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Starting to Invest
- Thread starter Squilly
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im 19 years old and all the money i made this summer just sits in the bank. theres no more compound interest and rates are like .01 % lol what can i do with 5 grand thats just there >?
im looking for a short term tai (2-3) years. please quote or inbox me any links or websites i can read incase i loose the thread
im looking for a short term tai (2-3) years. please quote or inbox me any links or websites i can read incase i loose the thread
I have an account with Ameritrade currently, and am really considering SPY as others here have mentioned it as well. I don't have $5000 to invest though.
Invest what you can. As a beginning investor with a small amount of money trying to pick individual stocks, mutual funds, etc is not worth it. Go with some sort of index fund while you learn about investing.
Are ETFs someone that can be purchased yourself, or do you have to go through a broker? I'm looking for a short-term, low-risk investment that I can put about $4,000 in initially, then about $250 a month for a couple years while I'm in school. What do you recommend? Also, what about investing in Bank of America?
EDIT: What about currency trading?
EDIT: What about currency trading?
they are 'selling' you a product. you pay for their ideas. you now have less money to invest. any idea where they get there ideas from?! bad idea...
you can buy/sell any ETF yourself (online/self help) if you have a brokerage account. double check the share limit, mine is 1000 shares or less online/self trade, if you go over the limit, the broker will need to 'help/charge' you.
scott trade, td ameritrade, e-trade, fidelity, etc. open an account with whom you trust, and with your inital balance, the first several trades will be free. go with the index as you will win over time and not need to spend time worrying/watching the daily numbers. just my 2 cents.
BAC is at new highs for the 'new' economy world. i think it would be a bad point to jump in, but it might go up more from here. who knows. big problem is that this stock is one of the most traded (day traded/volatile) out there. the financial sector led most of last year and seems ready to go higher this year. i would pick the XLF play over BAC as you get the upside without so much risk. again, just my 2 cents.
you will TOTALLY lose ALL of your money. crazy speculation best left to experts with inside up to the minute info. i trade options, and i wouldn't touch FOREX with a 10 foot pole.
I was hoping you would respond to my post. You seem very knowledgable about the topic. I'm extremely money-oriented and always love saving money and figuring out ways to make it grow. I am pretty financially stable at this point and have enough extra money that I'm looking to invest now. Another question I have about ETFs is do you sell them or do they also always continuously increase? I guess I'm just confused as to how they work.
ETFs work just like a stock. They are traded on a daily basis. They can decrease in value. The one I recommended, SPY, tracks the S&P 500. If the S&P 500 increases, so do the SPY. If the S&P 500 decreases, so do the SPY.
Your plan to invest a sum then invest on a monthly basis is a good one.
I agree with 4JNA, avoid currency trading. It is a recipe for disaster.
yay, what he said. same as stock, can go up, can also go down. picking something like SPY (or any other ETF (exchange traded fund)) means that they have a 'bucket' full of everything in the S&P index or whatever, and weighted the same way. using SPY as the example, when the S&P goes up or down, your share of what is in the 'bucket' goes up or down the same amount or percentage. friday for example, SPY opened at $149.41 and closed the day at $150.25. up for the day .56% while the actual index was up .54% due to last minutes sales and what not. it's always really close, sometime the same, but i often see a tiny divergence at/after close.
anyway your investment/balance of $4000/149.41 = 26 shares for $3884.66 (assuming no fee for new money, your balance). at the close, your initial investment would have been worth $3906.50, meaning you increased your worth $21.84. for a historical perspective, if you would have invested the first day of 2012, SPY was $126.02. the last day of the year was $142.41. change of $16.39 per share, assuming the same 26 you would have shown a gain of $426.14. something else to keep in mind is that there are dividends that get paid back to you as a share owner. i would recommend having the broker reinvest the dividends when you receive them, also known as a 'DRIP'. that would have increased your gain even more.
you will pay a transaction fee when you buy something, you will pay a transaction fee when you sell something. compare different brokers to see what they charge, and again check to see if they have limits on volume or shares. important to keep costs low, as it really starts to increase your 'basis' or 'total cost' over time. if you only have a bit to invest every month, i might recommend that you put it in the brokerage account, but wait and invest 3-4 times a year to keep your cost down. build up a balance, and the buy on a pull back or down day. not trying to time the markets, just common sense/cents!
