Investing 101...

[chromaticc]

I am a twenty year old dad. She is a twenty one year old mom. We're just starting our lives together with our new son. We have barely five thousand dollars saved for us to do so. Most of it is in a savings account right now and we try to keep as much there as possible... but our finances are slowly being drained away. I'd like to invest some of our savings now while we're still young to make a better future for all three of us (and who knows, there may be four or more of us down the road...). I've been reading up a little on different ways to invest and I feel like I've barely scratched the surface. We would like our money to work for us as soon as possible to see maximum return (who wouldn't), but at the same time we know that there is definite risk involved and don't want to get greedy and lose our savings in bad investments. What path should we take? Should we invest more aggressively to see returns and possibly save more now while we're young, or stay conservative and stay in it for the long haul?

[Ethel]

This is a UK site and there will be little knowledge of the US financial market.

You will get better advice elsewhere.

[Whoever]

I think in your case, the answer would probably be the same in the current economic environment, whether you were in the UK or US. Investing in the stock market is an extremely risky business, especially at the moment with the credit crunch and several world economies heading for recession. I think your savings would disappear even faster if you invested in equities right now. You might make money in the long term, but right now, your savings seem to be your only emergency money,. You don't say whether your partner is working or not so it would seem you can't afford to risk losing it. If I were in your situation I'd put the money in the highest interest savings account I could find until I had more income coming in and could afford to gamble with the risks the stockmarket involves.

[sue11]

Hi, I have limited financial knowledge, but I would like to try to help. The stock market generally has shown itself to outperform other types of investments in the long run (over a 20 year period), the risk very much depends on the type of stocks you invest in. Some stocks are risky, but have the potential to pay out well if they come good. When my partner started to invest, he did his homework and read up as much as he could with various financial magazines and newpapers to gain as much information as possible before making his choice. He makes some very good gains and also some losses, but generally makes money. We both hold shares, mine tend to be the safer options and his tend to be the riskier ones, he keeps a close eye on them and places stop losses to call a halt to any potential loss if they look like crashing. What you need to do if you do decide to invest in the market is to keep an eye on the stocks and act quickly if they start to move in a way that you don't like.
I also own a rental property which I bought when prices were very low, now it is worth 4 times what I paid for it. This is a nice pension plan for me as long as prices do not crash too far in the future, if and when we have a crash in the uk! I understand that house prices have fallen dramatically in the states? It may be worth keeping an eye on this and trying to judge when and if you think that prices are at the bottom of the fall. If you can afford to and interest rates are not too high, I would consider a buy to let or owning your own property if you do not already do so.
Whatever you do, I would advise getting as much information as possible, your own research will be much better than getting advice from financial advisors who may have a vested interest in pushing you in a particular direction, best of luck!
Sue