Have about $4000 to invest.. Is it even worth it?

[jmoney1]

With me being a student and part time worker, and my wife a teacher, we have our 6 month emergency fund money set in place…which leaves only about $4000 left over to invest (I'm guessing in some type of growth stock mutual fund). So is $4000 really enough to be worth placing in mutual funds? If so, any recommendations? And this is def money that is meant to sit and grow.. Ideally, earning interest above 8% would be nice! Thanks for all of your advice.

[disneysteve]

That's certainly enough to get started. If this is money intended for retirement, open a Roth IRA and put it in there. You can do that through a company like Vanguard, Fidelity, or T. Rowe Price. $4,000 exceeds any minimum investment requirements (except for a few specialized funds) so you'd be all set. Start the account and then add to it every year as you are able.

[Petunia 100]

Yes, if you have 4k you can set aside for long-term growth, it is absolutely worth it. Most of us do not build big nest eggs by starting with a large sum, most of us get there $100 and $200 at a time.

Having read a bit about Modern Portfolio Theory, I am a staunch believer in investing via index funds. Instead of trying to determine which stocks/bonds are the best to own, an index fund simply buys a little of the entire market. The advantages are: investing this way eliminates guesswork AND keeps costs ultra low. Over time, index funds outperform a whopping 80% of all actively managed funds. There are few guarantees in investing, so I grab the ones I can, and I recommend others do the same.

I suggest you open an IRA (traditional or Roth) with a quality custodian, such as Vanguard. Invest your 4k in a Target Retirement Fund. At Vanguard, if you elect to have your statements delivered electronically rather than via US mail, you will pay no annual custodial fee. You will never pay a fee to buy/sell, or pay any sort of commission. You will pay only the rock bottom expense ratio of the index funds. This means that more of your money stays in your account, working for you.

If you prefer, you can split your 4k and open two IRAs, one for you and one for your spouse. At Vanguard, you only need 1k to invest in a Target Retirement Fund, so you have plenty to open two accounts if that is what you choose to do.

[disneysteve]

Most of us do not build big nest eggs by starting with a large sum, most of us get there $100 and $200 at a time. .

Great point. We opened our first mutual fund account in 1992 with a $50 deposit and signed up to add $50/month. That same account now has about $55,000 in it and we stopped adding to it years ago. Our portfolio is now over $700,000 but it started back then with that first $50.

[Petunia 100]

Great point. We opened our first mutual fund account in 1992 with a $50 deposit and signed up to add $50/month. That same account now has about $55,000 in it and we stopped adding to it years ago. Our portfolio is now over $700,000 but it started back then with that first $50.

I started with $20 per paycheck in 1998. It took me YEARS to amass 4k.

[KTP]

I rolled over my 401K from a previous employer to a IRA and invested it (at Etrade of all places). The rollover amount was $1700 (something like $1705 to be more exact). This was in 2001.

I have not added a dime to that account and today it sits at $67,544.32

Think about that before you scoff at $4000.

[jpham540]

I will also have to agree with Petunia, I am also an index investor and indexing is the way to go. Check out the boglehead forum and research the 3 fund portfolio. Although I do have some stock the majority of my money is in vanguard index funds.

[jmoney1]

Wow can't thank you all enough. That truly makes thè future seem hopeful. I hope you all know your advice is literally saving lives.

[jmoney1]

With the Target retirement fund, around what rate of return might I expect? Thank you

[disneysteve]

With the Target retirement fund, around what rate of return might I expect? Thank you

It depends on a bunch of factors. How old are you? What target year would you be selecting? How will the market perform between now and that year?

You can go to Vanguard.com and check the performance history of their target funds. For example, the 2050 fund (if you are 30-ish years old) has an average annual return of 6.89% since inception in 2006.

[feh]

With the Target retirement fund, around what rate of return might I expect? Thank you

There's no way to know. Anybody that says they can predict what the market will return is lying to you.

You've taken your first step down the path. Please read this page for further info:

http://www.bogleheads.org/wiki/Bogleheads%C2%AE_investing_start-up_kit

[snafu]

Good on you and DW for getting an EF in place. I too recommend you start with the Vanguard Index fund for ROTH and find a way to eek out $ 50. each month on their automatic withdraw program. It's critical to know the fees and MER [Management Expense Ratio] as these expenses silently move from your pocket to salesman's. As income increases, boost monthly contribution and you can split holdings into other sectors as you wish. Please understand that there will be ups and downs but on downturns you will be buying more units and forging ahead.

There are several quick reads that might make you more comfortable with the process like The Automatic Millionaire [David Bach] available at most libraries or on-line booksellers like abebooks.com

[jamiesmoneyadvice]

Diversify

You should get started on investing. $4k is a fine start but make sure to diversify it. Stock markets and funds stink. Spread it across many areas for safety.

[JadeSmith]

Thats enough to take a start...for retirement go for retirment funds or else look for short portfolios.

[bjl584]

To answer your original question; yes, it is definitely worth it to get started investing.

For some perspective, I graduated college in 2000 with about the same amount that you have now. Today, 14 years later, I have almost $300,000 in my investment portfolio.