Join our investing community

First Investment Help Needed

Discussion in 'General Investing Discussion' started by Johny_come_lately, 29th Jul, 2010.

  1. Johny_come_lately

    Johny_come_lately Well-Known Member

    Joined:
    1st Jul, 2009
    Posts:
    703
    Location:
    SE Queensland
    I have a young friend soon to start his first job. What options does he have after he has saved $2000.00. Where should he go?





    Thanks,
    Johny.
     
  2. Johny_come_lately

    Johny_come_lately Well-Known Member

    Joined:
    1st Jul, 2009
    Posts:
    703
    Location:
    SE Queensland
    I guess the above post sounds like all the new begginer posts and is too open ended. So I will change the question.

    What advice would you give a young man starting out in the workforce?





    Thanks,
    Johny.
     
  3. sav

    sav Member

    Joined:
    23rd Jul, 2010
    Posts:
    15
    Location:
    Darwin, NT
    I made the mistake of being in the workforce for over 10 years before even thinking about investing :(

    So the advice I would give is don’t do what I did…start learning about finance and investment now. Then when he has the $2000 (or however much) he can invest in a way he has learnt about and has confidence in/passion for. In the meantime put any extra income in a high interest online savings account.

    The other advice I would give is don’t just blindly take the default Super option. Take an interest in the options available in his Super fund and make an informed decision.
     
  4. Jenni

    Jenni Active Member

    Joined:
    27th May, 2009
    Posts:
    34
    Location:
    Brisbane, Qld
    Hi

    I'd suggest he start by educating himself (I know it sounds boring) and to do this start by reading widely. Marcus Padley's Stockmarket Secrets is one book to look out for (Brisbane libraries have it). Maybe also take his advice in his column:

    The vital first step to staying afloat

    Best of luck.
     
  5. Simon Hampel

    Simon Hampel Co-founder Staff Member

    Joined:
    9th Jun, 2005
    Posts:
    4,623
    Location:
    Sydney, Australia
    The first step should always be for them to spend some time thinking through their goals in life.

    Where do they see themselves in 5 years time? 10 years time? etc

    Are they planning on getting married and settling down? Travelling the world? Just having fun? Do they want to retire early? Do they want to own their own home?

    It's not about locking yourself into a course of action - it's about getting your thinking straight about where you want to head and about setting some realistic short-medium term goals to aim for. Start with some easily achievable ones (helps keep you motivated), such as saving $5000 and being free of personal debt. Write them down! And don't be afraid to modify them and add more goals along the way.

    I wouldn't ask the question "what should I do with $2000", I would ask the question "what are you trying to achieve - what is your goal" ?

    I always suggest that people should aim to avoid all personal debt. Owning your own home is the one exception, and it also might be necessary to buy a car using a loan at some point, but that should be a modest loan and should be paid off as soon as possible.

    You get much better bang-for-the-buck with paying down credit card debts (often 18%+ interest!!), or personal/car loans (12%+ interest), than you would doing pretty much anything else with the money (without taking significant risk) ... and what's worse you are generally paying for that debt with AFTER-tax money, which makes it even more expensive.

    I also recommend that people set aside a cash buffer of at least 6 months worth of expenses to cater for unexpected emergencies. Just park it in a high-interest savings account that you can't access via ATM, but can access at call when you need it).

    Practice the discipline of spending less than you earn.

    I really wouldn't be looking to do much with $2000 if he doesn't have any other money to his name. I would start by saving a cash buffer first, and then once he has at least $5000 in additional cash available that he won't need within the next 5+ years (unlikely at that age!?), then he could start looking at learning about the sharemarket.

    That's my thoughts anyway.