Savings and investments: A brief overview for fresh graduates

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By: NathanielCopeland
on 2nd Aug,2012

The public debt load of America is past the $15 trillion mark and the worst affected section of the population seems to be students.
Savings and investments: A brief overview for fresh graduates

The public debt load of America is past the $15 trillion mark and the worst affected section of the population seems to be students. The national total for student loan debt has just crossed over the $1 trillion mark and seems to be steadily rising in spite of Federal intervention. The problem doesn't actually lie with the interest rates or the cost of higher education. One half of the problem arises straight out of the financial habit of fresh graduates.

Most recent graduates can get themselves a decent pay packet if they have played their cards right as far as their choice of curriculum is concerned. A standard pay check would more or less allow students to pay off their debts and save enough money to fund a modest, if not lavish, retirement.

In a large number of cases, these fresh graduates start with their lucrative jobs and instead of paying down their debts and stowing away a little money in a bank account, they tend to spend their money on acquiring the latest gadgets and similar stuff.

Why and how to save?

What most of these graduates fail to realize is that investing money, paying off student debts and creating an emergency fund will prevent them from facing financial hardship a few years down the line. Investing and saving is not just for people who have significant amount of cash to spare, rather, it is the path to personal financial security.

Saving and storing $25 a day in a bank account would roughly translate into a quarter of a million dollars in 30 years. Contribute a little more and make your daily target $50 and you will have a neat $750,000 to a million in 40 years, that too without factoring in the compound interest. There are various savings vehicles available to employed people including ESAs (Educational Savings accounts), FSAs (Flexible Savings Accounts) and 401(k) plans. These savings vehicles not only let your build up your retirement funds but also have payroll tax benefits.

The basics of investing

The more adventurous graduates can opt to invest rather than just stash away their money in various savings schemes. Instead of depending on interest rates and fixed earnings, fresh graduates can choose to invest in stocks, bonds, options, futures and mutual funds. Putting money on such investment vehicles do carry a significant degree of risk but the more the risk, the better chances you have of a higher payoff.

Learning about key investment instruments and gathering as much knowledge of the subject as possible is absolutely necessary for new investors. Moreover, some professional help in the form of an investment consultant and a broker would also ease the process. A full service broker would be a good choice since they provide professional money management services, develops investment strategies and maintains a portfolio suitable for your strategy.

Building and diversifying your portfolio (your collection of stocks, bonds and other such investment instruments) is the key to successfully investing and mitigating risks. Most investors have a portfolio which consists of stocks in large and small US based companies, foreign stocks, real estate, commodities and bonds. For conservative investors with limited knowledge of buying and selling stocks, they can choose to invest in Index Stocks which are nothing more than mutual funds diversified based on a particular section of the market.

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