# Just turned 18, how should I invest the money I came into?



## krampster2 (1 October 2014)

So an investment account that was opened upon my birth by my grandparents recently matured (when I turned 18). I have a bit over $7000 to invest, how should I go about it?

I have a full time job (working gap year) and will likely not be needing the money any time soon. Am wanting to invest in something or several things long term. Gold is definitely something I'm interested in as I've heard it's rather stable. Although of course I shouldn't put all my eggs in one basket, what else can I invest in? I don't know a lot about bonds, is that a viable choice for me?

I don't want anything that has to be actively maintained or that I have to spend a lot of time on, because I don't have a ton of spare time. Can anyone give me some tips or general strategies?


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## Value Collector (1 October 2014)

krampster2 said:


> So an investment account that was opened upon my birth by my grandparents recently matured (when I turned 18). I have a bit over $7000 to invest, how should I go about it?
> 
> I have a full time job (working gap year) and will likely not be needing the money any time soon. Am wanting to invest in something or several things long term. Gold is definitely something I'm interested in as I've heard it's rather stable. Although of course I shouldn't put all my eggs in one basket, what else can I invest in? I don't know a lot about bonds, is that a viable choice for me?
> 
> I don't want anything that has to be actively maintained or that I have to spend a lot of time on, because I don't have a ton of spare time. Can anyone give me some tips or general strategies?




Firstly, I am not an advisor and don't know your situation, so nothing I say is meant to be proper advise, I'm just giving you ideas to think about and study yourself.

at your age the best thing you can do is keep learning, read  books on investing and try to learn as much as you can. Decide whether your interested in trading or investing.

Basically there are two main options you have when it comes to long term investing in the share market. 

The first option is, You can try to pick individual companies you think are under valued or will be worth more in the future, This option has the highest possibility for large gains, However it has also got the possibility of the largest losses, I would only recommend it for people with a lot of business and accounting knowledge who want to dedicate the time and effort to finding the best investments.

The second option is what I would recommend to people who want a good long term investment strategy without  having to put in the time, effort and risk of picking individual shares / companies. I would recommend buying into what's called an "index fund".

Basically an index is a big list of companies, and by buying into an index fund you are taking an ownership interest in all the companies in that index. The index I would recommend is the "ASX200 index", 

The ASX 200 index, is made up of the 200 largest companies on the Australian share market, so by investing as little as $1000 into the asx200 index, you would own a really diverse portfolio of Australian businesses that include all the major banks, Coles and Woolworths, all the big miners, transport companies, Insurance companies, Westfield and other real estate businesses, health care companies, gas and electricity infrastructure businesses, food processors, packaging companies, wineries, etc etc, You will own a broad cross section of the economy .

By investing in the index over time, throughout the ups and downs of the share market you should be able to earn a compounded rate of about 8 - 12%.

most banks can assist you with getting into an index fund, and help you set up regular weekly or monthly contributions into it, the best strategy is to save a certain amount into it each week or month, that way when everyone is freaking out about share market crashes, you can feel good knowing your weekly contribution is buying you a larger slice of the economy because prices are lower. If you just continue saving into the index regardless of what the market does you will do well over time.


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## krampster2 (1 October 2014)

Value Collector said:


> Firstly, I am not an advisor and don't know your situation, so nothing I say is meant to be proper advise, I'm just giving you ideas to think about and study yourself.
> 
> at your age the best thing you can do is keep learning, read  books on investing and try to learn as much as you can. Decide whether your interested in trading or investing.
> 
> ...



Thanks for all the info. That does sound like a wise choice, but what about if there were to be another GFC? Looking at some charts of the ASX200 it doesn't look like it took it the last GFC very well. Gold on the other hand I believe increases in price during a crisis due to people flocking to it's stability. What if I were to invest in both? If a crisis were to happen then my index fund would go down and my gold investment up, hopefully canceling each other out and resulting in little to no loss.

I'm just throwing it out there though I have little knowledge of these things.


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## Value Collector (1 October 2014)

krampster2 said:


> Thanks for all the info. That does sound like a wise choice, but what about if there were to be another GFC? Looking at some charts of the ASX200 it doesn't look like it took it the last GFC very well. Gold on the other hand I believe increases in price during a crisis due to people flocking to it's stability. What if I were to invest in both? If a crisis were to happen then my index fund would go down and my gold investment up, hopefully canceling each other out and resulting in little to no loss.
> 
> I'm just throwing it out there though I have little knowledge of these things.




