I am a 19 Year Old College Student who just opened his Roth IRA I put $1000 dollars in it and am putting $100 monthly to start out. I was wondering the best way to diversify my portfolio. Being young I am looking into High Risk High Reward options but also would like a few medium to low risk options just to be safe. Was wondering what my best route to go would be. I also play around with a couple thousand dollars in stocks. Thanks So Much For Answering.

  • 5
    Are you interested in courting my daughter? She is 20 and is doing the same.
    – Pete B.
    Apr 13 '16 at 17:21
  • You can contribute to an IRA only if you receive compensation, that is, wages or salary, or self-employment income, or commissions on sales etc. Since you are a college student, you might not have compensation unless you have worked part-time on or off campus during the year (or summer vacation) for which you contributed to your Roth IRA. If you opened the IRA for 2015 (which you could have done till 4/15/16), did you work during 2015? If you opened it for 2016, but haven't worked at all during 2016, you have until April 15, 2017 to remove the contributions and the earnings thereon. Feb 2 '17 at 4:52

Put it all in an S&P500 index fund. Never touch it until you start to get closer to retirement age. Hopefully by then you will have plenty of education on diversification strategies.

There will be mediocre years like the last one, and there will be great years like the few prior. Over all you should have some great growth.

  • I'm a fan of a little more diversification than that in passive diversification - I particularly like VIG (in addition to SPY, and also for maximal diversification, VTI). I also thought it neat when I discovered that there's a "high risk high reward" type fund for bonds, too, traditionally considered super-boring low-risk-low-reward, in JNK (particularly great for Roth IRAs, since it generates high dividends, which would otherwise be taxed.)
    – neminem
    Apr 13 '16 at 13:28
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    Because it is an index fund, there is already some diversification, and don't assume that just because it is comprised of only US equities that it is somehow more at risk of a localized disaster. If the US equity markets drop, the world markets drop. By all means use other diversification strategies if they make sense to you, but this is the easiest proven strategy for someone completely new to investing. Apr 13 '16 at 13:58
  • Index funds cost very little and are somewhat diversified. If you want greater diversification, spread your money between domestic stock index fund, international stock index fund and a bond index fund with the emphasis on stock since you are willing to tolerate risk. It's very hard for an individual investor to diversify properly by buy individual stocks, especially when your are working with very limited capital.
    – ventsyv
    Apr 13 '16 at 15:59
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    Still would add in some bonds, REITs, maybe an MLPs; having all stock is not asset diversification just stock diversification.
    – Ross
    Apr 13 '16 at 16:56
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    Someone who has a 45 year horizon can safely ride out the bumps. Apr 13 '16 at 17:14

Start with SPY as others have said. Then for every $2000 that you have accumulated in the account buy something else like REIT and foreign stocks or small-cap index.

So the first $2000 in SPY (S&P 500) and then next $1000 in REIT and then next $1000 in small-cap and then come back to SPY.

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