Investing small $$$$ - Ferrari Life
 
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post #1 of 13 Old 01-09-2010, 07:23 AM Thread Starter
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Investing small $$$$

I am by no means a money guy, don't know much about stocks, bonds, IRA's, etc. I have heard guys talk about keeping cash around since savings accounts don't do much.

My question is are there any wise, not so risky things to do with small amounts of money? Say $10k-$50K... Looking for easy recommendations that an average Joe Blow citizen like me can do...

If you had $20K cash laying around and didn't need to use it for 5 years or more--What would you do with it? Put it in a savings account?, A sock in your underwear drawer?
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post #2 of 13 Old 01-09-2010, 08:44 AM
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ETF's (exchange traded funds) are probably one of your choices.
You buy them through a financial advisor/broker (such as Edward Jones, Charles Schwab) or online through a low-cost investment site like Etrade, ScottTrade, etc.
ETF's are a collection of investments with a common theme.
They are often better for the small investor than individual stocks because you are buying a small slice of a large collection of stocks.
Several firms specialize in running them such as ishares, vanguard, etc.
Because it takes almost no brains to run one, the internal costs are very low compared to mutual funds.

They have 3 or 4 letter trading symbols just like stocks.
For example, for a precious metals theme, there is SLV or GLD to invest in silver or gold.
For a theme in foreign country economies, there are ETF's like FXI (China), EWZ (Brazil), etc.
For a "commodities" theme, try XLB or FCX or USL (oil).
For the S&P 500 companies, use SPY or IVW.

To learn all about one, you can look up the 3-letter symbol on Yahoo Finance.
For example, here is a link for USL:
http://finance.yahoo.com/q?s=USL
You can see price charts for the last 6 month or year, you can read the profile write-up to understand what they invest in, etc. Use the blue links on the web page to navigate to different info, such as the "profile" write-up.

I currently use etrade. It typically costs $9.99 to make a purchase and $9.99 to make a sale. So, USL is trading for $42.06 at the moment, so to buy 100 shares, it will cost about $4216 ($4206 + $9.99). I recommend you buy in blocks of multiples of 100 shares if the price is under $100 per share. Obviously, if you bought 500 shares, the $9.99 cost is spread over more shares.

The tough part is setting your strategy. Do you think the US dollar is going to go bust? If yes, buy commodities or foreign economies. Do you think we're going to have more deflation and deeper recession, then stay in cash. No one really knows these answers. Read news articles and make your own opinion.

Hope this helps. YMMV.
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post #3 of 13 Old 01-09-2010, 09:17 AM
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Is a ETF different from an index fund? They sound similar.

For $20k I might look into a duplex in a college area or dense rent area and get a loan to cover the rest. More work is involved though and your cash is tied up but if the numbers work and it's cash flow positive it can be a win with depreciation & int write offs
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post #4 of 13 Old 01-09-2010, 09:34 AM
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Quote:
Originally Posted by Andrew View Post
Is a ETF different from an index fund? They sound similar.

For $20k I might look into a duplex in a college area or dense rent area and get a loan to cover the rest. More work is involved though and your cash is tied up but if the numbers work and it's cash flow positive it can be a win with depreciation & int write offs
Very similar to the investment style of an index fund but trade like stocks.
Here is a good article or two on the differences:
http://www.investopedia.com/articles...FIndexFund.asp
http://www.investopedia.com/articles.../05/060605.asp
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post #5 of 13 Old 01-09-2010, 09:37 AM
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I was thinking the best investment might be to get several of us to form a car investment club and buy an F40, F50 or 288 GTO.

That way, if 20 or so people chip in on the $$ (in the same region), we could each take the car home for a week during the non-winter months.

And, if we kept the car for 5 years, we might make more than in the stock market.
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post #6 of 13 Old 01-09-2010, 09:55 AM Thread Starter
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Originally Posted by Toggie View Post
I was thinking the best investment might be to get several of us to form a car investment club and buy an F40, F50 or 288 GTO.

That way, if 20 or so people chip in on the $$ (in the same region), we could each take the car home for a week during the non-winter months.

And, if we kept the car for 5 years, we might make more than in the stock market.
The week Ed has it, he would have a bag of guppies in it for a customer, they spill out and now car smells like fish....

or he is riding around 14th St and picks up a "friend"--and it smells like fish
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post #7 of 13 Old 01-09-2010, 09:58 AM Thread Starter
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Originally Posted by Toggie View Post
ETF's (exchange traded funds) are probably one of your choices.
You buy them through a financial advisor/broker (such as Edward Jones, Charles Schwab) or online through a low-cost investment site like Etrade, ScottTrade, etc.
ETF's are a collection of investments with a common theme.
They are often better for the small investor than individual stocks because you are buying a small slice of a large collection of stocks.
Several firms specialize in running them such as ishares, vanguard, etc.
Because it takes almost no brains to run one, the internal costs are very low compared to mutual funds.

They have 3 or 4 letter trading symbols just like stocks.
For example, for a precious metals theme, there is SLV or GLD to invest in silver or gold.
For a theme in foreign country economies, there are ETF's like FXI (China), EWZ (Brazil), etc.
For a "commodities" theme, try XLB or FCX or USL (oil).
For the S&P 500 companies, use SPY or IVW.

To learn all about one, you can look up the 3-letter symbol on Yahoo Finance.
For example, here is a link for USL:
http://finance.yahoo.com/q?s=USL
You can see price charts for the last 6 month or year, you can read the profile write-up to understand what they invest in, etc. Use the blue links on the web page to navigate to different info, such as the "profile" write-up.

