How should I allocate roughly 30k worth of funds?

For context: currently an undergrad, have student debt (roughly 30k) to be paid once I work in about a year's time.

Should I
1) pay it off one shot
2) place it in a safe vehicle (fd, stash simple etc)
3) mix between aggressive investing & wealth preservation (10k stock picks & 20k fd)

Regarding 3) it's because I believe most attractive stock picks (pltr, tsla, ark funds) are mostly in the red and attractive buy zones imo. Would it be advisable to place a portion of my funds into these? Thanks

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thefrugalstudent

01 Mar 2021

Founder at thefrugalstudent.com

Hi Anon,

If I'm not wrong, most student loans have an interest rate that is upwards of 4%, abt 4-5%. I'm not sure if you will be able to get a reduced interest rate due to the economic situation, but I'll assume that it stays at the 4-5% level.

At that interest rate, I don't feel that you'll be able to leverage much on returns by investing the $30k especially given that you only have 1 year until you graduate and the interest kicks in. Not only is this time frame extremely short, but the returns you stand to gain in excess of 5% is probably not much - I'd guess in the range of 2~3%, if even (unless you get extremely lucky with some stock picks).

Having said that, personally, I would pay it off in 1 shot upon graduation. In the 1 year that lies between now and then, I'd probably just park the $30k in an SDIC insured, high-interest vehicle like Singlife/Dash PET/Jumpstart. The reason I won't consider StashAway Simple/Syfe Cash+ is because they are money market funds and are still investments that come with inherent risks. I wouldn't want to take any chances on a large sum of money, especially when the difference in return is not much.

While it's not wrong to want to invest in the market when it's in the red, I probably wouldn't do it with the money I need to pay off tuition fees, especially given the short time horizon. However, I would put some of my savings set aside that I don't need for investing.

Hope this helps & all the best!

Regards,

thefrugalstudent

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