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One of the scribes that I work with asked me a series of questions by email recently. He's very close to professional school. Below are his questions and my replies. Any other opinions?
"1. What would be the best long term investment to make at my age (19)?
2. What would you recommend for short term with a slightly higher risk?
3. Which ETFs are favorable in following the NASDAQ and S&P 500 (or other strong insex funds)?
4. What percentage of my savings should be allocated towards these investments?
5. Any recommendation for decent online brokers?"
1. Long term it is hard to argue against index funds that track broad markets. Right now keeping your expenses low (think car, phone bill, rent/housing expenses) is probably more important than any specific investment.
2. I don't find short term high risk investments appealing anymore. I lost $8k on a high risk bet during med school. What I want is boring long term stable growth with as close to a guarantee of future financial independence as possible. Short term high risk to me is essentially gambling on my future.
3. It is hard to go wrong with the Vanguard or Fidelity ETFs. Vanguard etf is a free transaction if you set up an account with them. I have a small amount of the VTI etf which is a total market fund.
4. A specific percent may be a hard number. A goal of 20-30% savings rate for retirement once you are out of schooling is what we target. I currently try for 50%. Right now, any savings you need to be able to spend in the next 5 years should probably just be placed in a high yield savings account like ally or discover bank. If you are taking money out for school, then I wouldn't advise investing much. If school is paid for then I'd keep an emergency fund of up to 6 months of expenses and then invest the rest.
5. If you want etf access for free, I would go with Vanguard.
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