Author Topic: investment advice (Read 1143 times)

Krusher · « **on:** February 16, 2004, 09:33:57 AM »

I sold my company stock to pay off a few debts. We still have about 2 grand left that I want to open some sort of investment account with.

Do any of you guys have any experience in online trading? Any recommendations on a online broker, or should I go with a financial planner?

I was going to put the extra cash in to a money market account and add about 100 dollars per month to the total. Eventually after we were a bit more comfortable (self education) with the workings of stocks and bond investments etc, I was going to start a small portfolio.

Any advice, tips or cautionary tales would be appreciated !

Ripsnort · « **Reply #1 on:** February 16, 2004, 09:41:37 AM »

I'd take a look at long-term "Growth" mutual funds if you plan to hold onto the earnings and investment for some time. You can pick up a Money magazine, Kipplinger or similiar publication and see how these mutuals perform over 6 mon., 1 year, 5 years, and inception dates. Then call and order a perspectice and take a look at what type of diversity they encompass within each fund and make your decision based on what your gut feeling that the market will be kind too (Medical , Technologies, etc.)

Focus on no-load funds with small account maintenance charges (Forget the term for the latter....)

Personally, anything a financial advisor can do for you, you can do it as well, and at less cost.

Adding monthly "payments" to these funds via a checking account automatically is a wise idea. Watch it grow, and start planning for early retirement.

Here is something to ponder: Alot of baby boomers will be retiring in the next 20 years, and the medical field is an ever growing business, more so within the next 20 years due to the surge of boomers.

One more note: Best investment is the Kipplinger Letter. Order it, then study the market for a month or two, then make your decisions on what you've read.

Ripsnort · « **Reply #2 on:** February 16, 2004, 09:58:27 AM »

Just thinking out loud again.

If individually-purchased stocks interest you, some banks will have a minimum charge ($40-$50) for buying and selling stocks if you keep a certain balance with them. For instance, our bank, (BOA) requires a min. balance of $10,000, inclusive savings, checking, and Money market accounts, to be eligible for buying/selling stocks at a low one time fee. DOn't forget to set some of the money aside from selling stocks, to pay the capital gains tax at the end of the tax year.

Also, rather than tying up money in a savings account, consider opening a Money Market account, the interest rate is usually 2% higher than a savings account, although you are usally limited to minimum amount that you can withdraw at one time (BOA minimum withdrawl amount is $500) But usually if you're tapping into a savings account, its usually for a big ticket item, so meeting the minimum is not a problem.

Habu · « **Reply #3 on:** February 16, 2004, 10:01:45 AM »

Forget all that.

You have a very small amount to invest and the most important thing for a risk adverse person like you is to diversify and keep you fees low.

Mutial funds are not the way to go with such a small investment.

But an index fund that tracks the NYSE. The fees and loads are small. You will get the same return as the market which if you look at most mutial funds is a pretty good record as most fail to consistantly beat the market.

Open an account with a discount broker. Go to thestreet.com and check out the ads there for one. Read that website everyday and you will soon get a good background in basic investing.

miko2d · « **Reply #4 on:** February 16, 2004, 10:12:27 AM »

You have a rather small amount. That severely limits your choice of investment options but also gives me some indication of your situation.

If you are just starting to invest, you should first direct the available funds towards safart - prevention of a financial disaster. Then you invest surplus money into reasonably safe growth and only after that you invest money into more risky but potentially more rewarding ventures.

I'd advice you to take $2,000 and buy 5 1-ounce gold coins as an insurance. Put them in to a safe-deposit box. The 4.5% comission you pay on purchase will be covered in 2 years by inflation that the equvalent dollar sum would suffer.
Any yearly interest income that you might lose, compared to depositing the money into the money-market account, just consider that your insurance premiums against the fall of the dollar.

miko

Ripsnort · « **Reply #5 on:** February 16, 2004, 10:14:26 AM »

Quote

Originally posted by Habu

But an index fund that tracks the NYSE. The fees and loads are small. You will get the same return as the market which if you look at most mutial funds is a pretty good record as most fail to consistantly beat the market.

Depends how you measure it. Since "inception of the stock market" vs 5 year return? Measuring any technology stock return to future earnings, from 1990 to 2000, can be decieving, considering the boom the technology stocks experienced during that time....

My Oakmark and Oakmark Select mutuals (with a minimum of $2000 that we invested 10 years ago) has done terrific. (32% in 10 years)

Habu · « **Reply #6 on:** February 16, 2004, 10:20:19 AM »

Quote

Originally posted by miko2d
You have a rather small amount. That severely limits your choice of investment options but also gives me some indication of your situation.

If you are just starting to invest, you should first direct the available funds towards safart - prevention of a financial disaster. Then you invest surplus money into reasonably safe growth and only after that you invest money into more risky but potentially more rewarding ventures.

I'd advice you to take $2,000 and buy 5 1-ounce gold coins as an insurance. Put them in to a safe-deposit box. The 4.5% comission you pay on purchase will be covered in 2 years by inflation that the equvalent dollar sum would suffer.
Any yearly interest income that you might lose, compared to depositing the money into the money-market account, just consider that your insurance premiums against the fall of the dollar.

miko

Miko a guy with 2000 should not buy bullion. If you want to bet on gold buy an unhedged gold producer.

