As I stated investing in stocks includes an element of risk. If you are willing to take a little risk then you could potentially earn a lot more. From what I can see you (Melonie) are very risk adverse and that's OK, that's just not everyones bag. Like you I'm just providing information to help make a decision, ultimately it is the readers choice on how they want to invest their money.
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Re: Where to invest small sums of money?
Quote:
Originally Posted by
Melonie
Also, in this specific case, there is also the issue of home currency vs the US dollar. It's not extremely helpful to earn 11% in a year on US dollar denominated investments when the exchange rate between the Buck and the Aussie backtracks 10% leaving you with a net 1% gain in terms of home currency !
You know as well as anyone that can go either way and ultimately help or hurt you (it's curious how you consistently point out the potential negative, I think it indicates your very conservative mindset: not judging you just making an observation). I can only suggest the US stock market since that's the extent of my experience. I'd assume there are similar mutual funds and stocks to invest in Australia, maybe there are maybe there is not.
I can tell you that international mutual funds are kicking ass right now and I've seen it suggested that we (Americans) hold as high as 40% in such international funds. I personally have about 30% and those funds are doing awesome! For instance, Oppenheimer Dev Mkt, 39% 1-year return, Templeton Foreign Small co 29% 1-year return, American Funds Europacific 25%, etc.
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Re: Where to invest small sums of money?
^^^ agreed on certain international funds ... whose returns consist of say 10% increases in the price of component stocks plus a say another 10% increase as a result of US dollar devaluation vs the 'home currency' of the foreign company's stock shares. However, by the same theory one can achieve a 5% interest rate on a foreign currency CD plus the same additional 10% increase as a result of US dollar devaluation vs the foreign currency with a significantly lower risk.
Personally I am not adverse to risk ... in fact from time to time I make highly leveraged or highly speculative investments. What matters to me is the potential reward VERSUS the potential risk - which is a subject that requires constant reevaluation.