Buy something in a company that’s been around a long time and pays a dividend. I have stock in AT&T, 130 shares, and every quarter they pay me $50. Since it’s at $26 a share right now I get two more shares every quarter since it’s reinvested.* That’s 8 shares a year and the number I gain only goes up.
You don’t really lose money when you invest though until you sell. Just because the value goes up and down really doesn’t mean anything unless you need/want to sell. Holding on to it in the long run is how you make your money.
*I used to take the dividend money and put it into my kids bank account, but just a month or so ago I saw I could get two extra stocks for the amount I was earning. My kids are going to get this money in the end anyway. That’s my long term investing plan, buy what I can and let it sit for years and I do mean 20-30 years.
Except that the inflation rate is 3%. So you are loosing 1% of your cash every year. And it’s more like a 1% interest rate for CDs and savings accounts.
Since the OP and I imagine most people here don’t really know that much about investing, I would suggest to the OP that they put money in something like an no fee S&P index equity fund.
Companies that make consumer staples (i.e. products like breakfast cereal and dish soap that people don’t stop buying when times are bad) and that pay a dividend. When the market tanks, they don’t tank as hard, and the dividends are good extra cash.
If you have the stones for it, I think now is a good time to buy real estate, for those reasons and others. BUT - this can and will never be an easy investment. You have to do hours and hours of research, tons of time will be spent analyzing properties, areas, cash flow, etc., and it’s long, long term. Your investment will be hard to liquidate, and if you pick wrong, you’ll lose big. Generally, if you’re not investing with a group (and a group investment has all sorts of its own pitfalls), you’ll need a large nest egg to get started.
Big the upside can be enormous. Lots of Big Time Money has been made through real estate. But you have to be passionate about it. I am smart, and I quickly get bored with reading about stocks and the market, but real estate…I can spend hours just looking at properties and calculating cash flows.
You may also look into “Spider” funds - SPDR - it’s basically an index-type fund which pulls together a group of consumer staples, or energy companies or what have you. They are generally stable, and easy for a novice investor to understand.
That sounds like a decent plan. There are several blue chips paying dividends of 6% or so. If there are decent long term stocks that pay 4-6% dividends and you reinvest them, then you’ll do fairly well a few decades down the road (assuming the companies you invest in do not go belly up).
Do you know if money invested in real estate investment trusts appreciates with propery value? ie, if housing bottoms out in a dense, landlocked area and you invest via an REIT, and over the next 40 years the prices quadruple do the shares also quadruple (aside from paying the annual dividend)?
From what I know, I get the impression REITs are more dividend investment vehicles, aren’t there mutual fund like investments that purchase property and appreciate as the property appreciates?
Then again the bottoming out may just be the natural market value.
It is my understanding that REITs run into trouble because, by law, they must distribute most or all of their cash earned at year’s end to the investors. Owning real estate without having cash hanging around is trouble - all you need is one giant repair to kill it, because there’s no money saved to pay for the repair.
With one guy and a single duplex, you may be looking at $10,000 for a roof repair, which can be relatively easy to borrow. For an REIT that owns ten strip malls, the trust is looking at a multi-million dollar bill.
In short, because thinking that you can beat the index means thinking that you’re smarter than all those other folks who think they’re smarter than you. It gets back to the OP’s quote about spotting the sucker at the poker table. Except that if you go into detail, it’s much worse than that: Betting on being able to beat the index consistently means betting that nobody at the table can spot the sucker, even after they they see the outcome of several hands. Plus, of course, with anything but an index fund, you’re paying fees that’ll eat into your profit (technically, index funds have fees, too, but only a small fraction of a percent).
And for commodities in general (precious metals, land, frozen orange juice concentrate, whatever), don’t buy unless you have something you intend to do with it. If you’re buying land, live on it, or build a business there, or at least rent to someone else who’s doing one of those things. If you’re buying copper, mill it into wires, or smith it into cookware, or whatever. If you’re buying frozen orange juice concentrate, turn it into smoothies. If you’re not doing any of those things, then you’re not really investing at all, just speculating. The thing with commodities is, they tend to remain at constant value with time (in fact, this could be taken as a definition of “value”), so on average, you’re going to end up right where you started with them. You can try to outguess the fluctuations in the market, but that gets right back to finding the sucker at the poker table. The reliable profit comes from taking something and turning it into something more valuable, or in getting a continuing use out of it.
Yes, but they sell it to somebody, usually the host or the host’s sponsor.
Regardless of the specifics of one aspect of the bubble, the point remains that, imho, in the current environment gold is a bad investment for a number of reasons.
People who believe that the governments in the USA and Europe are going to stop spending more than they take in in revenues and stop printing currency to pay off their debts, should definately stay away from buying gold.
If on the other hand, individuals who believe these governments will continus to spend more then they take in and have to continue borrowing and monitizing their debt by printing money, should continue to buy gold.
It just depends on whether you trust your government to have your best interests in mind when they make decisions.
Not “just”, but to be honest, I don’t want to debate gold’s worthiness as an investment.
I do know this: You buy low, sell high. Buying an investment that is already at its all-time high is thumbing your nose at this obvious rule, daring it to go down.
You’d think that with the upcoming collapse of the financial world and all, he’d put it in gold, especially as the price of the metal has dropped almost 10% since Monday.
Seriously, though. Congratulations on identifying an undervalued stock. I hope you’ve already bought some, as Buffett’s investment should trigger a rise in the price.