Ripsnort · « **Reply #7 on:** February 16, 2004, 10:24:19 AM »

Quote

Originally posted by miko2d
You have a rather small amount. That severely limits your choice of investment options but also gives me some indication of your situation.

If you are just starting to invest, you should first direct the available funds towards safart - prevention of a financial disaster. Then you invest surplus money into reasonably safe growth and only after that you invest money into more risky but potentially more rewarding ventures.

I'd advice you to take $2,000 and buy 5 1-ounce gold coins as an insurance. Put them in to a safe-deposit box. The 4.5% comission you pay on purchase will be covered in 2 years by inflation that the equvalent dollar sum would suffer.
Any yearly interest income that you might lose, compared to depositing the money into the money-market account, just consider that your insurance premiums against the fall of the dollar.

miko

If you're tempted by gold, don't go overboard. Gold is best used as insurance against a fall in the dollar or sky-high inflation. Gold investment will not make you rich, but its good for a diversified portfolio if you keep 5% to 10% of your portfolio — at most — in gold and rebalancing your portfolio regularly. If your gold fund has risen dramatically, it's time to sell, not buy.

Habu · « **Reply #8 on:** February 16, 2004, 10:24:48 AM »

Quote

Originally posted by Ripsnort
Depends how you measure it. Since "inception of the stock market" vs 5 year return? Measuring any technology stock return to future earnings, from 1990 to 2000, can be decieving, considering the boom the technology stocks experienced during that time....

My Oakmark and Oakmark Select mutuals (with a minimum of $2000 that we invested 10 years ago) has done terrific. (32% in 10 years)

Oakmark select is a value fund and value funds have done well over the past 3 years. However the cycle of the market we are entering will see value funds do less well.

Oakmark is an excellent fund and if you had lots to invest you could put 20% in that fund and ride out the market swings. However with only 2,000 the smart play is just to pick an index (S & P or an NYSE index) and but the index fund. You will get the same return as the market guarenteed. Over the past 10 years that has been a good investment as well.

Ripsnort · « **Reply #9 on:** February 16, 2004, 10:43:36 AM »

Habu, I take it you do this for a living...

What do you think of small cap funds in this period we live in? I've had great success with small caps over the past year since investment, but I get gun shy now and then and like to pull some riskier investments back in before a downturn in the market. Should I keep my small caps going a bit or turn them over into something little safer?

Habu · « **Reply #10 on:** February 16, 2004, 11:56:22 AM »

Actually I don't do this for a living. I do subscribe to James Cramer's private notification service where he sends an email every time he makes a trade in his portfolio and he explains what he is buying and why. He is one of the founders of thestreet.com and he also has a daily show on CNN called Kudlow and Cramer.

I have traded stocks for myself for years and also have a mutial fund portfolio as well as use a private investment service for my investments. I also have bought some real estate over the years (for pure investment purposes, not the family home). I believe in diversifying my risk. If my private investment management company has a bad quarter or two and I do well on my own it all cancels out. About 25% of my investments are in each vechicle. I am selling out the mutial funds to buy more land though.

In terms of performance my mutial funds have been the biggest disappointment. I am totally sold on index based investments though as a means to diversify.

Regarding small caps. I have been burned big time buying small caps and generally like to stay with large caps as they are what the big players are in. The problem with small caps is that they always have a bigger risk of going under or getting into financial problems due to thier size. The are less covered by analysists and they may be more volitile. Also you have to time the market cycles to get the big returns and that is very hard to do.

Right now my US portfolio is composed of these stocks.

ET
MU
USB
CVX
AES
DYN
CNXT
AA
PD
TYC
JDSU
EMC
DD
CHTR

I have been on holiday for the past week so I have to sell out a position or two and I have some new stocks to buy but that basket of stocks has returned 8% since Jan 1 this year.

I really like Alcola Aluminium and Philips Dodge (AA and PD) for the long term this year. Both are up big time over the past week though. I bought them early so they are now just over what I had paid for them. I believe that demand for commodities is going to be very strong this year especially copper and aluminium. The ecomomic cycle is in the begining of a phase that favors raw material producers. Already the raw material prices are going up and these two stocks are a good way to ride that wave. Manufacturering in China is really exploding and it needs to import lots of aluminium to keep up to demand.

Ripsnort · « **Reply #11 on:** February 16, 2004, 12:02:16 PM »

Thanks. My intuition suspects volitility in small caps in near future. I think its time for a transfer, get out while the getting is good.

Curval · « **Reply #12 on:** February 16, 2004, 12:02:25 PM »

Blow the 2 grand on a new HDTV.

You will enjoy it and it will help the consumer spending figures.

Ripsnort · « **Reply #13 on:** February 16, 2004, 12:12:48 PM »

Quote

Originally posted by Curval
Blow the 2 grand on a new HDTV.

You will enjoy it and it will help the consumer spending figures.

hehe. I had similar feelings (different technology) right prior to investing in Microsoft stock in 1989....

Krusher · « **Reply #14 on:** February 16, 2004, 02:08:28 PM »

Thanks for all the tips guys

We always put off investing until we had more money. Like most procrastinators we just need to get started at any level.