i would also recommend that you stick to big names like SPY to start as they have enough volume during the day that you won't get trapped/stopped out. what i mean by that is some small names or 'penny' stocks only trade a few thousand shares a day... if no one wants to buy your stock, your are stuck. if you want to buy some and there are no open interests, then tough luck. SPY traded 108,388,777 shares on friday... lots of volume helps when you want to get in and out safely or quickly, or both!
best of luck getting started. things go slow at the beginning. fun to get a ways down the road and see the pile start to grow! money that makes money = awesome.
anyway your investment/balance of $4000/149.41 = 26 shares for $3884.66 (assuming no fee for new money, your balance). at the close, your initial investment would have been worth $3906.50, meaning you increased your worth $21.84. for a historical perspective, if you would have invested the first day of 2012, SPY was $126.02. the last day of the year was $142.41. change of $16.39 per share, assuming the same 26 you would have shown a gain of $426.14. something else to keep in mind is that there are dividends that get paid back to you as a share owner. i would recommend having the broker reinvest the dividends when you receive them, also known as a 'DRIP'. that would have increased your gain even more.
you will pay a transaction fee when you buy something, you will pay a transaction fee when you sell something. compare different brokers to see what they charge, and again check to see if they have limits on volume or shares. important to keep costs low, as it really starts to increase your 'basis' or 'total cost' over time. if you only have a bit to invest every month, i might recommend that you put it in the brokerage account, but wait and invest 3-4 times a year to keep your cost down. build up a balance, and the buy on a pull back or down day. not trying to time the markets, just common sense/cents!
i would also recommend that you stick to big names like SPY to start as they have enough volume during the day that you won't get trapped/stopped out. what i mean by that is some small names or 'penny' stocks only trade a few thousand shares a day... if no one wants to buy your stock, your are stuck. if you want to buy some and there are no open interests, then tough luck. SPY traded 108,388,777 shares on friday... lots of volume helps when you want to get in and out safely or quickly, or both!
best of luck getting started. things go slow at the beginning. fun to get a ways down the road and see the pile start to grow! money that makes money = awesome.
But if ETFs are traded at such frequency wouldn't you want to avoid them in order to reduce stock turnover, and subsequently fees and commissions?
yes and no. i guess more no-ish. sometimes volume/volatility is a good thing.
if you are a day trader or are going to try and beat the market by moving in and out of trades, then you NEED the volume/volatility or churn to try and capture the small moves. in quick, up a few cents and out. repeat. end of the day, this has been proven to do poorly compared to indexing/ETFs, but someone always ends up being sure they can do better...
if you are starting out, or don't want to spend all day watching tickers, then no, they are a great way to match the index, they are easy to trade, and fit the 'buy and hold' method very well. you only get charged when you buy/sell, your basis/cost has nothing to do with all the other nut cases and the high freq trade stuff.
so, buy low, hold, when there is a downturn that confirms with several days on the charts, buy more, hold. repeat!
if you wish to get more specific, ETFs can also be used for sector plays. XLF is a great way to play finance/banking without the risk of a single stock. XLV if you think healthcare and the upcoming changes are the way to go. i like XLK and the technology play, it's cyclical, and the upswing in the global/us market means business will be spending big to upgrade old/outdated system and tech. or i might be wrong. ask me in 10 years... anyway you get the idea, index everything or pick and choose. either is a great way to get started.
free pick. worth what you paid for it. i've got a decent position in VYM, vanguards high yield index ETF. last year i gained 11.82%, and earned just over 3% in dividends. beat the hell out of the few penny's my savings account earned! i love having my money make me more money.
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free pick. worth what you paid for it. i've got a decent position in VYM, vanguards high yield index ETF. last year i gained 11.82%, and earned just over 3% in dividends. beat the hell out of the few penny's my savings account earned! i love having my money make me more money.
Excellent choice.
Low expense ration, nice dividend yield. That's how you play it if you don't want to pick individual stocks or want to minimize transaction fees.
-t
you nailed it. just 18 months to late. lets look at the numbers.
260% gain in the last 12 months. PE of 101.57, and for reference the S&P is around 14. best case would be investing in a company around 10-12. price to book is an absurd 12.56 when 1.0 or below is the best case scenario. things looks good for the original investors, not so much for the CURRENT CROP.
this is called a PARABOLIC MOVE which is great if you get in before it happens, not so much after the fact. ask anyone who bought AAPL (Apple) at $650-700. when it goes 'whoosh' people at the back end get hurt and loose money. maybe it comes back. when and how much is the never ending question.
i love this stuff, just my 2 cents, best of luck to all.
