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Author Topic: Ok....I'm ready. Teach me how to invest  (Read 474 times)
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Knightshade Dragon
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« on: April 14, 2015, 02:50:21 PM »

I really need to figure out what my gameplan is to take the money I have and grow it into more money.   Anyone have advice for a complete newbie (other than the obvious buy low, sell high - I learned that in GTA)

Anyone care to train a rookie?
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Ron Burke
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« Reply #1 on: April 14, 2015, 03:28:23 PM »

Buy Apple stock!   icon_biggrin

Seriously though I am not much of an investor but the few piddly shares of Apple I bought a few years back have made me more money than probably all my other investments combined.  They give a quarterly dividend to boot!

Anyway you'll probably need to be more specific.  Are you looking at retirement stuff like IRAs, do you have a 401k, or are you asking about mutual funds, stocks, etc?

Either way I wish you the best of luck!

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ATB
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« Reply #2 on: April 14, 2015, 03:45:03 PM »

I got started a long time ago, but have gone mostly fallow.  I made a good amount of money but made a lot of mistakes too, like holding stocks wayyyy too long.

I would get a dummies guide to investing as a baseline....that's what I did.



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Clanwolfer
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« Reply #3 on: April 14, 2015, 03:50:14 PM »

It comes down to whether you want the money to work for you, or to be for play.

If it's for play... by all means, research stocks, dive deep, make trades.

But at the end of the day - you're going to have a hard, HARD time beating just plunking it into a passively managed fund with an extremely low expense ratio, and just walking away from it. I've been entirely happy with Vanguard - if you can afford to drop in $10K, you get access to their Admiral funds, which are incredibly cheap for the performance you get. If you fancy yourself a bit more of an active trader, you can find all sorts of exchange-traded funds (ETFs) that have really low expense ratios and let you pick specific things to invest in. I've always intended to set aside some money to "play" with stocks outside of my retirement money and rainy day fund, but honestly whenever I find myself with the spare money it's easier to just shrug and drop it into funds that are already doing well than it is to do the research and make the gamble.

I'm not saying you're going to get absolutely burned if you go with an active strategy or trade stocks, but especially if you're paying for trades just keep in mind that you have to be making out like a bandit to make it worth the cost.
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« Reply #4 on: April 14, 2015, 04:18:09 PM »

Quote from: Clanwolfer on April 14, 2015, 03:50:14 PM

But at the end of the day - you're going to have a hard, HARD time beating just plunking it into a passively managed fund with an extremely low expense ratio, and just walking away from it.

This is what I did.  I got started really late, but have been contributing to a 401K and IRA for years.  I was finally in a position this year to invest a pretty good chunk of cash.   I ended up working with a guy who manages both my dad's and my brother's investments (brother is a doctor pulling high 6 figures), so I know I can trust him.  I don't have the time, energy, or knowledge to figure out how to invest it all on my own, and would rather pay someone I trust a small percentage to manage it all for me.  It's too early to know what the results are going to be (we just did the initial investment in February), but this is intended as a long-term thing so I'm not going to lose any sleep over it unless I see it tanking for some reason.
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Lee
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« Reply #5 on: April 14, 2015, 06:06:09 PM »

What Clanwolfer said.

I love investing in individual stocks, but I did it more for fun than anything else. To do it right takes a lot of time and a significant portion of money. It almost feels like educated gambling and I was obsessed with it for a couple of years. It's great when you make money, but devastating when you lose it, which is far too easy to do.

Now I just do mutual funds. Vanguard because of the low expense rates. Not exciting at all, but it's easy and much more predictable. Now I just worry about my stock to bonds allocation.

The way I jumped in was just by reading finance sites. Found a stock that looked interesting, and was getting positive praise from the financial press (not a great way to decide, but I was new and trusting) and just bought $1,000 of it. As I learned more I kept putting more money into it and other stocks. You learn as you go, but mistakes can be very costly.
« Last Edit: April 15, 2015, 12:57:18 AM by Lee » Logged
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« Reply #6 on: April 14, 2015, 06:12:17 PM »

Quote from: rittchard on April 14, 2015, 03:28:23 PM

Buy Apple stock! 

