Invest now, enjoy later: Tips for making the most of your money

Short-Term Options:

Certificates of Deposit (CDs). Certificates of Deposit are essentially an alternative to a low-interest bank account; most banks offer a variety of options, which differ in percent yield and length of time. Say you have a bank account with a current interest rate of 0.05 percent, but your bank also offers 0.7 percent interest yield on a one-year CD with a minimum deposit of $250. The smarter option, for those who would like to see their money make money, is to deposit funds in the CD -- as long as you're confident you won't be needing that money, because banks charge a penalty for withdrawing from a CD early; a $2,000 deposit, for example, will make you $14 in that year's time.

“CDs have very little risk and are good if you will need the money soon to purchase a car, a house, whatever,” said Hartman, adding that a CD's qualities make it the safest short-term investment option.

Short-Term Funds. Short-term bonds are often defined as bonds that mature in less than five years; since they're associated with minimal risk, they're suitable for the average 20-something looking to invest profitably yet safely. Unlike CDs, this option places your money in the hands of professionals who will invest in a diverse portfolio -- “primarily in bonds and other debt securities that have a short maturity," according to eHow. Short-term equity yields similar results to short-term bonds; they are often times associated with hedge funds, but your money is still in the hands of professionals.

“I would put some of it into some safe stuff, like a short-term bond fund…and I’d put some money in an equity fund," said Leonard Rosenthal, a finance professor "I’d find a broad-base one…maybe one covering the entire world….[I'd keep] it pretty simple, [depending] on how sophisticated the person is."

Low-Interest Bank Account. If you're unsure if you'll need your money or unwilling to take a risk, a bank account is your safest option. "I think the pain of losing money and not being able to come up with the amount required for the first rent or the first car -- falling short for that will far exceed the potential gains that you might expect to see by putting your money in stocks or bonds," said finance professor Kartik Raman. "Can you bear the pain of not being able to buy that first car or first apartment? [If you can't,] my suggestion would be to keep your money in savings."

Long-Term Options:

Stocks. While investing in the stock market can feel a bit like gambling -- unless you're a glutton for punishment, checking your stock price daily isn't advisable -- but it's also sort of fun because you can choose to own a piece of your favorite clothing company or the manufacturer of your car. If you've got the cash, you may even be able to get into Facebook at the ground level with an IPO.

“In general, young investors can afford to take more risks than older investors, because in the long term, the market compensates for short-term volatility by earning higher returns on riskier asset classes," said Hartman. "If you are saving for the long term and are comfortable with taking some risks, then index funds are a good idea. If you like to gamble, trade on individual stocks.”

Commodities. Bought and sold through an exchange, commodities are raw materials, like agricultural products. In today’s global market, they're playing an increasingly important role in a young investor's portfolio.

“[Commodities] should be a very important part of the portfolio for anyone thinking long-term. They can offer a nice protection…[and] balance the risk in the portfolio," said Raman. "The demand for commodities has increased significantly."

Index Funds. Index funds include mutual funds or exchange-traded funds (ETFs) "with clearly defined rules of ownership [and] that are held constant regardless of market conditions," according to indexfunds.com.

“Ten percent of your money should be in the working market index fund," said Rosenthal. "It's more risky, but there’s more opportunities."

How have you invested your money?

Photo by RambergMediaImages (Flickr)

About Lacey -- With a passion for liberal arts and an addiction to excessive writing, I somehow ended up at a business school. I currently attend Bentley, where I plan to major in economics and finance. In an attempt to hang on to my true devotion, I write for the news section of the Vanguard. For me, the greatest thrill of the job is conducting interviews and listening intently as people reveal their stories.

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