Mutual funds and individual stocks.?

Question

In your opinion, what would be the best way for a beginner...mutual funds or carefully pick out stocks I want. and YES, I have been researching and know that buying stocks are more risky. I'm more of a long run person, I want to see a gradual increase after years after years after years.

Answer 1

Standard investment advice is that you should invest in a diversified mix of stocks, bonds, and money market funds. You want to buy a diversified portfolio of stocks as individual stocks are too risky. Most folks have a dificult time buying a properly balanced portfoilio of stocks on their own. They will misbalance their portfolio by buying all small stocks or all growth stocks, or some other misbalanced assortment of stocks. Unless you know what you are doing, it is best to buy mutual funds. I like Vanguard.com, other people like Fidelity, TIAA-CREF, and DFA. Buy no-load, low cost funds. If you are like most people you will invest part of your money aggressively in stock funds, and part conservatively in money market funds and bond funds. Vanguard.com has an on-line questionnaire which will give you an idea of how to do "Asset Allocation," determining how much to put in each type of fund.

If your company offers a 401K plan at work, try to invest the most you can. The money grows tax free, and some companies will match your contribution. Investing in a mutual fund IRA is also a good idea. If you have children, you may want to consider a 529 plan or other college savings plan that grows tax free.

I like index funds. Because of their broad diversification, you are less likely to have a dramatic drop in value. They also have the lowest expenses. For stock funds, I would suggest putting ~70-80% of your money in the Vanguard Total Stock Market Index Fund. and ~20-30% in a foreign stock index fund. However, there are many different opinions out there on what the best mutual funds are. Read the links below and form your own opinion.

If you have high-interest debt, like credit cards, it is best to pay this off first before trying most of the investment ideas above. You should also have 3-6 months of salary saved up as an emergency fund in a bank or money market fund before trying more risky investments.

Believing advice you get on Yahoo answers can be risky, so read these websites for further information. If you find it too confusing, contact a professional financial advisor. They will charge you significant commissions, however.

Sources:

http://www.vanguard.com/VGApp/hnw/planningeducation
http://www.fool.com/school.htm
http://sec.gov/investor/pubs/assetallocation.htm
http://www.diehards.org/readsites.htm
http://finance.yahoo.com/education/begin_investing
http://finance.yahoo.com/funds/basics

Asset Allocation Calculators
(Determining how much to put in stocks and how much into bonds and money markets is a personal decision depending on your financial status. These Asset Allocation questionaires give you a rough idea how to do this. I like Vanguard best, but try some of the other sites as well.)
https://flagship.vanguard.com/VGApp/hnw/FundsInvQuestionnaire?cbdInitTransUrl=https%3A//flagship.vanguard.com/VGApp/hnw/planningeducation/education
https://ais2.tiaa-cref.org/cgi-bin/WebObjects.exe/DTAssetAlcEval
http://www.ifa.com/SurveyNET/index.aspx

Web forum: http://www.diehards.org/
(Many investment web forums are overrun by scam artists. This one seems the most legitimate site.)


529 plans: http://www.savingforcollege.com

Answer 2

I would go with mutual funds if you are in for the long haul. Pick good, solid funds that have at least a ten-year track record. Individual stocks require a lot more hands-on work (you have to keep up with the numbers more and they are more volatile).


Personally, I would start with a ROTH IRA if you qualify. They are an awesome long-term (as in retirement) savings tool.

Answer 3

Unless you plan on spending your days and nights mauling over stock charts, and worrying about your individual stock picks go with quality mutual funds.

Most people simply do not have the time it takes to pick individual stocks. It is a very time consuming process. If you have a long time to invest your money go with quality mutual funds, and enjoy life instead of worrying about your stock picks everyday.

Answer 4

Try drip funds you can buy directly from the company, or the bank that manages them. some like GE you can send a check and they will open an account, like a savings account. after it is open you can send them as little as $10 and the will buy portions of a share.
They pay dividends each qtr. which is reinvested. Some like Norflok Southern (nsc) are like that, but you must have a share of stock in record befor they let you open an account. To buy and sell is slower, snail mail but it is a great way to start.

Look up DRIP accounts Funds

Answer 5

Okay, one more vote for mutual funds...and make sure part of your investing plan includes a ROTH IRA...and make it a " self- directed" IRA with Fidelity, Schwab or the like....where you can pick the funds you want and change as you go along.
Wise to be in it for the " slow but steady..long-run" but with the ROTH you are twice as wise....when that retirement comes you'll be getting all those years and years of gains back..TAX-FREE !!!

Answer 6

Agree with other people, mutual funds. Stocks are very complicated so it is not for beginners.

Answer 7

better off to start with mutual funds. it is simple and yet can give quite handsome return with less risk (cos they are well diversified). besides, if you don't have that much money yet, also better to start with mutual funds.

and long term stock investing is profitable as well. it is just that you need the passion and knowledge to make it profitable as much as possible. you might want to read this article about how long term stock investing can give you a handsome return:
http://www.stock-investment-made-easy.com/long-term-stock-investing.html

Answer 8

everything is in a free fall,panic sell