Capital Gains

Perhaps your parents are generous. Or your work ethic unparalleled. It may very well be a combination of responsible saving, smart spending and a little luck from a scratch-off lottery ticket. The end result is you have money.

And you’re not satisfied.

Sure, the extra cash is great, but it’s not enough because you want it all: your savings collecting interest and your money wisely invested, working towards that white-picket fence. Retirement at 45. Or a year in Paris. Whatever the goal, key investments now can make the future much easier: you’re 20 years old and a financial powerhouse. Intuitively, further investing is your only option.

There are many options for student investors and contrary to the belief that it takes money to make it, most work just as well with small beginnings. It’s how you finish the race, right?

High-Yield Savings

They are to the banking industry as pastels to the fashion world; high-yield savings accounts are in, and offer an opportunity to save well above the national average 1.57% annual percentage yield, or, the overall percentage growth per year. The catch with many, such as Citibank and MetLife, is an intimidating minimum balance. There are exceptions, and naturally, these exceptions are the places to bank.

ING Direct Orange Savings (http://home.ingdirect.com/) offers a 4.40% APY and free beverages with in-branch deposits. HSBC’s Online Savings (www.us.hsbc.com) boasts a 5.05% APY. These two options are accessible at any given time and are free of fees or required deposits. Saving for a senior-year apartment, new car or graduate school? These are the most sensible ways to do so, and keep an open eye for Wachovia and Washington Mutual, both expected to follow ING and HSBC in a similar high-yield direction.

Diversified Funds

A sample of savings, bonds and stocks, these funds diversify your investment. Great for long-term growth and with convenient fractional trading, depositing into mutual funds (whether on your own, with an IRA or via a 401k) allows you to make the decision of, how much� and leaves the question of, where� to the experts. There are dozens of companies to choose to invest with and each tote a myriad of options. As always, research is recommended before making any contribution.

Morningstar (www.morningstar.com) is the almanac on mutual fund trading. If you’re looking for an explanation of small-cap and large-cap stocks, stable funds and fractional trading, Morningstar is your dictionary.

Want to know more but with less biz-jargon? Yahoo’s user-friendly, interactive guide is the perfect tool: http://finance.yahoo.com/funds.

Stocks

When the immediate future is affordable and there are still funds at your disposal, becoming a shareholder is an appealing option. Purchasing stock allows you to be flexible with investments: risk what you’re willing, invest where you want and decide how to direct your money.

E-Trade (www.us.etrade.com) and TD AmeriTrade (www.amtd.com) make it easy for anyone to invest. At $8 a trade and with convenient Internet access, purchasing stock is no different than shopping online. Of course, haste can prompt the inexperienced to invest in the first hot stock tip, so it’s crucial to know the company and its history before investing in it. Stable growth is an ideal target for the conservative while some investors like to gamble, making stocks a very personal investment. A balance of predictability and risk is recommended for fledglings.

Dividend reinvestment plans (DRIPs) are another useful stock option for beginners. Rather than pay directly, shareholders’ earnings are funneled into the company’s DRIP; the dividends are used to purchase additional shares, or occasionally fractional shares, in the shareholder’s name and often done so without a fee. DRIPs are a great way to enter the stock market, since most companies only require one share to be initially bought. For a wealth of information, DRIP Central (www.dripcentral.com) answers all introductory questions and the DRIP Investor (www.dripinvestor.com) has great recommendations (for a fee.)

A Solid Plan

Before rolling up the sleeves, outline where you want to be financially. Take a serious account of your accounts and ask yourself, ‘What is the best option for me?’ How much are you willing to invest and what type of return are you looking for? Will you need your capital gains in a year or a decade? Is accessibility a factor, and how often can you contribute? When your answers are at hand, give your finances a boost and begin your investing.