Dear Liz: I am not versed at all in money matters. I have no clue where to invest or even if I should invest. I have $5,000 squirreled away that I am totally comfortable investing for 12 months because I feel I would have no need for it before then. Can you make a suggestion where I should put it to make a safe return?
Answer: An FDIC-insured bank account.
Investing requires a longer time horizon and a willingness to risk losing some of your principal. If you can’t do either, you need to stick with low-risk, low-reward options.
Gee Liz I think you could have given the person a little more help and encouragement. They mention they were new to investing so give them some encouragement. The first step in investing is to save money. They should be encouraged for mastering that step. The next step is to help that money grow. Perhaps a good start for them would be a 1 year CD. During that year, they could research some mutual funds such as those at Vanguard to invest their money when their CD matures. They could also start reading about investing and determining the types of stocks in which they be interested in investing. Your answer cut them off at the knees with no encouragement.
Actually, the nature of my answer had more to do with the limits of print media than a wish to discourage anyone. My Q&A needs to fit into prescribed lengths, so sometimes answers are going to be brief. In any case, the first step in investing is to recognize that risk and return are related. I often hear from people who want safe, high returns, which of course don’t exist.