I am actually doing an analysis paper on AAPL for a finance class right now. I want to put some money into it because their numbers are great, but it seems expensive right now. That's always my problem though, I struggle with the when to enter more than anything else.
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Zinfan
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« Reply #7 on: April 14, 2015, 08:04:54 PM »

I buy and hold index funds.  These funds track the market pretty closely and have very low expense ratios.  I read about them many years ago on The Motley Fool website and it has worked well for me.  I don't research individual stocks at all, no time or patience.  I compared my 401k holdings with a coworker who does like to study and trade the markets and we actually have pretty much the same assets having started the accounts about the same time. 
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Zinfan
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« Reply #8 on: April 14, 2015, 08:16:39 PM »

Quote from: Lee on April 14, 2015, 06:12:17 PM

Quote from: rittchard on April 14, 2015, 03:28:23 PM

Buy Apple stock! 

I am actually doing an analysis paper on AAPL for a finance class right now. I want to put some money into it because their numbers are great, but it seems expensive right now. That's always my problem though, I struggle with the when to enter more than anything else.

It can be very hard to convince yourself that the time is right to invest but you have to take the long view and historicaly the market will rise hence why I buy index funds and hold them.  A coworker whose wife also made good money paid off his house years ago so has earnings that are not needed for day to day expenses,  he keeps this money in a bank savings account because he can't make himself buy stocks believing the next crash is right around the corner.  His 401k also is far behind mine because he put all his into the so called chicken fund that has a low but guaranteed retun rate (probably less than 3% annual) while mine dropped steeply in 2008 but recovered in a few years and is doing fine now.  Of course there are no guarantees in life so you have to decide for yourself what your risk tolerance is.
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Zinfan
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« Reply #9 on: April 14, 2015, 08:35:08 PM »

Not to spam this thread or try to convince anyone where to put their money but here are a couple of earning reports of two of my funds

First is a Fidelity Large Company fund

see the low 0.02% expense ratio, that helps keep costs down.  Here is a shot of the funds top ten holdings


And here is a Fidelity Small Company fund

performance between the index funds is pretty close.

The small company index holds stock in



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Teggy
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« Reply #10 on: April 14, 2015, 11:10:35 PM »

I've only got one piece of advice for you.

Always bet on black.

Works for me every half of the time.

Spoiler for Hiden:
Except for when it lands on green.
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Lee
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« Reply #11 on: April 14, 2015, 11:16:36 PM »

Quote from: Zinfan on April 14, 2015, 08:16:39 PM

It can be very hard to convince yourself that the time is right to invest but you have to take the long view and historicaly the market will rise hence why I buy index funds and hold them.

Right, but individual stocks are different if we're talking short term like I am. With a mutual fund long term investing, timing doesn't matter (assuming you are going to keep adding it). Even if I bought today and a crash happens next month, as long as I keep buying into it, I am just cost averaging it out. That's what happened in 2008/9, I didn't care because it was just a great time to buy low and I had decades to go until retirement.

With individual stocks for short term (a few years) even though there is a good chance I will add to my position later,  I can't just throw a few hundred into it here or there because of the fees. So I can't really cost average with a single stock. If I buy into AAPL now, I have to be really careful about the when.

I do use mutual funds for short term now (5 year time frame is the plan), but I am playing with fire. I have money in a couple of bond funds to reduce the risk. But interest rates are going to start rising at some point, and stocks are due for a pullback at some point. If both happen at once, I could lose my gains from the last 3 years. I just can't bring myself to put the money into a 1% savings account.
« Last Edit: April 15, 2015, 01:04:28 AM by Lee » Logged
Azhag
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« Reply #12 on: April 14, 2015, 11:36:54 PM »

Unfortunately there's no real good short term investments right now. Stocks are fairly high from PE, gold is risky and will get worse if interest rates rise, bonds will be hit by interest rates. Personally for your five year plan I like some good dividend focused funds or preferred ETFs (like PGF) as at least you'll get a bit more out of them if they drop.

Medium-long term, suggest cost averaging into some low fee vanguard or index funds (especially through tax advantaged systems). Meaning contribute on a regular basis rather than trying to time the market with big contributions.

As others said, trying to time individual stocks can feel good when it's up, but they can fall a lot faster than they rise unless you're lucky, so need to have patience or it can drive you mad. Something like Apple is at least unlikely to drop huge percent though.
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Lee
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« Reply #13 on: April 15, 2015, 12:46:19 AM »

For retirement investing KD, this is what I use as a guide. The Boglehead lazy investing method. John Bogle is the guy who started Vanguard, and that site has great info on how to do it (Vanguard's site also pushes you towards using these core funds). It's kind of a put money into 3 core funds and forget about it approach. Once a year you rebalance your bonds vs stock holdings to maintain your risk levels. That's it.

John Boggle's The Little Book of Common Sense Investing is also a good place to start. It's a quick read, and explains the basics of the method. I had a financial advisor though Wells Fargo and I would call him and have no idea what he was talking about. I once asked him what I should read to help me understand it all better. This book was his advice. I fired him the next month, sold all the crappy mutual funds he had me in (they were so bad they even had load fees) and started investing with Vanguard.

