I think I have a problem

[Andrew W]

I suppose it's better than uncontrollably spending, but I feel just as bad and just as guilty: I can't seem to stop throwing any and all savings I have into the stock market! Surely there must be something better I can be doing with my money?

 

I'm 21, still in college, and will be looking for a full-time job next year after I graduate. I only have a part-time student job which pays around $10k a year. I've essentially thrown all my savings from the last 3 years into stocks, and while they have been doing well so far, I can't help but stop feeling guilty. Part of me feels like those transfers of a few grand into stocks may just as well have been spent on a brand spanking new laptop or something of the sort.

 

I'd love to get the experts opinions on this. I'm not quite sure how healthy it is to be throwing my entire savings into these investments.

[LBCS]

I suppose it's better than uncontrollably spending, but I feel just as bad and just as guilty: I can't seem to stop throwing any and all savings I have into the stock market! Surely there must be something better I can be doing with my money?

 

I'm 21, still in college, and will be looking for a full-time job next year after I graduate. I only have a part-time student job which pays around $10k a year. I've essentially thrown all my savings from the last 3 years into stocks, and while they have been doing well so far, I can't help but stop feeling guilty. Part of me feels like those transfers of a few grand into stocks may just as well have been spent on a brand spanking new laptop or something of the sort.

 

I'd love to get the experts opinions on this. I'm not quite sure how healthy it is to be throwing my entire savings into these investments.

 

Dude, you are 21. Instead of worrying about the stock market start worrying about lining up some ***** for next week. What's wrong with you?

Edited November 6, 2009 by LBCS

[Kevin20]

I suppose it's better than uncontrollably spending, but I feel just as bad and just as guilty: I can't seem to stop throwing any and all savings I have into the stock market! Surely there must be something better I can be doing with my money?

 

I'm 21, still in college, and will be looking for a full-time job next year after I graduate. I only have a part-time student job which pays around $10k a year. I've essentially thrown all my savings from the last 3 years into stocks, and while they have been doing well so far, I can't help but stop feeling guilty. Part of me feels like those transfers of a few grand into stocks may just as well have been spent on a brand spanking new laptop or something of the sort.

 

I'd love to get the experts opinions on this. I'm not quite sure how healthy it is to be throwing my entire savings into these investments.

 

 

I was once like you but worse -- I threw every penny I could into stocks, despite having substantial credit card debt and no cash savings.

 

Don't worry about spending money on consumer goods -- if you don't need it don't buy it. Ideally though if you have excess income, you should be building up cash savings in addition to investing in the market. It may take you awhile to find a job. But even when you are working, you should have cash savings as a something to fall back on if you lose the job or otherwise experience unusual expenses. So you may as well get started on that now since you apparently can afford to.

 

You don't want to have to sell stocks every time you need some cash. Selling stocks is a taxable event, and the taxes add up, plus make it more complicate just to do your taxes. Also stocks of course are risky; cash savings won't suffer a market correction or tank and make half your savings disappear. Sooner or later, your stocks WILL (and if you don't believe that now, someday you will my friend). Prudent financial advice is to build up 6 months worth of monthly expenses as cash savings, and you may also want to look ahead to saving up a home down-payment, much of that should be saved as cash.

 

If you can get yourself into that position and avoid debt as you begin your working career, that would be fantastic and would let you get a great head start on retirement savings.

 

Also, you don't specifically say, but it's prudent to avoid buying on margin. Works great when stocks go up, but when they go down you can get eaten alive and wiped out surprisingly quickly. Your stocks may shrink in value but that margin debt does not.

 

Yes cash savings accounts are boring if you have an interest in the stock market, I realize that -- but this is good advice, take it from someone who knows.

Edited November 6, 2009 by Kevin20

[nothingtolose]

Assuming you have a liquid emergency fund, investing 100% of other savings in a diversified stock portfolio when you are that young is not crazy IMO. As long as you don't intend to pull out the money soon, you should be fine. Even with years like 1987 or 2008 stocks (spread across US and foreign) are IMO the way to go to ensure growth.