I don't invest in gold, I prefer to own assets that produce earnings, Gold just sits there, and the only way to make money in gold is to find someone in the future willing to pay you more for it, even though it hasn't changed. There is a whole thread dedicated to gold, lots of gold bugs in there though.

during market crashes is when you can make the best purchases of shares.

learn about the power of compounding returns, that will help you decide what's best for you long term


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## DeepState (1 October 2014)

krampster2 said:


> So an investment account that was opened upon my birth by my grandparents recently matured (when I turned 18). I have a bit over $7000 to invest, how should I go about it?
> 
> I have a full time job (working gap year) and will likely not be needing the money any time soon. Am wanting to invest in something or several things long term. Gold is definitely something I'm interested in as I've heard it's rather stable. Although of course I shouldn't put all my eggs in one basket, what else can I invest in? I don't know a lot about bonds, is that a viable choice for me?
> 
> I don't want anything that has to be actively maintained or that I have to spend a lot of time on, because I don't have a ton of spare time. Can anyone give me some tips or general strategies?




https://www.aussiestockforums.com/forums/showthread.php?t=28717


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## pixel (1 October 2014)

krampster2 said:


> Thanks for all the info. That does sound like a wise choice, but what about if there were to be another GFC? Looking at some charts of the ASX200 it doesn't look like it took it the last GFC very well. Gold on the other hand I believe increases in price during a crisis due to people flocking to it's stability. What if I were to invest in both? If a crisis were to happen then my index fund would go down and my gold investment up, hopefully canceling each other out and resulting in little to no loss.
> 
> I'm just throwing it out there though I have little knowledge of these things.




My first granddaughter also turned 18 earlier this year. I gave her a rare coin (5000 minted) of her birth year as a memento; by all means, I said, use it as jewelry or as a souvenir from your Pop; but don't consider it an item of "material value".

For that purpose, she received a cash injection to save or spend as she sees fit; but I strongly advised her *against *buying any bullion of any kind - last of all as a hedge against a GFC Mk 2. My reasons:
Since the last serious recession, tons of the stuff have been dug out and spread across emerging middle classes; many of whom believing in the "safe haven" theory of old. However, if "it" were to hit the fan, I believe it would be especially those new middle classes, who would try to maintain their status by selling off what they hoarded for just such an event. It's not necessary for conditions to become as bad as after WW2, when refugees from Eastern Europe would trade the family jewels for something to eat. 

The monthly chart below tells the story. I have highlighted the period of the last GFC from mid-2007 to mid-2009. While not to the exact extent of global indices, the price of gold has trended pretty much in sync with global markets. Only when the worst was over did it pick up the earlier trend - IMHO because of people's belief that bullion would allow them to remain "rich" in a crisis. 




Look what happened the last 3 years: High volume, falling prices. 
The conclusion I draw from this: Gold is a commodity that cam be traded the same way as shares: Buy when it's cheap, sell when it has peaked. It follows its own agenda and meandering trend, which depends on people's perception at any time. That makes it neither more nor less of a "Safe Haven" than any other instrument.


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## krampster2 (1 October 2014)

pixel said:


> My first granddaughter also turned 18 earlier this year. I gave her a rare coin (5000 minted) of her birth year as a memento; by all means, I said, use it as jewelry or as a souvenir from your Pop; but don't consider it an item of "material value".
> 
> For that purpose, she received a cash injection to save or spend as she sees fit; but I strongly advised her *against *buying any bullion of any kind - last of all as a hedge against a GFC Mk 2. My reasons:
> Since the last serious recession, tons of the stuff have been dug out and spread across emerging middle classes; many of whom believing in the "safe haven" theory of old. However, if "it" were to hit the fan, I believe it would be especially those new middle classes, who would try to maintain their status by selling off what they hoarded for just such an event. It's not necessary for conditions to become as bad as after WW2, when refugees from Eastern Europe would trade the family jewels for something to eat.
> ...




Good points, I did look at gold charts and was turned off by the last three years. Perhaps I will go with an index, it's just that naturally of course I'm worried about another crisis but I guess I'm not going to find many, if any, investments free of such worries.


