This being my first FWF post, I'm not sure how to properly approach it... but I feel stuck financially.
I'm a 21yr old college student who isn't necessarily in a bad position, but would like to financially grow. I've saved up about $30,000 & have no expenses. I will graduate with only about 10k owed & will have a degree in Finance. I never really "splurge" on shopping and stupid expenses. The most unnecessary thing I probably spend my money on is going out for food too much (which is never really expensive food). I've always held a job, but have gotten laid off in the last year and figured I'd take the opportunity to stack up on credits and finish school.
Out of the 30k I have, 20k of that is used in my stock portfolio and I casually day trade throughout the week. Sometimes I do well for the week and obviously sometimes I do poorly. I tend to go for the riskier investments just out of fun & adrenaline, more profitable, and I highly believe that I'm young and should be high risk (as long as its MANAGED risk). In 2014 I launched a business which had more unprofitable weeks than profitable ones so as a result, I decided to close the business in 2016. Managing my business and also working full-time felt great, even if the business was a failure in the end - this might be because I felt productive and I was proud of myself for attempting something.
I'm always told that I shouldn't stress so much because I'm yet to graduate and "things take time" but I find it hard to accept. I feel as if I am not proactive enough with trying to make my money grow....or rather, I don't really know how to go about making it grow. I also feel like I am managing my money in a generally good way, but am not seeing anything in return. I really am not too fond of the idea that I'll have to wait for a job and build capital before investing to see a major difference. I just feel like I have a decent amount of money saved up for someone my age and I should be taking advantage of that now.
I guess my question is, are there any other methods besides the traditional stock investing or entrepreneurial business venture that you FWF pros would suggest if you were in my position? Sorry, I feel like I rambled all over the place.
I would suggest you stop day trading. Don't be fooled by your track record alone, every strategy has made a killing in stocks for almost 10 years now. You do have good savings, but you describe your trading as gambling. That just doesn't work out in the overwhelming majority of cases. If "not seeing anything in return" means you haven't had outstanding returns the last few years, you've proven the theory.
Keep your expenses low and of real value to you - sounds like you must have a good handle on that already. Impatience is not a good attribute for building wealth.
Not sure what your expectations are as far as making your money grow. But I think you've already nailed it as far as investing or trowing a business. I think building a business is probably your best option as far as increasing your wealth in your situation.
The only other thing I can suggest is investing in your education further. I don't know the value of MBAs in general but I understand if you can get into one of the high ranked programs its worth doing.
One thing : Day trading is just gambling. If you've had some success then its almost certainly just luck.
SlimTim said: I would suggest you stop day trading. Don't be fooled by your track record alone, every strategy has made a killing in stocks for almost 10 years now. You do have good savings, but you describe your trading as gambling. That just doesn't work out in the overwhelming majority of cases. If "not seeing anything in return" means you haven't had outstanding returns the last few years, you've proven the theory.
Keep your expenses low and of real value to you - sounds like you must have a good handle on that already. Impatience is not a good attribute for building wealth. You're right, as of recently I find myself throwing way too much of my portfolio into one thing, which is stupid. Thank you for your input. I have to work on the patience part of it.
How did you come up with the 30k? Earnings from job? Business? Inheritance? How are you paying for school (besides the 10k owed)? Parents? Trust fund? I believe you live with parents right now who pay all your living expenses. How long do you have to graduate?
Thank you everyone for the input and replies - It's appreciated. A part of me wants to admit patience at this point is hard....but at the same time, I believe I'm a very patient person. I think I just feel as if I am capable of more but I'm not sure what "more" is yet.
Also, I know it sounds ideal to invest in my education further (and i agree completely), but it's a constant battle with my happiness when I'm sitting in school. Maybe thats why I feel the need to have a plan now.
I mean, I understand no one likes school or work... or responsibility for that matter, but I hate to have to depend on my school success to back my financial success.. you know? I learn more in an hour on FWF than in one of my lectures.
Dont get me wrong, I'm not shooting down anyone's suggestions at all because they are really appreciated...
I would agree with the sentiments of others. Day trading is gambling. There's nothing wrong with it as something fun to do, just treat it as such (and make sure you don't run into regulatory problems-not sure if these exist as I don't really know much about day trading, but I've gotten the letters from my broker that I violated some rule about trading within three days of selling a stock or something like that). It's like playing blackjack (with both a greater upside and greater downside).
As for other things to do, are you enjoying school? If so, I'd say put most of your effort into school. If not, and you're just trying to get the credits in, do you have any other ideas for businesses (services that you would like to see improved/created)? If not, maybe take the time to figure out what went wrong in the previous business so you avoid those mistakes in the future.
fwuser12 said: How did you come up with the 30k? Earnings from job? Business? Inheritance? How are you paying for school (besides the 10k owed)? Parents? Trust fund? I believe you live with parents right now who pay all your living expenses. How long do you have to graduate? 1) Savings from working 2) Mixture of myself and parents- 6.5k a year roughly on tuition. Paid in full every year 3) yes 4) Will finish all my credits in December
I wish I was half as smart as you are at your age Time is on your side. Learn to manage risks, don't need to play with fire (e.g. day trading) to succeed. Diversify your investments, gain marketable skills in your field and stay away from leechers (if you know what I mean).
