If you never invested before...

[Tykimeister]

,only have money in a savings account, early 20's, and have an extra $500 to burn. What would you invest in NOW?

Not just stock, bonds, money markets, etc. But would you throw it in an IRA, a roth, CD? Oh yes, you wont be touching this money tell you retire and you plan to contribute more money to it each year. More and more each year.

 

[kyounge1956]

,only have money in a savings account, early 20's, and have an extra $500 to burn. What would you invest in NOW?

Not just stock, bonds, money markets, etc. But would you throw it in an IRA, a roth, CD? Oh yes, you wont be touching this money tell you retire and you plan to contribute more money to it each year. More and more each year.

I personally would be inclined to reduce debt before thinking about what to invest in, especially at such a young age. If you don't have any debts, bravo!

 

[bbbamI]

If you have no credit card debt with high interest, enough money in a MM for emergencies, and max out your 401k...I suggest a Roth IRA.

 

[dex]

Assuming no debt - Corporate High Yield bonds

 

[Dawg52]

Gold. You heard it here first.

 

[Darryl]

Eliminate all your debt.
Stash 3 months to a year of living expenses in safe liquid insured products saving acct, CD's etc...
401k up to the company match
Roth
Reading time:
Dave Ramsey Total Money Makeover
Bogleheads guide to investing
Four Pillars
Etc...
You are already ahead of the crowd just by getting started good luck.

 

[Tykimeister]

The only debt I have is my student loans. I don't have to start paying them back tell after I graduate, but it is a concern. I will be applying for a good job that I think I will get this month. Then, after graduating in May I will be going to a police academy this summer. I plan to have my debt payed off by the end of this year. Should I send some money into a ROTH now, or should I widdle away at the debt? I own my car, I have no rent, and my insurance is payed up for the next 6 months. I feel 100% secure starting something now. However, where is another story. I think I will start a ROTH at Wells Fargo some time soon since I don't have enough for an initial investment at vangard; my place of choice.
Ty

 

[Frugality_of_Apathy]

If you don't have an emergency fund I'd keep enough money in an old fashioned savings account to feed and house you and pay any bills for a month just in case something comes up quickly. Like a blown head gasket or unexpectedly having to find a place to live in 24 hours. Then once you have that money you'll want two or three months of more money in a laddered CD system.

Nothing sets you back faster than needing money immediately and not having it on hand forcing you to use credit.

After you've got that safety net, then you can start worrying about where to invest.

 

[ziggy29]

If you don't have an emergency fund I'd keep enough money in an old fashioned savings account to feed and house you and pay any bills for a month just in case something comes up quickly. Like a blown head gasket or unexpectedly having to find a place to live in 24 hours. Then once you have that money you'll want two or three months of more money in a laddered CD system

Agreed. I'd also add that in this economic environment and job situation, I'd be inclined to make this pile of cash larger than usual. The traditional wisdom says 3-6 months of living expenses, but in this environment I'd be more comfortable with 6-12 months unless you know you're in a VERY secure job or in a field where jobs are still relatively plentiful (i.e. health care).

 

[Tykimeister]

I realize and understand the importance of an emergency fund, but this isn't really what I wanted to discuss. Assuming you had everything in check, what would you invest this $500 in?

 

[Frugality_of_Apathy]

Personally I'd buy some gold as it looks like we're in for some heafty inflation the next couple years.

 

[clifp]

Unfortunately many of the best mutual funds (especially index funds) have a minimum investment in the $1500+ range. Still there are many funds that have allow a $500 investment. I would stay away from individual stocks until you have a portfolio approaching $10,000 and/or several years of investing.

Given your age I'd be comfortable in investing in any highly rated domestic or international mutual. I think the potential returns are highest in small growth companies, and the emerging markets (because these are the type of stocks that have fallen them most. But with prices so depressed over a 10 year period I think there is an excellent chance that your $500 will grow to $1,000 and decent chance $1500-$2000 in the next decade or so

Morningstar is the main rating company that rates mutual funds. You can use the screening tool Morningstar provides here to look for highly rated (4 or 5 star funds) with a minimum investment of $500.

 

[dinodino]

I'm going to second the suggestions to build a fund equal to 6-12 months' worth of living expenses. Once you've done that, kill your debt as quickly as you can. Dave Ramsey's podcasts and books would be good for motivation for this. I disagree with Dave's $1000 emergency fund "baby step," as I think $1000 is too small, but the rest of his get-out-of-debt advice is good. Just ignore what he says about investing!

 

[brewer12345]

I'd probably wait until I had $1000 and then invest in the Vanguard Star fund.

 

[ziggy29]

I realize and understand the importance of an emergency fund, but this isn't really what I wanted to discuss. Assuming you had everything in check, what would you invest this $500 in?

See, the problem is that for most people this isn't assumed. They may have nothing in the bank, they may have $10000 of debt, and then they come into a $3000 windfall and ask where they should invest it.

SO assuming you had the usual bases covered (emergency fund established, non-mortgage debt paid off), my first investments would be something like a total stock market index fund in a Roth IRA, but the amount in question ($500) may not be enough to open some accounts or positions without fees, if at all.

Again, this is assuming all your other financial circumstances are configured properly as I mentioned above. If they aren't, then "what you didn't want to discuss" is what you should be doing, rather than investing.