Smart investments for young professionals: whether you have $500 or $5,000, here are great places to stash your cash

Black Enterprise, July, 1993 by Leslie N. Vreeland

If you're in the 28% or higher tax bracket, then you may want to shelter your money. Municipal bond funds are ideal for that purpose. For $2,500 you could get into Fidelity Advisor High Income Muni Bond Fund (800-522-7297), which holds multiple state bonds with top-notch ratings. This fund, exempt from federal taxes, was up 11.1% last year.

Also worth checking out are state municipal bond funds, especially if you're in such high-tax states as New York, California or Montana. The advantage is exemptions from both federal and state taxes.

Julia Young, 25, a customer service rep at Brian Unlimited Distribution Co. in Detroit, got into the stock game three years ago when she received stocks as birthday gifts from her aunt and uncle. "Investing has always seemed natural to me," she says. At the advice of her financial advisor, Gail Perry-Mason, Young has enhanced her portfolio (which includes EuroDisney and Pepsi) and has recently purchased three zero-coupon bonds for $1,000 apiece. She can expect to redeem each for $3,000 (for a roughly 8% return) upon their maturity in the year 2006. (See Personal Finance for more on Zeroes.)

In another smart move, Young also contributes about $200 each month to a capital appreciation-fund IRA (AIM Constellation, up 15% last year; 800-347-1919). Total value of her nest egg to date: about $7,000. Young, who earns about $20,000 a year and considers herself a conservative investor, says her monthly investments are no sacrifice. "I'm saving for my old age," she quips. "Starve now, live it up later."

When You Have $5,000

With this much money to invest you can afford to branch out even more. Consider doctors Michael and Karin Ashwood, 37 and 31, of Brookfield, Conn. The Ashwoods have already invested about $60,000. And their comfortable six-figure income made it possible for them to recently buy a new home. Still, saving for the future is paramount. Aside from funding their retirement (via an IRA and pension plans at work), the Ashwoods intend to pay for the college education of their seven-month old son Gabriel. "We're planning to send Gabriel to public school, but we might change our minds," says Michael. And that's just for starters. "Karin," he adds, "is pregnant again."

The Ashwoods have about $5,000 earmarked for mutual funds, and their financial planner, New York City-based Ian D. Quan-Soon of I.Q. Financial Services, recommends that the couple continue to invest for growth. Where to put it? Probably the best answer is overseas, says Quan-Soon. Once you've covered the U.S., experts say, its a good idea to diversify further by looking abroad - and now may be one of the best times to do so.

San Francisco fund guru Kurt Brouwer, of the financial advisory firm Brouwer & Janachowski, Inc. recommends two international funds. Harbor International, one of his picks, has the highest five-year returns of any foreign stock fund (16.16% on average, according to Morningstar Mutual Finds, 800-422-1050). Lately, it's invested mainly in Europe and emerging markets such as Argentina and Chile (minimum initial investment, $2,000; 800-422-1050). "Europe is where the action will be for the next decade or so," he wagers. Financial Strategic European, Brouwer's other favorite, seeks out undervalued sectors such as banks and insurance firms. It's gained an average of 7% over the past five years, but Brouwer expects it to be an even bigger winner over the next five (minimum inital investment: $1,000; 800-525-8085).