CeeJay24 said: I guess my question is, are there any other methods besides the traditional stock investing or entrepreneurial business venture that you FWF pros would suggest if you were in my position? Sorry, I feel like I rambled all over the place.
What type of career are you interested in? Do something that will improve your skills in that area.
Make sure you max out a ROTH IRA every year with your investment money. That way over the next 40 years it can grow tax free (hopefully).
Find a side job in your free time. Why not setup some tutoring business for High School and College Freshmen. I did some of that in college and its crazy what some families will pay to get Billy Boy through High School math with a decent grade.
OP needs to stop playing investment games with professionals and should instead first focus on: 1. Maxing out any Tax Advantage accounts. Especially a ROTH one while your yearly income is low. 401k/IRA 2. Having your money in individual stocks at your age, your education, and time commitment is equivalent to playing roulette at Vegas. Except you probably have better odds in Vegas. 3. Worry about your career. You're still in college based on your post, right? You need to be looking around for opportunities now, as well as distancing yourself for others. It's a dog eat dog world, you're going to pop out of college with a finance degree along with 100,000 other people with the same degree. Why should they hire you? You can't possibly do enough here.
1.) Live below your means, sure there is a balance and dining out at inexpensive places is fine in moderation, but aim to save as much as you can. Watch out for recurring costs like cable and cell phone that add up over time. (Sounds like you are pretty well on track here.) 2.) Open a Roth IRA at a low-cost provider and stop the day-trading, or limit it to a small fraction of your portfolio. Broad cheap index funds are boring, but resist the temptation to constantly try to "tweak" or "beat" someone else. 3.) Use your education to either find a good career or start a profitable business, or work in the field you're interested in to learn the ropes & make contacts before starting your business. Saving is critical, but you do need to earn money too. 4.) Continue saving and avoid "lifestyle creep" as much as possible, even as you earn more money. Believe me, if you get married & have kids, that will add a great deal to your non-discretionary spending ("burn rate") even if you remain frugal generally -- for me it was 4x. If you add on designer watches and crap, it becomes hard to save anything. 5.) Have patience. Keep building the foundation one layer at a time and let your stocks/bonds/house value go up quite a bit in the next 30 years.
CeeJay24 said: I mean, I understand no one likes school or work... or responsibility for that matter, but I hate to have to depend on my school success to back my financial success.. you know? I learn more in an hour on FWF than in one of my lectures. As flattering as it is to learn that FWF community is educating you, it is not by a long shot, a substitute for a college degree in Finance. Yes, you may lean many valuable "life/finance lessons" on FWF but it is not either/or when it comes to a college degree and FWF. You need both. Spend an hour on FWF a day and at least 8-10 hours on school work; plus whatever other activities your campus offers.
You're doing very well for your age. Just open and contribute to a Roth IRA, focus on getting an offer/full-time job, travel if you'd like to, and go have some fun. The things you're able to do in your early twenties, you can't really do later on in life for a variety of reasons: marriage, friends move away, kids, harder to meet people. Enjoy it while you're young -- life isn't just about net worth.
If you do open an IRA like many have recommended (and I recommend as well), you may not want to do day trading in that account. I'm not sure what the rules are, but I remember there being rules about day trading in an IRA.
I'd also recommend that you hold off until April to open up the IRA (unless there's a specific reason you want to do it right now). Doubtful we'll see any changes before April to the tax code because Trump has said he wants to deal with ACA first, but it can be a pain to reverse contributions and close accounts, so might as well just wait 1.5 months.
My recommendations: 1) As many others have said, don't daytrade. It's just gambling since you don't have any info that the people on the other end of the trade don't have as well. In fact, many of them probably have more info about the company than you, and you will lose as a result. That money is not "play" money. You really need it. Wait till you have a million saved up before you start gambling some of it.
2) Invest your 30K towards getting an MBA from a good private school. If you're going to work in business, the contacts you make will be invaluable, and top firms only hire from top schools. You can easily double your salary vs stopping now, and if you have what it takes (and are willing to work 24/7 for some years), it's a ticket to upper management and real wealth. It's the best investment of the $30K that you can make at this time. There are no "get rich quick" schemes. You have to work for it.
Also keep in mind you're rich in time right now. Both in hours per week and years until you need retirement dollars. Try some stuff that you won't have time to later. Live in another country, go backpacking, volunteer. Plenty of time to earn paychecks and start new businesses but the hours get shorter as you trade possibilities for certainties.
