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

You've just pocketed an awesome graduation gift - the kind that folds. Or perhaps you scored a nice sales bonus at work. Maybe you even received a hefty tax refund from Uncle Sam. No matter what the source of the cash - whether it's a modest $500 or a meaty $5,000 - you now have the happy task of figuring out what to do with it. The Caribbean is calling ... you can taste that Pina Colada, smell the salty air, feel the palms swaying ...

Snap out of it. True, this kind of dough is enough to drum up some serious fun, yet not enough (not by a long shot) to allow you to declare financial independence and withdraw from the nine-to-five set. Still, if you cultivate your stash carefully, it can become a powerful tool to help you realize your dreams and financial goals. After all, "It doesn't really matter how much money you have to invest to begin with," says Don Phillips, publisher of Morningstar Mutual Funds, a Chicago-based mutual funds ranking service. "The trick is to get into the game."

Before you consider locking even a cent of your newfound nest egg away, however, make sure you have enough extra cash at the ready. Typically, financial advisers suggest keeping at least three to six months' worth of living expenses on hand to cover any unexpected financial demands. "To really make your money grow, you'll want to invest it someplace for several years," explains Lynn Ballou, a financial planner in Lafayette, Calif. "And because investing can be risky - a market may drop or dry up just when you want to cash out - you shouldn't do it with money that you may need to live on."

Where to park your funds, then, if you'll need them back in less than five years? The surest, safest places are bank certificates of deposit where, usually for minimum initial investment of a few hundred dollars or less, your funds are insured by the U.S. government for up to $100,000. Recently, rates for six-month CDs were about 3.10%. Care to up the ante with slightly more risk to your principal? Then consider short-term bond funds. Two winners are Babson Tax-Free Income-Short Term (recent yield: 4.43%; 800-821-5591) and Strong Short Term (taxable; recent yield, 7.33%; 800-368-3863). Both have minimum investment requirements of $1,000.

by: wowo