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## pinkboy (1 October 2014)

krampster2 said:


> *So an investment account that was opened upon my birth *by my grandparents recently matured (when I turned 18). I have a bit over $7000 to invest, how should I go about it?
> 
> I have a full time job (working gap year) and *will likely not be needing the money any time soon.* Am wanting to invest in something or several things long term. Gold is definitely something I'm interested in as I've heard it's rather stable. Although of course I shouldn't put all my eggs in one basket, what else can I invest in? I don't know a lot about bonds, is that a viable choice for me?
> 
> I don't want anything that has to be actively maintained or that I have to spend a lot of time on, because I don't have a ton of spare time. Can anyone give me some tips or general strategies?






krampster2 said:


> Good points, I did look at gold charts and was turned off by the last three years. Perhaps I will go with an index, it's just that naturally of course *I'm worried about another crisis *but I guess I'm not going to find many, if any, investments free of such worries.




1.  You never had the money in the first instance, so its 'free money' at your disposal.  Good on you for wanting to invest it.  So, do so wisely.

2. You're not needing it anytime soon?  Then put it into an investment that has compounding returns, such as suggested above.  Gold may rise, gold may fall....but equities have dividends that can be rolled over and over and over, generating further cash and/or shares.  The power of compounding cannot be beat.

3.  Look at every chart.  What happens after every single crisis?  Recovery.  If you are not 'in need anytime soon' then let the compounding take effect, and let it ride the ups and downs....looking at the longterm trend of the market has been going up.


pinkboy


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## doctorj (1 October 2014)

[Insert standard disclaimer about not being an advisor etc]

Knowing what I know now, if I had my time again, I would be a little more risky. $7,000, whilst not insignificant, isn't such a great sum of money these days.

And so I would invest it in myself by trying to start a business.  Unless your long term plan is to be a trader, the best long term investors in the private equity world tend to have operational experience.  Even if you intend to be a passive stock market investor, the experience of having run something is invaluable.

As you're 18 and presumably a still a student, this is the best low risk time to start something.  You probably don't need to rely on the success of the business to eat and pay the bills, so you can afford to use your $7,000 on trying  something a bit innovative.

And don't let age be a barrier. I know some guys that had an idea in their very early 20's to do with live streaming of conferences.  So they went ahead and tried it, it seemed to get some interest and so they kept doing it. They eventually sold it a couple of years later for £100 million.

I know this is an unconventional opinion, but we live in an age of a modern gold rush. For the first time in the history of the world people can distribute their product/service for effectively 0 up front cost and they have access to a market of nearly 3 billion people.  The opportunity cost of ignoring it cannot be measured.


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## pixel (1 October 2014)

krampster2 said:


> Good points, I did look at gold charts and was turned off by the last three years. Perhaps I will go with an index, it's just that naturally of course I'm worried about another crisis but I guess I'm not going to find many, if any, investments free of such worries.




You said earlier, you don't want to constantly keep an eye on your portfolio. That could make an Index Fund a reasonable choice. You may not achieve as high gains as you could with individual shares, but you'd follow the general economy. If you chose an Accumulation Index, you wouldn't even have to watch dividends and their reinvestment because the Fund would do all that for you.
One responsibility you can't outsource, however, is the question "When do I get out?"
With individual shares, that involves an almost daily routine of monitoring and checking for increased risks. You don't want that. But even for an averaging fund, you'd be well advised to remain connected to the state of the economy as a whole. If you find a recession coming on, you may want to quickly divest your exposure to the falling average and park the money in something like a term deposit with guaranteed interest, however small. That would make the difference between being dumped to the ocean floor by a monster wave, and staying above water in a sheltered harbour.

Anyway: I commend you for your decision to save up and take charge of your financial future. With that attitude, I'm certain you'll get very far. Best of  luck and enjoy the ride.


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## krampster2 (1 October 2014)

doctorj said:


> [Insert standard disclaimer about not being an advisor etc]
> 
> Knowing what I know now, if I had my time again, I would be a little more risky. $7,000, whilst not insignificant, isn't such a great sum of money these days.
> 
> ...