If you are good with math and analytics , spend your time in educating in Machine Learning and Python programming. Prepare yourself for an exciting career or your own startup with that knowledge. ML is very hot right now for financial analysis.
Very smart and lucky young man. Please stop stressing, you are way ahead I Graduated $15,000 in dept and with $2000 in life savings . I was not fortunate enough to have parents that could help me ... I worked 2 jobs to pay for school and pay rent
Firstly, I would like to thank all of you for your input. It's deeply appreciated. I appreciate all of the positive reinforcements and kind words.
Seems like the overall sentiment I've read was to contribute to my IRA (which I have not done, but plan to do- probably after April). Thank you.
Also, I would like to clear up my statement about day trading as it seems to have sparked interest. Yes, I'm fully aware daytrading is generally seen as gambling; I agree to an extent. Though, I feel the need to defend myself a bit. Not in denial or rejecting anyone's input..just defending myself a bit. I Definitely am not an experienced trader compared to lots on you on this board but I have about..hmmm..I would say 5 years of experience (paper traded when 16, opened an account @18) and I like to pride myself that I'm a bit more knowledgeable than to just gamble and throw money into things guessing & trading off of hope; that's not what I meant at all. I generally Like to trade ETFs as of recently (Gold Mining ETFs, Natural Gas, etc.) and catch the momentum on things and I'm on Stocktwits, seeking alpha, marketwatch, WSJ pretty religiously. I actually really enjoy it. That's beside the point tho.
Anyways, I know it isnt ideal to trade as such...but I just want you all to understand that as of recently, I've been more actively trading because...well...I'm unemployed and have lots of time to focus on it. It's all really interesting to me and with the degree I plan on getting, I would like to one day be anything along the line of a broker, data analyst, and shooting high..even a fund manager. That's in the long run though.
Thank you to those who have suggested things other than an IRA as well. If someone told me they think it would be cool to start a food truck with my money, I would even appreciate that!
The reason I launched my first business in the first place several years ago was because I always loved the entrepreneurial feeling it gave me. I personally believe there is nothing wrong with both routes; the FWF "Tips and Tricks" to building wealth through such tools as an IRA and focusing on career advances.....and then there's the other route of investing in the creation a product or service with the money I have. Like I mentioned, maybe I feel this way because I would love to do more down this second route...but i Just dont know what "more" consists of yet. I feel like I should take risk now, while I'm young and can afford too without failure setting me back too much. dont you agree with that somewhat?
Once again, thank you all for all of the responses. They really got me thinking today.
I think if you get a chance, or maybe you should start your research, real estate investing is one of the best way to invest, especially when you're so young. I started around 25 and 10 years later I ended up with 4 properties, sold 3 that in hindsight I shouldn't have sold. It enabled me to quit my full time job and be a stay at home mom. Learned a lot about how to maintain a house, how to fix up simple stuff, design, dealing with tenants, and the best financial decision I've ever made. I tried being a day trader but my focus isn't there and the risk is too high for me. Real estate was almost foolproof. I had wished that when I was in college, I had the foresight to buy houses that I can then rent out to roommates and basically live rent free for my college years. Of course, that might require some co-signing by your parents if you don't have the income for it.
CeeJay24 said: Also, I would like to clear up my statement about day trading as it seems to have sparked interest. Yes, I'm fully aware daytrading is generally seen as gambling; I agree to an extent. Though, I feel the need to defend myself a bit. Not in denial or rejecting anyone's input..just defending myself a bit. I Definitely am not an experienced trader compared to lots on you on this board but I have about..hmmm..I would say 5 years of experience (paper traded when 16, opened an account @18) and I like to pride myself that I'm a bit more knowledgeable than to just gamble and throw money into things guessing & trading off of hope; that's not what I meant at all. I generally Like to trade ETFs as of recently (Gold Mining ETFs, Natural Gas, etc.) and catch the momentum on things and I'm on Stocktwits, seeking alpha, marketwatch, WSJ pretty religiously. I actually really enjoy it. That's beside the point tho.
Have you objectively measured what your investment returns are? Take into account money invested, date(s) invested, fees, gain/loss etc. How does that compare with say a simple market return over that period (use S&P 500 or other broad market index as a proxy for the market). Also, how many hours have you put into it.
The vast majority of people dont do well day trading (your 5 years of experience not withstanding). Even the ones that do well, dont necessarily can consistently do it in future.
CeeJay24 said: Think about it this way. Literally everyone wants to make their money grow. The quicker the better. If it was easy, no one would be poor.
In any safe investment, your money is going to grow slowly. Daytrading is terrible. You are gambling against very very smart people with millions or billions of dollars.
In my view you should be doing 3 things now. 1. investing in boring index funds and allowing the growth to compound over time 2. having fun in a somewhat financially responsible manner 3. doing everything you can get get a higher paying career. While your 30k might turn into 40k in 4 years, getting into a highly paid in-demand field will net you millions over your lifetime.
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