athletics

I would like to put a little money in the stock market. I do not have a fortune, but I have enough that I would like to put a little here and a little there. Most of my investments are in low risk fund and I would like to take a portion 10-15% and use it in the stock market to get started. Should I use a stock broker, one of those crazy day traders, the bald guy on tv with the sleeves rolled up mixed with my own investments? What is a good place to start. I don't mind some risk being involved, I just want to make smart decisions with my money and invest wisely. Any tips?

Yakk

Track an index. Find a means of tracking an index with the lowest load possible.

Load is the fees that mutual funds and other fancy investment methods charge in exchange for handling your money. You want a load of 1% or less -- less is better.

The idea is you can't afford to buy the really smart advisors, you aren't an investing genius -- so the best thing you can do to boost your average returns is to minimize how much money is wasted, and make sure you have some breadth to your investments.

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Last edited by JHVH : 10-29-4004 BC at 09:00 PM. Reason: Time for a rest.

skier

You can do it yourself- invest in companies you think will do well... but you will have to spend time researching those companies and staying on top of them if you don't want to blindly gamble.

I guess i'm saying either do the work and expect to spend a few hours a week studying the market or else give your money to some other trader who does it for a living.

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soma

Here's a primer I wrote on the subject that will get you started.

http://www.tfproject.org/tfp/showthread.php?t=108333

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ChrisJericho

Like the other people have said, it depends on how much work you want to put into investing.

One of the simplest ways like Yak says to to buy an index fund. For instance, most major mutual fund companies (like Vanguard, T Rowe Price, etc) have an index fund that tracks the S&P 500, however well that index does is how well your fund does. These indexes are a good way to be diversified and the expense ratios are usually pretty low.

Of course there are many mutual funds that specialize in specific industries or sectors like Energy, Emerging Markets, Health Care etc, as long as you get these from a major company the expense ratios should be fairly low.

If you want to invest in individual stocks you will have to do devote a substantial amount of time doing the homework and keeping up on the latest news for each stock. Jim Cramer (the bald guy with the sleeves rolled up I believe you're talking about) says that for each stock you own, you need to do an hour of homework per week. So the amount of individual stocks you buy depends on how much free time you have to monitor them.

Generally you can do all this stuff within one major company (like I said Vanguard, T Rowe Price, Fidelity etc). So you can have a few mutual funds, a few stocks, a money market account, you don't need to have a personal broker. Almost everything can be done online (except for the initial setup process which usually requires some sort of real signature).

Of course I'm not a financial adviser, and there's always risk involved, but I hope that helped.

Nice thread Soma, that should be stickied !

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JustDisGuy

The best way to make a small fortune on the stock market? Easy. Start with a large fortune.

If you don't have the time or inclination to spend your whole day tracking miniscule gains and losses of individual stocks, buy yourself into a professionally managed mutual fund. Easy and depending on your choice of aggressive vs. non-aggressive growth can be either potentially very lucrative or very safe.

My $.02.

Yakk

That PM mutual fund has a problem. It costs, say, 2% of assets every year for overhead.

The same problem happens with buying and researching your own stocks when you have a small amount of money. 1 hour per week per stock is 52 hours per year -- if your time is worth 10$ per hour to you, that's 520$ per year.

If you manage to pull off a 6% real return on your investment (after inflation and any taxes), you break even with a 8600$ investment. If you invest 20000$, get 6% real return, and spend 500$ of your own time working on it, that's 1200$-500$ = 700$ net profit, or an actual return-on-investment of 3.5%.

You could probably have done better, on average, just by buying the market.

As your pile of savings grow, so does the leverage for doing stock research yourself grows. Funds with minimium investments that have less load costs start to open up. So this doesn't mean you shouldn't have savings -- rather, you should place your savings into low-management fees low-self-research investments until you start having a real nest egg. Spend your time ratcheting up your salary and working rather than playing the market.

You can play the market for educational reasons -- but there is little reason to actually commit your real savings when learning about playing the market. Play with a small amount of money, and/or play using fantasy investment systems.

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Last edited by JHVH : 10-29-4004 BC at 09:00 PM. Reason: Time for a rest.

iccky

Two words: index funds.

Don't try to beat the market. There are thousands of incredibly smart people being paid large amounts of money to spend all of their time looking for ways to beat the market. We call them hedge fund managers, investment bankers and mutual fund managers. Even they regularly fail to beat the market.

Do not invest in an actively managed mutual fund. Investing in a mutual fund is slightly smarter than trying to beat the market yourself: in essence you're paying someone to try to beat the market for you, someone who devotes their lives (and their considerable staffs) to beating the market. But even mutual funds fail to beat the market more often than not, once you take into account fees.

Do diversify your portfolio. This means holding a range of large-cap, small-cap and foreign stocks, along with some bonds and real estate (in the form of REITs, real estate investment trusts). You can do this by investing in several different index funds that track different indexes.

If you don't have enough money to buy into several index funds, ETFs are a good second option. ETFs are essentially shares in a bundle of stocks identical to those making up a stock market index. You can buy and sell them like normal stocks, and there's no minimum investment. Keep in mind transaction fees however. Say you buy $700 worth of ETF shares and pay a $7 brokerage commission. That just knocked 1 percent off your first year's return. If you're only investing $140 you just lost 5%, and are better off putting the money in a high yield savings account.

Do buy and hold, do not trade stocks rapidly. Again, the transaction costs associated with making a trade mean that you have to make much more money on the trade then the average market performance just to stay even with the market.

Do read "A Random Walk Down Wall Street." Best book about the stock market ever.

Watch Jim Cramer because he's entertaining. Do Not watch him for investing advice.

Ourcrazymodern?

Don't bother - buy gold.

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