How do you think I should invest?

Question

Ive been saving money for a couple years (Im 19) and right now have a few thousand in CD's at an interest rate of 5.25%. I want to expand the areas Im investing in to include things like mutual funds, bonds etc. What would anyone with experience in investing recommend starting with next? What percentages should be invested in each area? Also Im looking for good long term investment not short term and dont want to spend too much time watching the market (why I dont really want to be involved with stocks) and such because I am too busy with work and school.

Thanks

Answer 1

A long term option for you to consider is mutual funds. But they may take a dive every now and then. You have to be prepared for such an event and not let it discourage you. There are also all kinds of index funds on the market today. Their big advantage over mutual funds is low expenses and low tax liabilities as opposed to traditional mutual funds. There are plenty of decent mutual funds available to you and also plenty that are not so decent. In fact more of the latter.

A good strategy is to pick several with different investment objectives. Maybe a large cap, maybe a foreign, and maybe a small cap or mid cap. Sort of spread the risk.

In general and historically good mutual funds have over a long period of time yielded about 10% to 13% annual returns.

Answer 2

wait until you have the amount needed to satisfy the minimums for an index fund such as S&P 500 index fund. Those will mirror the S&P 500 and have minimal expenses associated with them....thus any mutual fund company should be able to do it. If you've been saving the money after tax, you may as well put it into a ROTH IRA. No sense in paying the taxes on the earnings if you don't need to.

Let the money sit in the S&P until you get about 10k then siphon off no more than 2k of it and put it into bond funds or a MM. Then when your S&P gets up to 11k siphon off an additional 3k and put it into an international equity fund. I choose those numbers only because of fund minimums not for any magic purposes. At that point you're diversified and just add your money in the same ratio 60/20/20 and watch it go! No muss, no fuss, just look once or twice a year and you're good to go. As you get older you'll want to diversify more but this will get you through the next 10-12 years.

I'd actually avoid target date funds. Many are actually funds of funds within that mutual fund family. Although not true with the biggest ones, some smaller ones use their highest expense ratio funds within these...they do it because they don't have to disclose the actual expenses of the funds...though this is changing!

Answer 3

I was very poor as a child. My mother, a widow, refused charity and taught us to study, work, save, and invest. When I got $200 I would buy stocks. Not knowing better, I started speculating, thinking this was investing. I did well but an occasional loss would set me back some. Then I started buying only stocks that paid a good .dividend, had a history of increasing dividends, had a fair price, and were in industries with a growth future. Decades later, I am what many would call rich. Not really, but being retired I can live off dividend income, not selling any shares, and still reinvesting some of the dividends. I never wanted mutual funds because their nature means carrying expenses and stock selections by people that have to be short term traders and not real investors. An investor buys for the long term, intends to buy more,, reinvests dividends, and hopes the stock price will go down so the reinvestments and added investments will buy a maximum number of additional shares. A speculator hopes the price will jump and then he will sell at a profit to somebody not as smart as he is, while his purchase was from a seller also not as smart as he is.

Answer 4

Your young, so you want to be ultra-aggessive with 40% of your money. If I were 19 again (I wish), here is what I would do:

40% aggressive (80% stock, 20% mutual funds, but aggressive-growth ones). Pick 2 or 3 stocks and a mutual fund.

20% Small Caps (one stock, one fund)

20% International Mutual Fund

20% S&P 500 Fund

Here is a stock I think will give you great returns. You can thank me later:

China Mobile (CHL). Growth in population in China as well as expanding economy make this sleeping giant a perfect play. The stock is $46 with a forward p/e of 17 and pays a 3.5% divvy. China is one of the best economies in the world right now. All our jobs are going there.

They are signing up 5 million suscribers A MONTH!!!

So you not only get the POPULATION growth, you also get ECONOMIC growth as well!!

CHL has 1 billion in potential new customers. It's also hedge against the falling dollar. Chinese people often don't have computers so the phone they buy will be their access to the Internet. Google and CHL just inked a deal that let's CHL suscribers get on the internet via phones.

China hosting 2008 Olympics. Gonna send stocks there higher.

CHL is a monopoly that is protected by the Chinese government. CHL is also the industry leader with 65% market share. Superb balance sheet. It's stock price is trading at a discount to its growth rate.

China is where the growth is right now, you want to be in this stock. By 2009, this stock will double and you get the divvy to boot.

Also, try the Greater China Fund (GCH). They invest directly in Chinese companies. It's another great play, but not as good as CHL.

GCH is a way to play in China directly so instead of buying some crappy mutual fund, go with this one and get on the money train!!

Also take a peek at Nidec (NJ). They make tiny motors that drive IPods and things. Stock has taken a beating lately. Might be time to jump in.

Good Luck!!

Answer 5

Hi BillyBob,

I have what I think is a great trading system for you.
Unfortunately this system comes with so many problems that you probably won't be interested in it....

First, you don't ever have any losing days with this system and we never use stops so there are no losing trades.

Second, you don't use any charts and I know how much most folks love charts....as much as I used to love them.

Third, it only takes 30 minutes a week to trade. I know that you guys devote your lives to trading so this system "just won't do it."

Fourth, it only makes about 20% a month in profit so it will double your money every 3 or 4 months.

Fifth, it's not a directional trading system so it makes money in all markets whether the price goes up or down.

I was going to tell you about it but because it has all these problems, I won't bother you with it. I'm sure you wouldn't pay any attention to it even if you knew about it.

Paul Upp
http://www.15daytrial.com

Answer 6

Check out fool.com.

Best thing you can do is a Roth IRA if you have any job income. It's taxed in the current year, but you never pay any additional taxes, which gives a HUGE boost to your returns. Invest in mutual funds, with 70-100% in stocks, depending on your risk tolerance. Best bet is index funds, say S&P 500 and a foreign large cap. You can diversify as you learn enough to do so.

Answer 7

Here's an idea for you. BusinessWeek tracks the Standard & Poors 500. Use their scoreboard and look for the kinds of things you like, cherry-pick the best from this list of the best. Another thing, also from BusinessWeek, they print two large investing issues each year with some 900 major companies divided into two-dozen "industries". I've made a few bucks by picking the most profitable of each group, I call it best of breed but some folks don't like the allusion to dogs, which has a different connotation on stocks. Give it a shot.

Answer 8

I think the best way to learn about the stock market is to first see what the best traders are buying and selling and why. You can find this information at http://www.top10traders.com - this is a free site that lets you create a portfolio of stocks with $100,000 in "play" money. Each day the site ranks the best performing portfolios, so you can see how your picks perform compared to other investors. You can read posts on investing from the best traders, as well as share your own investing ideas. There is a charting feature, so you can see how your portfolio performs compared to the S&P 500. Also, you can create your own "group" so that you can see how you are doing compared to your friends.

Here are this month's best traders:

http://www.top10traders.com/Top10Standings.aspx

Good luck.

Answer 9

at your age put it all in a good no load mutual fund, pick one from fidelity, troweprice or vanguard, just pick a target date fund , you tell them the year you plan to retire and they adjust it as you age, all you need to do is put money in

i have most of my money in the troweprice 2040 fund, and most of the rest in the spectrum growth fund that is another nice one from troweprice that invests in a bunch of their aggressive stock funds

Answer 10

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