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Aggressive or conservative? How a college student should invest his nest egg.

Posted by Cheryl Costa  August 12, 2008 09:28 AM

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I'm a 3rd year college student with some savings that I haven't touched in years. I've accumulated about $10K which, given the current economy, doesn't seem like a whole lot anymore.

I've decided to take about half and invest with some long-term goals in mind. I don't mind being relatively risky, so I was thinking about splitting the amount I was willing to invest and putting half in CDs or treasury funds, and about half in mutual funds.

Can you tell me if I am on the right track? Is this the right decision to make at this stage in my life? I'm only 21, and I've been lucky enough to save this much so far, but I am getting a little worried about loan payments coming up soon. I review your Q&A everyday to get hints about being a better saver/spender.

Having $10,000 saved by the time you are 21 and while still a student is a pretty impressive feat. I am sure that many college juniors would love to be in your shoes. When I was a junior, my college roommates and I were still pooling money to buy pizzas and beer....

Anyway, back to your question. I would encourage you to be conservative with your savings. You mention that you are at least somewhat worried about your ability to pay all your student loans. Do you know exactly what your payments will be? And, more importantly, what do your job prospects look like? Do you think it will be relatively easy to find a job when you graduate in two years? How much do you think you will earn?

Because there is a good deal of uncertainty in your immediate future, I think I would lean towards keeping all of your savings in very safe, relatively liquid investments like laddered CDs. You just never know what life after graduation will bring. Maybe you will move to another city. Maybe it will take you six months or more to find a suitable job. Or maybe everything will turn out wonderfully and you will have a job you love that pays you a great salary. In that case, you might want to think about purchasing a home or condo. In order to do so, you will need a downpayment. If half of your money is tied up in mutual funds that are not performing well when you need the money, you would have only $5,000 available to use to meet your needs.

Any money that you would consider investing in equity mutual funds would have to be money that you absolutely, positively won't need for at least five years. At your age and stage of life, I don't think you can say without any hesitation that you absolutely won't need this money in the next few years. It is very true that investing in laddered CDs will not make you rich, but the expression "cash is king" is especially true in your case because having cash gives you a lot of flexibility.

My answer to your question would be different once you have graduated from college and started your first job. At that point in time, when there are fewer "unknowns", I think it would be fine to invest some of your money in longer term investments. Check back in with me in May 2010 and good luck!

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Local finance professionals share insights and advice on issues such as budgeting, managing debt, and retirement planning.

About the contributors

D. Abraham Ringer is a CERTIFIED FINANCIAL PLANNER practitioner and a Financial Adviser with Morgan Stanley Global Wealth Management in Boston. He is registered in MA, NH, NY and several other states to which his articles are directed. For more information please visit
Financial Planning Association™ of Massachusetts has 900 members who specialize in the financial planning process. Many of its members engage in philanthropic pro bono work in their communities, recommend legislation, elevate public awareness, promote financial literacy, and advocate for sound economic and tax policies.
Odysseas Papadimitriou is the founder of, a credit card and gift card marketplace, and, a personal finance site. He has more than 13 years of experience in the personal finance industry, and previously served as senior director at Capital One.

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