“Just put your money in the S&P 500 and don’t look at it.” This was the advice given to me when I started taking more of an interest in my personal finances. After lots of research and talking to my parents and trusted friends, this is exactly what I did.
If you’re anything like me, the idea of finances, investing, and what you should be doing with your money is a daunting concept. Especially during a transitional time such as college, it can be hard to know where to look for reliable, helpful, and easy to digest information.
Since high school, I’ve always worked a part time job. This has allowed me to accumulate a decent amount of savings over the years (I’m definitely a saver not a spender!), but I just let this money sit in my checking account, not doing much. Recently, however, I have begun to take a new interest in my personal finances, wanting to educate myself more on my options, as well as how I can make my money work more efficiently for me.
Now, the options here are endless, but I’m a pretty risk averse person and that was one of the most important things for me when choosing where to move my money. This means the options I was looking at were a Roth IRA, a high yield savings account, or the option I ultimately landed on, investing in the S&P 500.
Firstly, let’s get into what the S&P 500 actually is. Simply put, it’s the 500 largest American companies you can invest in with the stock market and it provides a good summary of how the market is doing overall. It may go up or down day to day, but over the years has safely shown a positive trend in the long run. This makes it a pretty low-risk and reliable investment, so long as you’re down to play the long game.
It’s also important to note that you can’t invest directly in the S&P 500 because it’s a stock market index, not a single company. This means you have to invest in it by purchasing an index fund. I did this through a Fidelity account because it’s a safe, reliable, and clear way to go. (Bonus: if you have a job at UCLA like I do, you’ll already have an account with them for retirement savings!)
As with all investments, the more money you put in, the more money you get out. But it’s important to find the right balance of how much you want to keep liquid in your checking, while still investing as much as you can at the same time. Take into account your expenses, income, and level of safety net you want when it comes to your finances. Although you can always take your money out of the S&P 500, it shouldn’t be the option you rely on. It’s best to plan on only adding money, not taking it out until a much later date. This will allow your money to accrue the most interest, making the most profit out of your investment. Planning to invest a certain amount of your paycheck every month is a great way to keep yourself accountable and organized.
So, to recap: put money in, don’t look at it, don’t touch it, repeat. By doing this, you’ll be setting up your future self to have a solid financial cushion… all by doing essentially nothing!