Investing - Where to start?

[rocanlover163]

I know there are some macrumors investors on here, so I'm looking for some help and or advice.

I've been reading a bit about investing (stocks, ETF, mutual funds) for a while now, though not as much as I'd liked too, and I am getting closer to jumping into the market. I have some companies in mind that I have been following as well as mutual funds. I'm just having a hard time getting started.. With 2-3K, is it wise to buy only one company's stock, or two, or go with mutual funds? What would be the best way to diversify those 2-3K? Should some be invested for the long term, and partial for short term? Any advice is greatly appreciated! Here is some info to help you guys out!

-A part from the 2-3K I do have some money stored away for emergencies.
-I know IRA's are another safe option, but for now I don't want to go that route.
-I know I can maybe go see a financial advisor, and maybe I will, but I want to be the one doing my own investing. Learning by trial and error I guess.

Main Questions:

-How would you invest 2-3K?
-What would be the best way to diversify it?
-Is it worth it to invest it short term? Greater risk for greater returns?

 

[Plutonius]

I highly recommend Vanguard.

 

[lowbelly]

Honestly? I'd stick 2-3k in AAPL. And I do. A percentage of every paycheck. And it has paid off handsomely. Highly recommended.

 

[Lance-AR]

Since you mention diversity, have you considered index funds? You should also consider the time frame. Are you wanting to use this money as a house down payment in 5 years, etc?

 

[miles01110]

I know there are some macrumors investors on here, so I'm looking for some help and or advice.

I've been reading a bit about investing (stocks, ETF, mutual funds) for a while now, though not as much as I'd liked too, and I am getting closer to jumping into the market. I have some companies in mind that I have been following as well as mutual funds. I'm just having a hard time getting started.. With 2-3K, is it wise to buy only one company's stock, or two, or go with mutual funds? What would be the best way to diversify those 2-3K? Should some be invested for the long term, and partial for short term? Any advice is greatly appreciated! Here is some info to help you guys out!

-A part from the 2-3K I do have some money stored away for emergencies.
-I know IRA's are another safe option, but for now I don't want to go that route.
-I know I can maybe go see a financial advisor, and maybe I will, but I want to be the one doing my own investing. Learning by trial and error I guess.

Main Questions:

-How would you invest 2-3K?
-What would be the best way to diversify it?
-Is it worth it to invest it short term? Greater risk for greater returns?

The answers to your questions depend on a lot of factors. How old are you? What is your income? Do you have kids (read: are they going to college?)? Is your goal to start building long-term financial security (for retirement), or to "get your feet wet"?

Statistically you will never beat the market average in the long term. Day trading takes an extensive amount of time to do well, and even then it doesn't always work out. Knowing when to quit isn't something an amateur has an innate sense for. The best way to invest money (again, imo) is to put it into mutual funds. 12% long-term gains without actually doing any work? Yes please. The problem you'll run into with only $2-3k is that a lot of mutual funds have a $5k minimum or something like that, but some funds don't have those minimums.

 

[rocanlover163]

Thanks for the suggestions guys.

Since you mention diversity, have you considered index funds? You should also consider the time frame. Are you wanting to use this money as a house down payment in 5 years, etc?

I don't have a specific time frame. I don't need the money anytime soon, and I would like to start saving for the future, but I have a higher risk tolerance right now, so I definately would like to me a little more aggressive.

The answers to your questions depend on a lot of factors. How old are you? What is your income? Do you have kids (read: are they going to college?)? Is your goal to start building long-term financial security (for retirement), or to "get your feet wet"?

Statistically you will never beat the market average in the long term. Day trading takes an extensive amount of time to do well, and even then it doesn't always work out. Knowing when to quit isn't something an amateur has an innate sense for. The best way to invest money (again, imo) is to put it into mutual funds. 12% long-term gains without actually doing any work? Yes please. The problem you'll run into with only $2-3k is that a lot of mutual funds have a $5k minimum or something like that, but some funds don't have those minimums.

-I'm 22
-No kids
-I am mainly just trying to get my feet wet, but ultimately I would like to invest long term for retirement. I don't mind taking on greater risk right now since I still have time to save.

