by Emily Foster
According to financial expert Dave Ramsey, 75% of college students feel they are not ready to make smart financial decisions for themselves. In fact, if you were to ask a group of your friends, how many of them would truly understand how compound interest and mutual funds work? It’s time for us to start thinking about our financial futures. Like, today.
This article from daveramsey.com compares the results of two friends who put money into investment funds–at different times in life and for different lengths of time. Ben started investing when he was 19 by putting $2,000 into his funds each year for a period of 8 years. Arthur didn’t start investing until he was 27 and invested a total of $78,000 over 39 years.
The friends viewed their funds when they turned 65 and, even though Arthur invested a larger amount of money, Ben earned $700,000, yes $700,000, more than Arthur. Moral of the story: start investing early. If you’re interested in putting aside even a small amount of money each year to be invested, talk to your banker or parents about setting up a mutual fund. I’m interested in starting my investment portfolio soon!
And, since we are an investor relations group, what is the latest news on mutual funds?
Uber is a private taxi business and is now valued at $50 billion. And, according to Andrew Ross Sorkin of The New York Times, Uber is one of the key “unicorn” corporations that Main Street investors (or mutual fund investors) are investing in. “Unicorn” in this sense is a term used to define start-up technology companies worth $1 billion or more. The category includes other tech businesses that you may know-including Pinterest and SpaceX.
According to Sorkin, unicorns are scary. He refers to the dot-com collapse in 2000, a time when internet-based stocks grew rapidly only to decrease suddenly within a matter of just a few years. Basically, the unicorns we see today are considered to be the next internet-based stocks and are risky to invest in. But, for some reason, public investors and 401(k) contributors have been placing shares of private companies like Uber into their investment funds. While it’s a scary thought to have volatile shares within your mutual fund, they increase in value quickly and can pay off if, of course, they don’t collapse before you can withdraw your earnings. Despite the risk that unicorns seem to bring to the investment world, Main Street investors like T. Rowe Price and Fidelity assure their investors that the “mystical shares” take up only small portions of their entire funds.
The Dave Ramsey and The New York Times articles show that while investing has large monetary benefits, it can be very risky and takes a large amount of analyzing to make wise investment decisions. So, if you’re considering investing your money into stocks or a mutual fund, consider whether rapid growth or a safe financial ride matters most to you and stick to a smart money plan.