Before settling on what stocks and accounts to pursue, I have found that it's vitally important to take assessment of what risk I'm willing to take on with my finances. It's one thing to say that interest added a couple hundred dollars to my savings account balance, but if inflation has outpaced those earnings, then I really haven't made anything because I have no increased spending power. So to be able to ensure that I can potentially see increased returns on my investments, I'm going to need to assume some moderate risk.
Luckily, as a student I have very little in the way of current expenses. My part-time job during the semester covers daily activities, such as gas and food, and I could continue living comfortably in the event of economic problems without having to empty my emergency savings accounts. Therefore, my $10,000 is ready to invest and I'm able to assume some risk in order to increase my returns. While I certainly don't want to lose my principal investment, I can also understand the need to diversify across low and high-risk options. Keeping my eggs out of the same basket, so to speak.
Right off the bat, I want half of my allotted amount to go to longer-term savings. Since I'm still in college and without a full-time job, for the time being a 401(k) is out of the question. Although it is paramount to start retirement savings at a young age, that's a basket I will keep my eggs out of for the time being. Instead, I want to focus on using this $5,000 to build up that emergency fund, so that when I graduate and get a full-time job I can afford to put more money towards the all-important retirement savings category.
