Financial Advice for High School Students
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Financial Advice
Where to put Money that you have Saved
The best place to put money that you are saving for retirement and will not need for ten years is the stock market. That is where you can invest your money in almost any company you can imagine, such as Apple, Google, Target, Starbucks, Coca-Cola, UPS, etc.
How to Invest in the Stock Market
There are many places to invest in the stock market, including your local bank, but this is where I recommend since it has no investment minimum.
At Fidelity (www.fidelity.com), there is no minimum amount that you need to invest. It is possible to buy $5 worth of a mutual fund and be invested in the stock market. A mutual fund is a fund that has many stocks instead of just one. If you invest in one company, they could perform bad and their stock price could go way down. If they go bankrupt, you could lose all your money.
I recommend investing in a mutual fund because they hold lots of stocks. If one company in the mutual fund does really bad, it will not hurt you as much because it is only one company out of the many that are in the mutual fund.
The mutual funds at Fidelity that I would recommend are either an S&P 500 Index Fund or a Total Market index fund. An S&P 500 Index Fund contains the stocks of the 500 biggest companies in the US. It tries to match the performance of those companies. A Total Market index fund tries to match the performance of the whole stock market. Both of these funds are not trying to beat the market. They are just trying to match the market performance.
There is no minimum investment to open an account at Fidelity, and no minimum investment for many of the mutual funds at Fidelity. That means that as soon as you have some money to save for retirement, you can open an account at Fidelity and purchase some shares of a mutual fund.
Representatives at Fidelity will be able to help pick the mutual fund that is right for you. Look for a fund that has a low expense ratio. That is the fee you are paying to be able to invest in the fund. Some Fidelity mutual funds have a zero-expense ratio!
I would recommend to set it up to automatically buy a certain amount of the mutual fund you choose each month. You can easily link your bank account where you have money with your Fidelity account to have $XX of a mutual fund purchased each month. That way, you don’t have to remember to invest each month. It happens automatically.
The most important thing to do is to start investing for retirement now. Pick where you want to invest, open an account, and buy some shares of a mutual fund. Remember that the earlier you start, the more money you will have later.
Keep in mind that if you are younger than 18 years old, you will have to open a custodial account. Parents will have to control the account until you turn 18, at which time you can put the account in your name only.
Also make sure that you only invest money that you don’t need for 10 years in the stock market. That gives it time to recover if the market goes down.