What time of investments should I look into making?
Posted by admin on 21 Feb 2008 3:14 am. Filed under Investing.
Damien W asked:
I’m 21, soon graduating from college, and am interested in diving into some investments. I already have a Roth IRA, but am curious as to what other ideas I should consider (i.e. bond funds, growth v. value). I know the very basics of investing but not enough to feel comfortable to jump right in. Any investment advice would be greatly appreciated. Thank you in advance.
I’m 21, soon graduating from college, and am interested in diving into some investments. I already have a Roth IRA, but am curious as to what other ideas I should consider (i.e. bond funds, growth v. value). I know the very basics of investing but not enough to feel comfortable to jump right in. Any investment advice would be greatly appreciated. Thank you in advance.
On February 22nd, 2008 at 12:28 am
Recommend you buy “The Little Book That Beats the Market” by Joel Greenblatt.
I would start off with a Vanguard index fund that tracks the benchmark S&P 500. Why? Because most investors fail to surpass this benchmark in their personal investing (though Mr Greenblatt says it can be done) and the fees you will be charged for an index tracking mutual fund through Vanguard are very cheap relative to their competitors.
Next I would by a growth fund with a long history of solid performance. Maybe that too is a Vanguard fund, maybe some other fund. Morningstar is your best source for information about no-load (no commission) funds.
After you establish this base, if you want to take a crack at individual investing, the read Mr Greenblatt’s book, as well as others. Start slow and low (take your time and don’t put down a lot of money).
It can’t hurt to have some money in a well rated emerging market fund. Here the risk is high, but the potiential rewards are high. However, I am leery of what’s going on in emerging markets right now – meaning now may not be the time, not yet.
Hope you found this helpful
On February 24th, 2008 at 10:31 pm
The author of the Rich Dad Poor Dad series talks about the 4 quadrants of cash flow. Investing is definitely in the right direction however there are many people that do not understand the risks and either play it too safe or run the risk of losing everything.
Just remember to not put all your eggs in one basket but at the same time keep your investments in a focused vehicle.
Make sure you do your home work and check out as many investment sites as you can.
Games people can play to learn:
Don’t underestimate the idea of buying into a small marketing business. You can sometimes reap great rewards from small start up costs.
On February 26th, 2008 at 12:36 pm
Congratulations on starting an investment program so early. If you want to invest for the long term (money you won’t need for at least ten years), at your age you should definitely look to stocks or, if you don’t want to pick individual stocks yourself, stock mutual funds. Until you develop more experience and confidence I’d recommend buying shares of some no-load mutual funds with low expenses. Three of the best places to look are vanguard.com, fidelity.com, or troweprice.com. Go with stock funds, and agressive stock funds at that including REIT funds (Real Estate Investment Trusts), Small Cap stock funds, and International Funds. Over periods of ten years or more stocks will outperform bonds-at your age I’d forget the bond funds. Growth has lagged behind value for years-each year I hear that this is the year growth comes back and each year it doesn’t. It will eventually but nobody knows when. Put what you can into your fund(s) each month (known as dollar cost averaging) rather than investing a large chunk all at once so if the market drops you don’t lose a lot right away. Stick with it and, because you are starting so early, you won’t need to worry about retirement.
On February 28th, 2008 at 11:36 am
1.) Have enough in an emergency fund to cover 3-6 months of expenses. This can be in a savings, money market, or other account that can be accessed immediately. Without this, you really shouldn’t be investing, b/c you may be forced to sell your investments at a loss to cover a car repair, surgery, or other unforseen event.
2.) Next start investing in a retirement account. Roth IRA’s are great, as are 401(K)’s (especially if your employer matches). These are for the long haul. For your retirement money, it’s best to be conservative and purchase index funds. They charge low fees, and all but guarantee that you will track the performance of the broad stock market. I recommend the S&P 500 index funds, although total market or balanced are find too. Make sure to dollar cost average, which is to say purchase small amounts throughout the year to ensure you get a good average price.
3.) I personally like to balance my portfolio between real estate, stocks, and bonds. To invest in real esate, you can either buy REIT’s, which are essentially mutual funds with real estate holdings that payout dividends to you, or rental property, which tends to be more work. For stocks, you need to diversify between energy, foreign, tech, financial, etc. As for bonds, it’s easiest to buy bond funds from Fidelity or Vanguard, since buying individual bonds is prohibitively expensive for most of us.
4.) If you truly want to be a great investor, read and learn everyday. Watch CNBC, read every investing book you can, and practice your investing with a “fake” portfolio on marketocracy.com or other website. The best advice is to learn from others, and learn from your own experience. I recommend watching Mad Money on CNBC, reading the Intelligent Investor, Beating the Street, Essays of Warren Buffet, and Common Stocks, Uncommon Profits, and reading news on Yahoo Finance.