First off, no, I’m not looking for advice on where I should invest and what the latest and greatest methodology for creating fabulous wealth is.
Instead, I’m sick of the spurious information out there on investing, all the different “experts” and their plastic opinions, and people who will spend all day encouraging you to buy their book on how to invest, but will never let you see the returns (or lack thereof) of their own portfolios.
If they even have a portfolio.
I’ve done a fair bit of reseach off and on for the last 3 or 4 years and I’ve decided that I might be ready to involve myself in what many believe to be an excellent tool for long term wealth: the stock market.
The lowest common denominator about what’s right seems to be index funds. My plan would be to use dollar cost averaging to make a fixed and regular monthly contribution in the S & P 500, with an investment horizon of somewhere between 10-15 years.
But does anybody really meet with success in trying to invest?
Can anyone here personally attest to having accumulated wealth as a result of a long-term investment strategy?
What annual percentage gain are you averaging?
On the flip side, can you attest to being one of the people that’s lost money in the market?
Enquiring minds want to know. Well, mine does, anyway.
I held some Compaq for about a year and a half, which didn’t move, and I still have 10,000 shares of Enron.
If I pursue other investments in public companies, I’ve already decided it will be in companies’ whose situation I am truly personally familiar with, which means that more than likely they’ll be in energy, at least for the near future. And it’s just as likely that I’ll invest in private ventures.
I do know quite a few people who had made some pretty serious sounding paper profits before the market collapse, but I can’t think of one who cashed out in time.
Index funds sound like a decent plan. Good luck with it.
I’d recommend using a broader index than S&P 500. There’s a distortion in index funds in that indexes are generally keyed to list “well performing” stocks. If a stock goes up, then it’s put on the index. If it goes down, then it’s taken off the index and replaced by one that’s gone up. This sort of effect can readily be seen in the smaller indexes, but harder to detect in larger ones such as the S&P 500. This effect is going to be less pronounced the larger the index. Of course, the larger the index, the more likely your gains will be smaller. But this is all about risk management, right?
Well, I’m glad you think that, but I was specifically not soliciting for opinions on where I should put my money. If I did that, this thread would probably be ten times longer by now, with many opposing viewpoints on the matter, only a tiny fraction of which would be backed up with a successful investing track record by people practicing what they preach, and doing so with success.
That’s exactly the kind of positive answer I was hoping to hear.
On a side note, do you continue to contribute to said fund via dollar cost averaging in these rough economic times? From a combination of what I’ve read and common sense I’m taken to understand that there’s much benefit to be had in continuing to make regular, fixed dollar amount contributions even (in fact, especially) in tough economic times to pick up shares of whatever you happen to be invested in while they’re on the cheap.
The investments mentioned above were made with one-time purchases.
I have another fund through my employer that makes small investments (5% of earnings) every payday. This has worked very well, and is probably the ultimate in “Dollar Cost Averaging”.
I funded the first whole year of my now 20 month unemployment/sabbatical/screw off period with the gains I had made in the previous few years when I was investing $500 per month in my E*trade account and making 60-80% gains on my carefully selected stocks, most in normal businesses, not E-businesses.
Stocks like NWNL (bought by Reliastar at a 80% profit for me), Musicland (60% on that one when Best Buy bought) and Yellow Freight (60% there too) - just to name a few.
Not that they all went that well. I’m currently sitting on three small holdings which cost me $4k total, but are currently worth about $1k.
All in all, though, I did very well.
The key is “Know the stock, know the market”. And by that I don’t really mean the Stock Market as a whole, but the field the business operates in. Two of the stocks I got burned on were the victims of market/cycle/legal problems that I could have known about if I had done more research.
I, too, have made money in my stock investments. I have been investing since the late '80’s, and although my portfolio has been hammered over the last 3 years, I am (guessing) that I am at least 100% ahead of where I’d be if I had put the money into bonds or some other guaranteed return device.
Interestingly, although the bulk of my investments are in indexes, the largest single holding I own is Whole Foods Market (WFMI), which has risen steadily for the last 5 years or so.
I have recently bought into some relatively steady tech/telecom/defense companies (IBM, EDS, LVLT, RTN) that I thought were battered down but had great prospects, and am above water on all of them. It’s also money I can afford to lose.
I would certainly do the dollar-cost-averaging thing and focus on index funds, but if you see something you like, give it a shot. You may not see much of a gain in the next couple of years, but over the long term, you will do great. Just think that you are buying the companies while they are “on sale”.
I made about 300% in 3 1/2 years. Not very reproduceable, though. For 8th grade graduation (1998), my dad gave me 100 shares of Cisco, worth about 8 grand at the time. This being the “good ol’ days” of tech stocks, it just kept going up, pausing only for a split, then going up some more. Long story short, when I cashed out it was worth a hair over $25K. Now, relying on one company is always a bad idea, so I wouldn’t recommend anyone trying to follow that path, but, yes I have made a profit in the stock market.
I am by NO means a financial wizard - I’m not even sure where my checkbook is right this minute. However, the WryGuy has a clue about these sorts of things, and we (meaning he - I just get JTWROS on everything) have done very well in the stock market. His two words of advice for beginning investors: Motley Fools. They make stuff reasonably simple for the layman, and by comparing and contrasting their advice with that of “big time” investing firms, you can get a pretty decent idea of how to, and where to. And DON’T put all your eggs in one basket.
I once bought 2 shares of Disney after going to a new park.
Three years later it had trippled and I’d cleared a couple hundred.
That excitement has lasted me.
