Extremely Low-Level Investing Question

[Ancalagon]

So let's say, hypothetically, I'm a college student with $1000 sitting dormant (in a non-interest bearing checking account). Let's say I have no real plans of taking that money out, and I'd like to see some measure of return on it. Now, obviously I'm not expecting to make millions. But what would be the best way to go about accruing some interest in a safe manner?

Buy 30 day treasury bills (or 60 or 90)? If so, what's the best way to go about doing this?

Put it in a time deposit rather than the checking deposit it's in now? What are the nuances involved in this?

Corporate paper? Emerging market stuff? Probably way out of my league, but thoughts!?

[Jimmy Carter wuwu]

Become a bookie. Start low range betting for sport events. Start with the super bowl. Then UFC fights and the special olympics.

[Brutul Tarew Marr]

If you want something with no risk and access to your money whenever you need it, look up some of the online checking accounts. Many pay as much as 5% and aside from a limit on how many checks you can write a month, there's really no downside.

OK I just looked and 5% is history thanks to the Fed, but you can still get some pretty decent rates considering you're basically doing nothing at all.

High Interest Checking Account - 4.10% APY salemfivedirect by Salem Five

is one of the better ones.

[Soriak]

Do you expect to put more money into the account regularly? If not, it shouldn't really matter - you're at best talking about $50/year, some of which may be eaten up by transfer fees.

Regularly putting money aside is well worth it, even if it's not a lot. You'd want to get started with mutual funds in that case.

edit: btw, those online accounts aren't zero risk either. If the place goes bankrupt, you'll be waiting a while before you get the money through FDIC insurance.

[Brutul Tarew Marr]

Well, Salem Five was founded in 1855 so they aren't exactly a fly by night organization.

[AladainAF]

etrade complete savings account. I use it. They pay 4.40% right now. They were paying 5.05% pre-75 basis point cut.

https://us.etrade.com/e/t/jumppage/v...&WT.mc_id=4006

If not, it shouldn't really matter - you're at best talking about $50/year

eTrade has no transfer fees to and from external accounts. The only thing you have to watch for is when you deposit money INTO your etrade account, you can't take it back out until 7 days later.

etrade is also FDIC insured, of course.

A savings account is a very poor way to really invest, but if you want to keep it safe, a high-yield account is better than a lot of CDs out there too.

edit: btw, those online accounts aren't zero risk either. If the place goes bankrupt, you'll be waiting a while before you get the money through FDIC insurance.

No bank is zero risk. Look at Societe Generale, or Barings Bank.

[rinthea]

Depends on your timeframe, I'd go with a higher return money account from a larger bank. A larger bank, wont fuck you over because they care about their repution and if thats gone, they cant do business.

If your time horizon is longer, you might as well open an accountin US equities (if you live there, forget about emerging markets) and buy an exchange traded fund, that has exposure to the whole market (SPY). So basically your buying the SP500. You can expect a 10% annnual return with 20% standard deviation.

[Ancalagon]

Alright, looking for another misconception of mine to be cleared up. I look at the yield on a 30-day T-bill, let's say it's 3%, and I'm under the impression that if you bought a $1000 30-day T-bill at that rate then at the end of the month you'd have $30. Is that correct?

My confusion stems from a comment earlier mentioning that a checking account with a 5% interest rate would result in my initial $1000 deposit turning into a $1050 deposit by year end. Based on this, it would seem ludicrous to opt for putting the money in a checking account rather than in T-bills, assuming I don't intend to use that money for the 30-day period.

So, more help, please. And appreciate the advice given so far!

[Soriak]

Originally Posted by Ancalagon

Alright, looking for another misconception of mine to be cleared up. I look at the yield on a 30-day T-bill, let's say it's 3%, and I'm under the impression that if you bought a $1000 30-day T-bill at that rate then at the end of the month you'd have $30. Is that correct?

Interest is always in years - so that'd be $30 per year. If it's only for a month, you'd get $2.50.

[Morodrim]

Oh god no that would be a crazy good investment it is 3 percent per year not per month. Your goal really should be 10 percent per year, especially if your young you probably want something a little more rewarding, but that will entail more risk. 3 percent won't even beat inflation these days shoot for 10 percent imho especially since you are young you should look at some equities.

[chu]

Sign up for a discount brokerage and invest it into an index fund.

[Desx]

I would go get a scottrade or ameritrade account.. You learn a lot by investing in stocks and mutual funds. You may have some losses and gains, but you develop patience and an eye for the market.

[prescient63]

Just put it into a money market account. If all you have is $1000 to your name there is a good chance you are going to need to access that money quickly at some point. Having a cash reserve is your number one goal when beginning investing. Once you have a cash reserve AND proper insurance given your situation you can begin to invest money in the market. Actually you could begin before that but it definitely isn't optimal.

Think about it this way since the market is invariably volatile your investments over time will most likely gain in value but we are talking about a large time horizon here than a few months or a year. Ideally when investing into the market you are going to want at least a 5 year time horizon before you need to get that money. This is why you need to have a cash reserve.

[Desx]

were talking about a college student with $1000, of course he doesn't need to throw it away.. but I don't think he needs liquidate cash faster than a week or two. Invest it, buy some E-Trade while its low. Check on Nvidia too.

[prescient63]

Originally Posted by Desx

were talking about a college student with $1000,

Which is exactly why you should start good investing habits early.