I was considering starting something of my own too. A friend of a friend has a cheap source (which he won't unfortunately name) of protein powder and he does quite well selling it on Ebay. It's possible I could try something similar, just need to find a gap in the cheap supply of a certain product that's in great demand.

It's just that managing a full time job and a business of my own may be a bit much. Even if it's just a simple Ebay store.


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## krampster2 (1 October 2014)

pixel said:


> You said earlier, you don't want to constantly keep an eye on your portfolio. That could make an Index Fund a reasonable choice. You may not achieve as high gains as you could with individual shares, but you'd follow the general economy. If you chose an Accumulation Index, you wouldn't even have to watch dividends and their reinvestment because the Fund would do all that for you.
> One responsibility you can't outsource, however, is the question "When do I get out?"
> With individual shares, that involves an almost daily routine of monitoring and checking for increased risks. You don't want that. But even for an averaging fund, you'd be well advised to remain connected to the state of the economy as a whole. If you find a recession coming on, you may want to quickly divest your exposure to the falling average and park the money in something like a term deposit with guaranteed interest, however small. That would make the difference between being dumped to the ocean floor by a monster wave, and staying above water in a sheltered harbour.
> 
> Anyway: I commend you for your decision to save up and take charge of your financial future. With that attitude, I'm certain you'll get very far. Best of  luck and enjoy the ride.




Alright so from the feedback I've gotten here and from the results of some brief research I'm starting to like the idea of an index fund more. Question is where do I start? How do I go about deciding which fund to buy into? Which tools should I use? Of course I can't afford to fork out a ton for charting software and it's probably not necessary for just monitoring one index. Lastly, once I've bought in how do I keep track of things? I've heard many times over that paying too much attention to the media is a bad way to go about things and that you should make decisions based of your own research.


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## doctorj (1 October 2014)

krampster2 said:


> I was considering starting something of my own too. A friend of a friend has a cheap source (which he won't unfortunately name) of protein powder and he does quite well selling it on Ebay. It's possible I could try something similar, just need to find a gap in the cheap supply of a certain product that's in great demand.
> 
> It's just that managing a full time job and a business of my own may be a bit much. Even if it's just a simple Ebay store.




These things tend to be transient as you're not creating any value.  His play is probably just arbitraging pricing of products in different countries and the opportunity will very likely disappear as currencies move.  

On the other hand, if you can solve a problem by creating a product or service, then you're well on your way to generating a lot of value.  All you need to do is find something that takes too long, annoys you, is way more expensive than it should be or is exclusive for some reason and find a way to make it faster/easier/cheaper/more accessible. 

As an 18 year old, you have another massive advantage that most of us don't enjoy - you will have a much clearer understanding of what people want.


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## DeepState (1 October 2014)

krampster2 said:


> Looking at some charts of the ASX200 it doesn't look like it took it the last GFC very well. Gold on the other hand I believe increases in price during a crisis due to people flocking to it's stability. What if I were to invest in both? If a crisis were to happen then my index fund would go down and my gold investment up, hopefully canceling each other out and resulting in little to no loss.
> 
> I'm just throwing it out there though I have little knowledge of these things.




Here is some actual data to help you out.  Gold in AUD vs ASX 200 Accumulation.  Gold has clearly provided the type of diversification benefit you are referring to.  There has been almost no instance of a weak equity market which has not been associated with some sort of rally in Gold within a few months on either side of that date.  The gross features of the (inverse) relationship are plain to see in any case:




It's not something you'd load your portfolio up with.  Just wanted to confirm that the effect you are referring to is present.  There is a considerable debate within the forum participants as to whether it is a commodity, currency, regular asset, industrial input, consumption item, store of wealth... if you are interested, the following thread will keep you occupied for a couple of nights: https://www.aussiestockforums.com/forums/showthread.php?t=2366


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## krampster2 (1 October 2014)

DeepState said:


> Here is some actual data to help you out.  Gold in AUD vs ASX 200 Accumulation.  Gold has clearly provided the type of diversification benefit you are referring to.  There has been almost no instance of a weak equity market which has not been associated with some sort of rally in Gold within a few months on either side of that date.  The gross features of the (inverse) relationship are plain to see in any case:
> 
> View attachment 59635
> 
> ...



Thanks mate, I'll have a look through that thread. Anyway I'm off for tonight, will come back to this thread tomorrow afternoon.


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