21 years old - how to invest 60k?
I’m a college student and have saved around 60k after a couple of different HF internships over the last few summers and winters.
I’ve opened a Roth IRA and maxed it w/ S&P, but I’m not sure what to do w/ the rest.
I am on scholarship and don’t have loans to pay back, but it seems like a shaky time to dump 40-50k in the market. Personally, I’m pretty pessimistic about this year’s outlook. However, I’m obviously not just going to hold cash for a year or two (other than maybe 5-10 thousand to travel Europe before start FT)
Appreciate any advice here. Thanks in advance.
Consider a few things.
1) If you don’t lose that money you have a fully funded emergency fund your first day at wherever you land.
2) In finance you will likely be able to put $60k+/yr in savings after 2-3 years if you have no consumer/student loans.
3) The most volatile years for personal finance are usually the first few because most people have no cash and bad credit so any major expense is going to have high interest.
4) While it doesn’t hurt to have a lump sum, the number of people I have met who credit $60k they made at summer jobs invested for being responsible for their successful retirement is zero. The number of people I have heard of who have done this are those dudes from the Big Short and that’s pretty much it.
I’d put it in savings and leverage having no debt/a full stocked EF when you start FT.
At the strip club
I saw this post earlier today and was hoping to see comments that are helpful to your situation, ideally by someone who actually invests money.
First of all, good for you for being in this situation and seriously thinking this through.
That being said, I disagree with the first comment. You should of course air on the side of caution, but I disagree with sticking $60,000 into a savings account when inflation is still close to double digits and because you have the benefit of starting early to build meaningful wealth. At the very least, you could stick some money into I-bonds to protect against inflation. Not saying to do this, but that is an already less worse decision than letting the cash sit and losing to inflation.
It is a difficult market environment but one important question is how long you're willing to tie up that cash. If you are long-term oriented, there are good deals in any market if you know where to look.
Will you be able to trade once you start working full time? / do you actually know how to pick individual stocks from your internships at HFs? If the answer to either of those is no, then I would skip investing in anything other than a money market fund / index fund. And then you have to consider timeline of needing the money and your appetite for risk:
If I had $60k that I probably didn’t need for the near term I would throw $40k-$50k in the S&P 500 and the rest into a money market fund (which are returning 4+% APY), just to have some cash on hand. As others have commented, you can also max a Roth IRA ($6k limit) / invest in inflation bonds ($10k limit).
Thank you this is helpful - any money market mutual fund suggestions?
Just look up with whoever your investment account is and they should have a website showing all the funds and what the 1-week yields are. If you live in New York, you can buy a NY muni fund which you aren’t taxed on, and the tax equivalent yields are like 6%+ right now.
You could also buy the actual bonds/CDs themselves and lock in whatever rate they are returning but then you have to hold them for 6months-a year at a minimum.
go to mykonos and blow it all in a week
thebrofessor please chime in. Lots of comments so far but I figured you do PWM and can provide insight.
Have you considered using that 60k as a deposit on an apartment? Would appreciate if others can chime in on whether this is a good idea or not as this is a process I have started.
Following
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Buy a Patek Philippe and put it in the bank.
I assume you’re in nyc, you’re going to need to buy furniture, put up a security deposit, update wardrobe, first months rent upfront, etc. I would say keep $30K in a money market yielding a few % pts to tuck away for when you move and that’ll be great start for emergency fund, allocate another portion for travel/fun because this is the last time you’ll have ample time in your life to do whatever you want, then toss the rest at a vanilla etf
Considering you are in the HF space. I would personally suggest to try and build an auditable track record in a simple equities strategy think long short or directional macro the most vanilla ones, then build that capital up while being conservative with risk.
This will be a prudent use of the capital along with helping you stand from other applicant if and when you choose to work at a fund.
Thaks
No one cares about the boring strategy of DCAing into index funds over a long time period until we get into a bear market like this one and suddenly the “bull geniuses” are realizing they aren’t actually that smart, and most of their gains have vanished into thin air. Even worse are the meme stock and crypto guys
You could always buy short-term treasuries for close to 5% yield if you don't want to deal with the stock market volatility. That's what I did for most of last year. Back then, yields were lower than they are now, but at least I made money instead of losing money in stocks.
If you think that stocks will continue to fall, then short-term high-grade bonds are an even more appealing investment than they were last year. However, if you think stocks will quickly recover and you don't mind the volatility, then the current prices are a pretty good discount if you want to get in for the long term.
Honestly don't recommend saving when you are that young and your future earnings are a lot rosier.....spread the utility throughout time bc in 10 years 60k compounded will mean a lot more... Another way to say that is your earnings are increasing at a faster rate than that money is compounding over next 10 years likely.
I didn't save in a very deliberate way until I made over 300k ish in a year for first time
10000% agree.
Invest in your happiness instead. Human brain is really easy to trick.
It will be way more rewarding on the long run, even more if you are considering a HF career.
Appreciate this. Was planning on spending a decent amount on travel and golf.
What's the best way to earn 4-5% in short-term fixed income? I want to be in something I can exit whenever and spend. Have compliance restrictions and can only buy mutual funds for the most part.
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IMO, other than any cash you need for expenses in the coming years, invest all of it in an S&P index fund (IVV, SPY, etc.). No point in trying to time the market.
Graphic & link to article about impact of missing x days of best performance & impact of overall returns:
but what's the probability of missing the X best days?
Also consider that for every Y% your investments decrease you need 100/(100-Y)% of gains to get back to your starting point. e.g. lose 20% you need to gain 25%, lose 50% you need to gain 100% ...
with this in mind, time in the markets may not beat timing the markets.
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Incremental gain from perfect market timing is pretty negligible relative to the risk you take of sitting on cash - Link to 20 year study
would be interesting to see how this changes with time horizon, 10yrs, 5yrs, 1yr etc
Don't want to hijack the thread, but would love to hear how you managed to get all these paid HF internships!
The top hedge funds usually pay a lot for the few undergrads they hire. I made ~25 per summer after tax.
Thanks!
Were these formal HF summer programs? DE shaw/Citadel/Point72..?
Since you’re only 21, invest 50 and drop 10 at clubs at your university and invite the baddest bitches out with you. You won’t regret it
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