 

[miles01110]

-I'm 22
-No kids
-I am mainly just trying to get my feet wet, but ultimately I would like to invest long term for retirement. I don't mind taking on greater risk right now since I still have time to save.

Perfect! I'd look into saving enough to buy into a Vanguard mutual fund. Since you're young you could put it all into one of the higher-risk (= higher reward) funds and just let it sit there for 20, 30 years.

 

[eric/]

Thanks for the suggestions guys.



I don't have a specific time frame. I don't need the money anytime soon, and I would like to start saving for the future, but I have a higher risk tolerance right now, so I definately would like to me a little more aggressive.



-I'm 22
-No kids
-I am mainly just trying to get my feet wet, but ultimately I would like to invest long term for retirement. I don't mind taking on greater risk right now since I still have time to save.

I'm no expert, but what I did was basically take my money and threw it into high risk roth IRA mutual funds and just put more and more in it. Have had mixed returns, but overall rather happy with it.

I started investing at 21 myself. I dabbled in some random stocks too and have made a bit of money.

Others can probably give you better advice.

 

[splitpea]

Statistically you will never beat the market average in the long term. Day trading takes an extensive amount of time to do well, and even then it doesn't always work out. Knowing when to quit isn't something an amateur has an innate sense for. The best way to invest money (again, imo) is to put it into mutual funds. 12% long-term gains without actually doing any work? Yes please. The problem you'll run into with only $2-3k is that a lot of mutual funds have a $5k minimum or something like that, but some funds don't have those minimums.

How does one find and select mutual funds without making the research a full-time job or just defaulting to whatever your bank is pushing?

 

[miles01110]

How does one find and select mutual funds without making the research a full-time job or just defaulting to whatever your bank is pushing?

Vanguard (for example, others are similar) gives you a list that's sortable by things like gain since inception or average annual yield. It's also categorized by risk level. You kind of mix and match; You can see all of the higher-risk funds in one list, all the low-risk funds in another.

 

[splitpea]

Vanguard (for example, others are similar) gives you a list that's sortable by things like gain since inception or average annual yield. It's also categorized by risk level. You kind of mix and match; You can see all of the higher-risk funds in one list, all the low-risk funds in another.

So first you have to find a list of companies like Vanguard that offer funds?

What criteria would one use to compare them? Average gain is an obvious one, but how does one measure risk? How do you factor in management fees and such?

 

[Huntn]

Stocks offer much higher risks and rewards than mutual funds. You need to stay on top of stocks. Under normal situations "stop losses" can protect you. Possible Resources:

For Stocks:
IBD: Investors Business Daily, a newspaper type publication, gives specific stock buying/selling information.
Gorilla Trades: more expensive, $300 per year, tells you what stocks to buy, with a buy and sell point.

For Mutual Funds, I assume there are newsletters out there, but I can't direct you to a specific name.

 

[miles01110]

So first you have to find a list of companies like Vanguard that offer funds?

Yes. A google of "mutual fund providers" should be helpful... this is not an obscure topic.

What criteria would one use to compare them? Average gain is an obvious one, but how does one measure risk? How do you factor in management fees and such?

http://www.sec.gov/investor/pubs/inwsmf.htm
http://budgeting.thenest.com/compare-two-mutual-funds-3784.html
http://www.mint.com/blog/investing/mutual-fundamentals-a-visual-guide-052012/

 

[rocanlover163]

I want to maybe invest 1K in individual stocks for now and get my feet wet with that, and maybe find a nice mutual fund to invest in overtime. I was looking at the Vanguard ones. Is that not a good idea?

 

[Plutonius]

So first you have to find a list of companies like Vanguard that offer funds?

What criteria would one use to compare them? Average gain is an obvious one, but how does one measure risk? How do you factor in management fees and such?

A google search should give you a list of investment sites. Register (for free) on the Vanguard site and you should be able to see all the investment funds and all the investment information that is available.

It's very tough to compare between the different investment sites since they all have funds that do well and some that do poorly (i.e. look through the different ones and pick the one that you are comfortable with and that supplies what you need).