There are also sites like Betterment that will do all this for you. They of course charge you a fee to do it, and that kind of defeats the purpose. The whole goal is to reduce fees as much as possible, and you really don't have to do much if you handle it yourself, but some people would rather let someone else handle it. People seem to like it, but I would advise against it if you have time to learn some basics.
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rittchard
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« Reply #14 on: April 15, 2015, 05:14:30 PM »

Quote from: Lee on April 14, 2015, 06:12:17 PM

Quote from: rittchard on April 14, 2015, 03:28:23 PM

Buy Apple stock! 

I am actually doing an analysis paper on AAPL for a finance class right now. I want to put some money into it because their numbers are great, but it seems expensive right now. That's always my problem though, I struggle with the when to enter more than anything else.

Hehe - it always seems expensive... but then it keeps going up and just gets more expensive!  I debate this with a friend of mine a few times each year, and each time he has ignored my advice.  Had he invested the first time I suggested it, he would have made a lot of money by now.  My philosophy with Apple is this: do you think it will go up even 5-10% over the next year?  If so, why not just invest in it rather than leave your money in a 0.5% (or whatever it is these days) share certificate?  If you believe in the company and its products (which he claims he does), its almost a no-brainer. 
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leo8877
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« Reply #15 on: April 15, 2015, 06:03:52 PM »

Quote from: rittchard on April 15, 2015, 05:14:30 PM

Quote from: Lee on April 14, 2015, 06:12:17 PM

Quote from: rittchard on April 14, 2015, 03:28:23 PM

Buy Apple stock! 

I am actually doing an analysis paper on AAPL for a finance class right now. I want to put some money into it because their numbers are great, but it seems expensive right now. That's always my problem though, I struggle with the when to enter more than anything else.

Hehe - it always seems expensive... but then it keeps going up and just gets more expensive!  I debate this with a friend of mine a few times each year, and each time he has ignored my advice.  Had he invested the first time I suggested it, he would have made a lot of money by now.  My philosophy with Apple is this: do you think it will go up even 5-10% over the next year?  If so, why not just invest in it rather than leave your money in a 0.5% (or whatever it is these days) share certificate?  If you believe in the company and its products (which he claims he does), its almost a no-brainer. 

This is what I did starting in 2011.  I rode through the 2012/2013 dip and now I am in good shape.  Wish I would have put more in back then!
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« Reply #16 on: April 15, 2015, 09:30:56 PM »

Give your money to someone who knows what they're doing. That's what I do. The trick is to start early and play the long game. It's not seem but it works. Of course the secret is to start as early as possible (like 20) because that last doubling period (every 10 years at 7% with the rule of 72) is when your money goes from a decent amount to an outrageous amount.
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Lee
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« Reply #17 on: April 16, 2015, 12:10:51 AM »

Quote from: Canuck on April 15, 2015, 09:30:56 PM

Give your money to someone who knows what they're doing. That's what I do. The trick is to start early and play the long game. It's not seem but it works. Of course the secret is to start as early as possible (like 20) because that last doubling period (every 10 years at 7% with the rule of 72) is when your money goes from a decent amount to an outrageous amount.

Unfortunately you still need to know what you are doing. My adviser would ask for my input, but since I had no idea what I was looking at, I just took his word on it. I have since learned that these financial advisers are paid to push certain mutual funds, funds that may have high fees (on top of the fees you are paying your adviser). Not saying they all do this, but I would certainly compare your funds to some of the benchmark funds to see how they are performing. More important though is looking at fees. I was in some Legg Mason fund that had over a 1% expense fee as well as a load fee. It was insane. Actively managed funds that require these kind of fees usually don't preform any better than an index fund either.

Quote from: rittchard on April 15, 2015, 05:14:30 PM

Hehe - it always seems expensive... but then it keeps going up and just gets more expensive!  I debate this with a friend of mine a few times each year, and each time he has ignored my advice.  Had he invested the first time I suggested it, he would have made a lot of money by now.  My philosophy with Apple is this: do you think it will go up even 5-10% over the next year?  If so, why not just invest in it rather than leave your money in a 0.5% (or whatever it is these days) share certificate?  If you believe in the company and its products (which he claims he does), its almost a no-brainer. 