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Thanks so much for all the help you two. So, I guess all I'm wondering now, just to make sure I understand it properly, is ETFs are bought and sold just like stocks? There's just generally less risk. It's something that needs to be sold once you see a substantial increase in the price.
yes and no. i guess more no-ish. sometimes volume/volatility is a good thing.
if you are a day trader or are going to try and beat the market by moving in and out of trades, then you NEED the volume/volatility or churn to try and capture the small moves. in quick, up a few cents and out. repeat. end of the day, this has been proven to do poorly compared to indexing/ETFs, but someone always ends up being sure they can do better...
if you are starting out, or don't want to spend all day watching tickers, then no, they are a great way to match the index, they are easy to trade, and fit the 'buy and hold' method very well. you only get charged when you buy/sell, your basis/cost has nothing to do with all the other nut cases and the high freq trade stuff.
so, buy low, hold, when there is a downturn that confirms with several days on the charts, buy more, hold. repeat!
if you wish to get more specific, ETFs can also be used for sector plays. XLF is a great way to play finance/banking without the risk of a single stock. XLV if you think healthcare and the upcoming changes are the way to go. i like XLK and the technology play, it's cyclical, and the upswing in the global/us market means business will be spending big to upgrade old/outdated system and tech. or i might be wrong. ask me in 10 years... anyway you get the idea, index everything or pick and choose. either is a great way to get started.
free pick. worth what you paid for it. i've got a decent position in VYM, vanguards high yield index ETF. last year i gained 11.82%, and earned just over 3% in dividends. beat the hell out of the few penny's my savings account earned! i love having my money make me more money.
Interesting.
You can consider my of the low cost index fund school of thought, so I've been weary of ETFs, especially sector based ETFs.
So you admitted that ETFs do have turnover, and with buying and selling those stocks somebody, somewhere, is paying a fee or comission to purchase and/or sell those funds into and out of the ETF, right?
As for sector ETFs/funds. Wouldn't a total stock market fund be better since it'll account for sector based growth? Isn't a sector ETF in the long run essentially just going to balance out and you won't gain over the market long term since the market is receiving those gains anyway? I'm concerned that a sector based fund/etf is a glorified stock with a little more diversification.
For what it's worth I've invested my money in the Vanguard Admiral Shares Total Stock Index VTSAX. And have no plans on being a day trader or anything like that, so my questions could be moot for somebody who is doing that.
the thread/OP was 'starting to invest'. everything i've posted has been in that theme. i've been doing this a long time, and only wanted to post the the stuff that i got and helped me in the "starting to invest' theme.
the 'VTSAX' play is awesome. *for disclosure, i've got about 50% in something similar, 25% more in various index funds, and the remaining bits in individual stocks and cash. *
the 'turn over' thing is the same for stocks, ETF shares, etc. every time you buy something or sell something, you pay a transaction fee. so does everyone else. same, same. all equal.
so, i have no inside info. i rely on subscriptions, memberships, my own research, etc to decide where to buy.
i posted that DDD would be a bad thing to buy now. today DDD was down 13.86% which was a lot.
apple was up (AAPL) and should go higher. trading and 8 times X cash, 136 billion cash, and no changes... they make lots of money, they have lots of money, sometimes the market gets it wrong. just my 1 cents.....
i have only posted stuff that i thought would help the initial investor. love to to tell you all about the amazing covered 'strangle' i wrote on AXP, and the reasons that i rolled it forward, but that has nothing to do with this tread. or the covered calls that make me lots of money every month.
trying to keep it simple and easy. would love to see 'everyone' make money, save money, etc.
don't invest in an 'MLP' or overseas stock if you don't want to deal with K1s, additional tax documents or the like. again, based on previous experience. lots of fun to make money, not so much fun to deal with the tax problems that investments create.
the world changes fast. if you are 'all in' an index fund like 'VTSAX', you go up and down with the index. if you think a particular sector might do better based on the world enconomy, then a 'sector' play might be the way to go.
for reference, the index was down today, and due to my interest in several sectors/stocks, i was up several hundred dollars. just saying that sometimes the 'other' idea is the way to go. and the index funds. pick the winners and best strategy for the win.
all the best of the investors of the world. new and old.
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Thanks, that was a good post. I'm pretty much just putting my funds away and letting them mature over the long term and riding the wave. I don't have the time or resources to trade like you do, so I'm hoping what I've done is the best option for me.
you are doing it right, you've picked a winning fund, in 10-20 years, you will be amazed at the outcome. congrats to you and anyone else that follows your example.
every time you get paid, put some away. profit!