I’m getting ready to dip my toe in the waters of investing, and I’m sure there are quite a few people here who invest or have some knowledge of the field. I thought it might be useful to start a thread to get some basic information flowing; it could be helpful to others as well as to me.
I’m most interested in advice on brokerage firms that people have experience with, and good sources of investing information. From my personal standpoint, I am unlikely to be doing lots of trading - I have more of a long term investment perspective. However, any advice that you think would be useful, I’d love to hear.
Choosing a good brokerage firm is probably the top item (or at least the first) on my list.
Are you looking to buy individual stocks, or mutual funds? If the latter, you don’t need a brokerage; you can invest directly with the companies offering those funds, e.g. Neuberger-Berman, T. Rowe Price, Vanguard, Fidelity, etc.
One good source for starting out is the Motley Fool, at fool.com. They have lots of articles to help you understand what you should expect out of investing, how to get started, how to set goals, and so on.
This is my opinion, but I think you will find pretty quickly your comfort level for making investments. Some people really enjoy the process of sorting through information to find just the right stock or mutual fund that will serve their goals. Others, like me, have better things to do and are satisfied with maxing out their Roth IRA each year, investing some other money as it becomes available, and finding a couple of funds that are good enough to let my money sit there, do its thing, weather the occasional storm and grow.
As far as brokers, a lot of people just use one of the online brokers these days, like eTrade, Scottrade, and so on. The bargain price for trades and minimal service level seem to suit many people just fine, at least those who don’t feel they need customized, hands-on investment advice from a human.
I know that the “Dummies” books are not held in high regard here at the Dope, but reading Mutual Funds For Dummies was an excellent starting-point for me. It helped me grasp the big picture and gave me lots of helpful hints which I still use today. And once I opened an account at Charles Schwab, I found a lot more straightforward online advice for the novice investor, particularly those interested in long-term, common-sense choices. Schwab does require $1,000 as a minimum amount to keep an account, but their educational content is worth it.
Check out the Bogleheads. There is a very useful Wiki. You can also post your particular situation in their forumand get very useful advice from seasoned investors.
I was just about to ask an investing question, but I suppose I’ll tack it into this thread.
I’ve started a handful of threads about investing over the years and finally decided to make the jump a few weeks ago as I figured that was going to be a better learning experience then all the advice I could get. I put a small chunk ($250) into an index fund which has gone up a few dollars and I put a larger chunk ($1000) into a single stock. Within two days it went from $1000 to $1060 and then a few days later it went to $900 where it’s been for a while now. It’s been more or less steady around there for a while now, I think it’s at $890 as of right now. My question is, do I put more into the stock while it’s low, do I wait for it to start heading back up, do I just sit tight? Also, I’m on Sharebuilder and try to think ahead so I can make my trades on Tuesdays when it’s cheaper.
The stock that I invested in is supposed to do well and I believe I read (from the people, not the forums at Motley Fool) that they expect it to double in 5 years. So my plan is to leave it parked there for a while and I’m patient enough to not jump the first time the stock goes below my cost basis, I understand that’s how it’s supposed to work.
But my question boils down to, do I toss more money at this stock since it’s low, or do I just wait it out?
If you are reasonably sure and comfortable that this company will do well in the future, by all means invest more while the price is at a discount. I’ve been investing for a few years now, taking things cautiously, and I had several opportunities to do what you’re contemplating, but didn’t feel experienced enough yet to follow the “buy low, sell high” rule.
But it all comes down to how much risk you’re comfortable with.
If you are reasonably sure and comfortable that this company will do well in the future, by all means invest more while the price is at a discount. I’ve been investing for a few years now, taking things cautiously, and I had several opportunities to do what you’re contemplating, but didn’t feel experienced enough yet to follow the “buy low, sell high” rule.
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It’s a branch of McDonalds (but not McDonalds per se) so I can’t imagine it’s just going to fall on it’s flat on it’s face. On the one hand, I don’t know enough about investing to be able to read all the forum posts/articles/reviews/etc about it OTOH what all those people say doesn’t really have that much to do with how many people walk in the door (it’s a restaurant, not an corporate firm that makes money by handling/shuffling money around).
I got $50 for opening a Sharebuilder account and the other $1200 I put in is more or less the amount I felt comfortable losing if everything I invested in were to go to zero.
Low compared to what? To what it used to be? That is irrelevant. To what it will be? How do you know that it is currently low? If it were a pretty sure thing that it is “low” compared to its true value, people who know a lot more than you or I would have bought it driving its price up. The current price has baked into it all the information currently known about the company. It is priced fairly.
If you have put 80% of your investments into one stock, you are taking a massively risky approach to investing. Mind you, you only have a small amount of money invested anyway. If I were you I would sell the stock and put all the money in the index fund, then use future savings to diversify across stocks and bonds.
Actually the first item on your list should be a good education on long-term investing. This can completely be self-education as there are so many resources available, online and otherwise. You have to first decide on your long-term goals, your personal level of risk aversiveness, asset allocation, etc. Picking a brokerage firm is really a pretty trivial decision once you’ve done the hard work of educating yourself. IMO your first ventures in investing should be in mutual funds and I would recommend checking out Vanguard for those purchases. With mutual funds you can avoid specific stock risk. Eventually you can add some specific stocks into your portfolio, but never beyond a level that significant losses in those stocks will wreck your long-term goals. Good luck!
The key to success is asset diversification - that means diversifying across all asset classes - debt obligations, equities, hybrids (preferred stock, convertible bonds), real estate, commodities, precious metals, developing markets, etc., etc.
The worst mistake you can make is trying to beat the market. You WILL lose. People who spend their lives managing money rarely beat the market on any kind of consistent basis, so what are the odds that you will?
edit: I go the mutual fund route myself. Vanguard has the lowest fees of anyone in the business - as low as 0.5% or less per fund if you have at least $10k in that fund. T Rowe Price is also very well regarded but more expensive.
Do not attempt to buy individual stocks. You’ll be competing with professional who have been at it for years before you were born. By the time you hear of a good stock to buy, the professionals on Wall Street have bought it days before and now its probably a good time to SELL it!
Hire professionals to work for you in the form of mutual funds. Vanguard almost always has the lowest fees so check them out first. Remember its not what you make, its what you keep and high fees will eat away at your profits quickly.
Do not attempt to predict which sectors of the market are going to do well. You may think for some reason that tech stocks are going to do well, so you buy a mutual fund that invests in tech stocks. Remember that recent past performance does not indicate future growth, often its the opposite. Buy the entire market. This way you may not make a killing, but at least you’ll not lose everything by making an incorrect prediction on what sector of the market went up. Vanguard Total Stock fund is a good example of this kind of investing.
Diversify your funds. Invest in foreign markets, real estate (REITS), Commodities (Oil, Gold, Rice, etc.), Bonds, etc. This can all be done via mutual funds and Vanguard again is usually the cheapest way to do it.
Today IMHO we are at or near the top of the market. The FED chairman is printing money like crazy to keep his and Obama’s job. Much of this newly printed money is going into the stock market, driving prices higher and higher. If the economy looks better near the November election, both Bernanke and Obama will keep their jobs. By 2013 when the election is over, it’ll be all downhill for awhile.
In other words, if you decide to invest now,you’ll be buying high instead of following the best investment strategy which is sell high, buy low. Just be prepared for a bumpy ride to say the least. Invest for the long haul.