I know you are right, but I still can't bring myself to pull the trigger. I actually owned exactly 2 shares in in 2012. I meant it to just be a very small entry point just to get my foot in the door. The stock was too volatile (that's what I thought then, but I know better now) and I kept listening to the media's opinion that Apple was too high and was due to come down, so I sold it. I made like a $100 on it. icon_smile Anyway, I own Apple though a couple of mutual funds, that just isn't as exciting.

I made too many expensive mistakes when I was first learning that made me very gun shy. (Hello NFLX!)
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Knightshade Dragon
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« Reply #18 on: April 16, 2015, 12:20:27 AM »

Ooooohkay.   Things just changed for me drastically.  You guys have all given some excellent advice, but as of right now I'm looking for work.   icon_eek    When I've got meaningful employment again, I'm gonna revisit this investment thing!   What a day....
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Ron Burke
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« Reply #19 on: April 16, 2015, 12:45:43 AM »

Oh man, so sorry Ron.  frown
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« Reply #20 on: April 16, 2015, 02:08:43 AM »

I spread our retirement money amongst an assortment of low-fee index funds that range in risk levels. Nothing exciting, they just reliably track the overall market. I also have a small Roth that's earning an anemic 0.75% in a mutual fund. That's my safe savings. In another 18 months I'll be old enough to tap that money without tax penalty, should I need it.

Once a year I rebalance the funds based on the previous year's performance. I just spent an hour doing that in February when my wife's employer announced that they are changing their basket of core funds and undoing all the choices I just made. For some reason they decided to move my four most aggressive funds (biotech, software, medicine, and transportation) into a boring conservative target date fund. That means I'll have to rebalance again after the dust settles in June. The sector funds are volatile and expensive, but the biotech returned 34% last year. Hard to walk away from that even though I know the smart thing is to take the profit and run. 

Speaking of which, has anybody mentioned target date funds yet? That's the simplest and safest way to invest for the long haul. The fund manager rebalances its portfolio to make it more and more conservative as your retirement date approaches. Now that we're just 9 years from retirement I steer a little more money each year out of the growth funds and into the target date.
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« Reply #21 on: April 16, 2015, 03:49:21 AM »

Quote from: Ironrod on April 16, 2015, 02:08:43 AM

I spread our retirement money amongst an assortment of low-fee index funds that range in risk levels. Nothing exciting, they just reliably track the overall market. I also have a small Roth that's earning an anemic 0.75% in a mutual fund. That's my safe savings. In another 18 months I'll be old enough to tap that money without tax penalty, should I need it.

Once a year I rebalance the funds based on the previous year's performance. I just spent an hour doing that in February when my wife's employer announced that they are changing their basket of core funds and undoing all the choices I just made. For some reason they decided to move my four most aggressive funds (biotech, software, medicine, and transportation) into a boring conservative target date fund. That means I'll have to rebalance again after the dust settles in June. The sector funds are volatile and expensive, but the biotech returned 34% last year. Hard to walk away from that even though I know the smart thing is to take the profit and run. 

Speaking of which, has anybody mentioned target date funds yet? That's the simplest and safest way to invest for the long haul. The fund manager rebalances its portfolio to make it more and more conservative as your retirement date approaches. Now that we're just 9 years from retirement I steer a little more money each year out of the growth funds and into the target date.

Fidelity seems to push them for our 401k plan, I haven't looked at their performance yet but may transfer some assets into one.  I should have rebalanced more often as one fund I own has been underperforming lately but I didn't catch it in a timely manner, it wasn't losing money but not rising as well as I expected it to.

Best of luck Ron!
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Lee
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« Reply #22 on: April 16, 2015, 04:33:00 AM »

Best of luck Ron, I am sure it will all work out in the long run.

Quote from: Ironrod on April 16, 2015, 02:08:43 AM

Speaking of which, has anybody mentioned target date funds yet? That's the simplest and safest way to invest for the long haul. The fund manager rebalances its portfolio to make it more and more conservative as your retirement date approaches. Now that we're just 9 years from retirement I steer a little more money each year out of the growth funds and into the target date.

I think they are great for people who want a low cost method where the can put money in and forget about it. Not sure I would say they are safest though. Like right now for someone retiring soon, those funds are shifting to a bond heavy ratio. We all know the interest rate is going to start going up next year and soon as it starts going up those bond prices are going to start falling. If you have a short time frame, you do not want a large amount of money in intermediate and long term bonds. That's is the problem with target date funds, they don't take real world happenings into consideration and it could burn some people close to retirement.

My short term investments I am heavier in short term bonds to try to counter the soon to be rising interest rates. My plan is to start shifting stocks into the intermediate bond fund as interest rates rise. Hopefully it will all cost average out after a year or so.
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