 

[mobilehaathi]

Emu farms are about to explode!

 

[Plutonius]

I want to maybe invest 1K in individual stocks for now and get my feet wet with that, and maybe find a nice mutual fund to invest in overtime. I was looking at the Vanguard ones. Is that not a good idea?

When checking out the mutual funds, verify what the minimum investment is to open the fund. When you invest, you generally want to diversify which would include mutual funds.

If you go through Vanguard, the best way is to put your initial investment money into the money market fund. You then buy stock and mutual funds by transferring the money from your money market fund (i.e. exchanging from one fund to another).

 

[elistan]

Some general rules I go by:

- Put <your age>% of your money into bonds, and <100 - your age>% into stocks. (Eg, 22% into bonds, 78% into stocks.) Up to once a quarter, but at least once a year, rebalance your portfolio. If stocks have a great year, you might end up with 85% in stocks and %15 in bonds - so rebalance to 77% stocks and 23% bonds. That helps maintain the "buy low, sell high" strategy.

- When putting your money into stocks, you basically have three choices - pick and choose which particular stocks, buy into a mutual fund that has a specific investing strategy, or buy into an index fund. From what I've read, the index fund over a long enough time frame yields the biggest gain.

- Index funds also have the advantage of usually costing the least in management fees. My index funds have management fees of 0.02% and 0.05%. Compare that to a certain small-cap blend fund I could invest in that has 0.80% fees, and a global fund with 0.89%. Those fees can eat in to a significant portion of your returns.

- The institutions I use are Fidelity, since that's who my 401(k) is with, and my bank, who offers stock trades and IRAs.

- An IRA is not necessarily a "safe option." You can invest money in an IRA into some extremely risky funds if they are available. An IRA is a method of saving on taxes. One option, a traditional IRA, lets you put money into the IRA before you pay income taxes on that money. You only pay taxes when you withdraw money - the theory being that in retirement you'll need much less income, and therefore will be in a lower tax bracket. The other option is a Roth IRA, in which you invest money after paying taxes, but then don't pay any tax on money you withdraw. In return for these tax advantages, you cannot withdraw the money until you retire, unless you're willing to pay a 10% penalty.

- Since you have emergency funds, and I assume enough income to pay for necesities and frivolities, I'd personally go for a long-term retirement strategy.

 

[AhmedFaisal]

I'll go against my own rules and give you what I live by:

1. The most important question is not when to buy but when to sell
2. Never talk about your trades to anyone, even your spouse
3. Never take advice from others on what trades to make
4. It's not money unless you cash out, otherwise it's worthless paper
5. The stock will tell you where it will go, news are noise
6. If it's news, the trade already happened
7. The performance of the stock has nothing to do with the performance of the company, fundamentals are worthless
8. A bull market is good for making money, a bear market is good for making money
9. If you are not willing to dedicate yourself to the market, don't trade and that includes funds. Unless you understand the mix of the fund and how it performs in a given market with that mix you can loose a ******** of money with them, especially when you can't get out of them quickly.
10. One of my latest favorites, ties back to point 7, in a downward market, come earnings they like taking out stocks and shoot them, no matter what the performance was, the stock will tell you when that's an opportunity to make big bucks on shorts.

 

[Iscariot]

Depending on how you factor it and how far back you go, the market returns on average between 7 and 10 percent per year. I'm sure I could maximize the return on my investments if I put a large amount of time and energy into it, but its not something that interests me. I buy RSP mutual funds with low management fees and don't lose sleep over it. I live beneath my means and have been contributing to my retirement fund since i graduated college many moons ago. It even looks like Ill be able to retire early. YMMV.

 

[Liquorpuki]

I recommend reading Jackass Investing, which is a book about myths that most investors believe. Ignore the guy's website, just soak in the knowledge in the book, it'll keep you from making a lot mistakes in the future

 

[ucfgrad93]

Since you mention diversity, have you considered index funds?

I invest in SPY, an index fund that tracks the S&P 500. I have done quite well with it.