Expert: Paul Henneman - 3/18/2004

Question
Hi, I'm 15 and recently got a job. For starters, I wanted to know how to make a fairly safe investement that would mature in or a little more than a decade. What kind of bond should I get, how can I get it (where do I go), and how much should I invest? What would be the best route in making a strong profile but that wouldn't need a lot of experience to handle?
Thanks for helping,
Marvin

Answer
Marvin,
   Thank you for your question! I'm pleased by your interest to invest so early. The way interest compounds over time, if you begin to sharpen your knowledge and discipline now to invest, your life will be greatly enhanced in the future.
   I'll start with the easiest question: How much should you invest? As much as possible. Do not try to achieve unrealistic goals, but invest as much as you can. You should still have enough money on hand to enjoy yourself, and meet unexpected expenses. Your investments should be off limits for daily needs. But, you can always withdraw your investments in the case of a real emergency, just do not get into the habit of doing this so that they will continue to grow.
  What to invest in? I recommend a money market account to start. This is a totally safe investment to start with. The interest is low, but secure. A money market account operates much like a checking account, except that you earn interest on your balance. You can even write checks on most money market accounts if you need the money in an emergency. The best money market account I am aware of is with NetBank (www.NetBank.com). They offer the highest interest rate, and are federally insured so your money is safe. You can sign up right online, and mail off your first deposit! There are other good ones out there, look for at least 1.5% interest and federally insured if you want to investigate others.
   I would invest in the money market for the first year or two. Save up as much as you can. I would not recommend bonds, as they are more risky and do not offer much more interest than the money market account. This gives you a year of planned investing, and time to learn about more aggressive investments that can return much more. But, they are more risky and require that you do some research and begin a life long process of building your knowledge and carefully adding to your investments.  
  There are some good introductory books that can help you with this. I like 'Investing for Dummies' the best. It is available on www.Amazon.com and offers the foundation of knowledge on a wide variety of investment types that you will neeed to know to begin to think about what fits you best. I recommend that you pay closest attention to the mutual fund section. When you are ready to invest in mutual funds, I strongly suggest that you do so in several, not just one. It is better to have less money in several mutual funds than all of your money in one mutual fund. You will see what I mean after reading the book.
  Another great book to have on hand is "Barrons Dictionary of Financial Terms". You will always come across terms that you do not recognize or understand fully. I still use this book each day, after years of working in finance. I strongly recommend that you get a copy, also at www.Amazon.com   With these two books, you can begin a life long process of learning and thinking about your investments. If you have the discipline to save and not spend on things such as whatever is the current trend, your portfolio will grow and you no matter what your occcupation, you will have a very comfortable life. I applaud your early interest!
   I hope this helps get you started. Please do not hesitate to follow up with me if I can be of any further service!

Sincerely,
Paul Henneman
President
ValuEngine, Inc.
www.ValuEngine.com