The new forums will be named Coin Return (based on the most recent vote)! You can check on the status and timeline of the transition to the new forums here.
The Guiding Principles and New Rules document is now in effect.
How to begin investing?
Munro
Registered User regular
Registered User regular
This winter I will be working full-time for a four week stretch (A temp job), and I will net a few thousand dollars in spending money for my efforts. I want to begin investing, somehow, but I'm not sure how much I should be looking to start with and where I should go to gather information regarding smart investing... can anyone that's already gone through this offer up any advice?
Munro on
0
Posts
So, what, exactly, do you want your money to do for you?
you can start by checking out the investment options through your bank. most banks have decent money market savings accounts and CDs for long-term investments (5 to 10 years). in short, you can't do anything with your money but you can let it sit and earn a good amount back.
mutual funds are also an excellent way to start investing. there are numerous mutual funds out there that essentially "take care of your money" by investing the collected funds of the mutual fund's members (hence the term "mutual") in a preselected portfolio of stocks, bonds, and other investments, all managed by the maintainers of the fund. mutual funds are relatively safe and offer pretty good tax advantages and earning potential. plus, there are mutual funds geared to invest in certain types of industries or in companies that have certain political bents or stated social goals or what have you, so you can feel good about your investment, whatever your inclinations may be.
there are also internet savings accounts run by companies like HSBC and ING which give you pretty good interest rates. the companies claim they can afford pay more because internet accounts have less overhead than traditional bank savings accounts. dunno if that's true. i do know that i have a nice savings account with one of the companies that earns a decent 5.05%
steam | Dokkan: 868846562
As long as you have enough money to meet that standard, you only have to worry about the time frame, risk levels, and liquidity of your assets.
If you don't know when you'll be needing your money again but still want to put something away, purchase CDs from your bank.
Buy them in alternative months, or with different ending times so that as one matures, then next one is half way or a third of the way finished. Buy a 3 month, 6 month, and 9 month CD (or whatever) and as each of them mature, simply reinvest them.
That way, while you earn more interest than in a standard bank account, you haven't locked away all your money if you need them in an emergency.
:^: The guy who runs that site is awesome. Lots of wisdom there.
Great, very intelligent investing site for people of all situations, and with an appropriate sense of humor, to boot.
Here are a few basics:
On average, over time, a managed fund cannot beat an index fund. In other words, your average investment expert who buys and sells for you based on market factors in order to maximize the return will accomplish nothing that would not have been accomplished by simply buying a good sample mix of stocks from across all industries and holding on to them. So index funds = good. But note that I said "average." That still means almost half of those investors can beat the market, so it's not necessarily a bad thing to go with one if you believe in him/her.
Basic psychology is the #1 reason people fail at investing. When a stock is really hot (making gains), people get roped in and want to buy. When a stock they own has been doing poorly for a while, they get mad and want to dump it. Unfortunately, these tendencies equate to "buy high, sell low" which is obviously the exact opposite of what you want to be doing. If a stock is "hot" and already making gains, that is not evidence that it will continue to do so. Unless you have evidence that a stock will go up in the future (not that it has gone up in the past), then you might want to keep looking. Similarly, if a stock you own is at a low point, that is not evidence that it will continue to go down. Unless you have evidence that a stock is going to continue to go down, then selling a stock because of a decline is the worst time to sell.
Buy and hold. That's what the million- and billionaires will tell you. If the experts can't even beat the market on average, you sure as hell can't. Don't day trade.
tl;dr: Open a Roth IRA.
That seems to me to be too cautionary. For me that's just under $5000 in my savings account making a pittance before I can start making any money, and everywhere I look I see advice telling you to start putting away money for retirement at a young age. At 24 I feel I'm already behind the curve as I've only got a little more than half that amount, all in savings so far.
I don't see it specifically reccomended here, so I'd reccomend that for any money you want to put away until retirement(obviously that should not be the entirety of your savings) should probably be put into a Roth IRA first to save yourself the tax dollars lost, and then invest from that account.
Seems to be working well so far. Almost no cost on the index funds since they're not managed, they just do what the markets do.
I mean, hey, I've already made like 5.5% increase in just a few months... though it'll probably go down later.. and then back up.. and then down.. but in the end it'll overall go up and this money is mostly for me to sit on for a few years.
Also, since I don't have tons of money to work with, but I do have these 2 index funds, sometimes I will put a bit more in one and less in the other, depending on whats what..
They say that because if you end up losing your job, or having something come up that requires a large sum of money (car repairs, hospital emergencies, etc), you have the cash on hand, and don't need to lose a shitload of money in fees pulling money out of funds.
They also say that you should invest at a young age because it makes mathematical sense. But it's not based in the real world. if you live paycheck to paycheck on 25k a year, it's unrealistic to save.
Ideally, the best way to get rolling investments going is to save up the 3-6 months mentioned, and then put extra savings in a good 6 month CD. Keep saving. When it comes out, split it between a 6 month and a 1 yr CD. Once you have around 10k, you have enough to seriously invest in some index funds or IRA or similar.
One of the big problems with young investors is that they'll look at investing as if it were buying a big TV -- they'll just spend all their money on it, and damn the consequences. It's useless to seriously invest if you do'nt have enough cash to account for the unforeseen (within reason). Otherwise you put all your money in investments and don't have enough to actually live.
That's what I'd do, anyhow. Or take the short-term and put it in a savings account, if you think you may want access to it in the next three years.