I currently use etrade. It typically costs $9.99 to make a purchase and $9.99 to make a sale. So, USL is trading for $42.06 at the moment, so to buy 100 shares, it will cost about $4216 ($4206 + $9.99). I recommend you buy in blocks of multiples of 100 shares if the price is under $100 per share. Obviously, if you bought 500 shares, the $9.99 cost is spread over more shares.

The tough part is setting your strategy. Do you think the US dollar is going to go bust? If yes, buy commodities or foreign economies. Do you think we're going to have more deflation and deeper recession, then stay in cash. No one really knows these answers. Read news articles and make your own opinion.

Hope this helps. YMMV.
I understand that it is not possibly to know, but on average what kind of return should I expect if I drop $20k into some of these funds? After 5 years, did I make $5, $500 or $5000...
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post #8 of 13 Old 01-09-2010, 12:11 PM
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Originally Posted by 285ferrari View Post
If you had $20K cash laying around and didn't need to use it for 5 years or more--What would you do with it? Put it in a savings account?, A sock in your underwear drawer?
Give it to me!!! I'm sorry, I had to say it, I know if I didn't somebody else would.

I am not a money professional but have done well for myself over the years with my own money. I can certainly tell you what not to do. I remember reading an article after a 3 year bull market that the average mutual fund investor was getting a return less than half what the S&P 500 was for the same time period. The reason was becuase the average investor kept looking at the fund that did the best last year and selling the one they bought the year before, often at a discount of what they paid for it. In other words they kept buying high and selling low. I bought the great fund that went up last year and this year it didn't do shit so I'm selling and buying that other fund that did so good this year.

Whatever you do don't follow the masses and be prepared to stick with your investments.

I look at buying stock as if I owned the company. Would I want to own that company? If I owned the company is it being run the way I would run it? Surely if I owned a started a business just becuase it had a good year I wouldn't turn around and sell it.

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post #9 of 13 Old 01-09-2010, 02:53 PM
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Quote:
Originally Posted by 285ferrari View Post
I understand that it is not possibly to know, but on average what kind of return should I expect if I drop $20k into some of these funds? After 5 years, did I make $5, $500 or $5000...
You could make from 4% to 10% a year if things went okay. In real bad years, you could lose 20%. In a super great year, maybe make 30%.

So, on a $20k investment, after 5 years, you would likely have made maybe $5k or so. In a real bad situation, after 5 years, maybe your $20k is only worth $18k.

If I had to guess, the odds are you'd make around $3k - $5k on your $20k over 5 years. YMMV.
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post #10 of 13 Old 01-10-2010, 07:29 AM
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Historically, the average return on equities in the US market has been 7%. That being said, I wouldn't put any money in stocks if:

a) I wasn't mentally prepared to lose all of it.
b) I needed the cash in less than 3 years.

In addition to the ETFs and index funds other people have mentioned, I'd also consider a Vanguard Total Market fund which holds a balanced portfolio of stocks, bonds and cash. Your average return is lower, but so is your risk.

On other thing I'll add -- if you decide to invest, consider the dollar-cost-averaging technique: instead of putting $10K directly into an investment in one shot, split it into 6 equal purchases made monthly on the same day for six months.
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post #11 of 13 Old 01-10-2010, 01:18 PM
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The thing with money is: people are prepared to give you more for your money, if you are prepared to take the risk away from them. So - the return you get is (in simplistic terms) your reward for taking that risk. The riskier the game is, the more likely you are to lose (some of) your money. But without risk, you get nothing. In fact, storing it under your bed is not without risk.

So, what to do?

If you look back on your life, you will probably realise that you've only ever made money with things that you knew about. Knew more than other people. Could tell other people why their opinion was wrong, and how they should improve their game. It's exactly the same in the money game, IMHO - pick something that you know about and specialise in it. Learn about individual companies and invest on the strength of their assests and management teams, rather than just picking something at random and hoping for the best.

This is what I do. I don't invest if it's just a wild guess. I do the research, and I don't let other people, that don't care about my money, do the work for me. I don't like funds - I'd much rather take the risk myself and have only myself to blame.


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post #12 of 13 Old 01-11-2010, 08:52 AM
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Originally Posted by 285ferrari View Post
I am by no means a money guy, don't know much about stocks, bonds, IRA's, etc. I have heard guys talk about keeping cash around since savings accounts don't do much.

My question is are there any wise, not so risky things to do with small amounts of money? Say $10k-$50K... Looking for easy recommendations that an average Joe Blow citizen like me can do...

If you had $20K cash laying around and didn't need to use it for 5 years or more--What would you do with it? Put it in a savings account?, A sock in your underwear drawer?

Personally: I love realestate, period. I know, but have never not had an ok experience from such investment, albeit, right now loosing millions in a couple deals.

Depending on your local, I would also, even in real estate, think about a diversify like to a GOOD, EXCELLENT area. I am in many LLPs which perform small $25k-[skys-the-limit] shares. You may need to keep a portion, or understand 'maintenance' costs like CPA cash calls etc, but the write offs, the rentals, the etc. Plust the cash back seem to be very good for me.

ALSO, I like investing in something that is more sound and has multiple uses like land in any given time/period. I know trucks fit that bill, but land can do so much more.

IF you want to enter into, what I believe is a very good short-long term industry, try the energy market. NOT ENRON style but the real companies investing in farms with a SOLID funding and need for expansion.

I always, treat, 'investments' as should most, as gambles/lost from the get go. I do my due D, and usually/typically have no issues.

Guide to the Galaxy: Don't Panic
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post #13 of 13 Old 01-11-2010, 11:35 AM
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At least you're smart enough to ask the correct demographic. I always love it when people take money advice from someone with no money. Too funny when someone that I know lives paycheck to paycheck tries to tell me how to get rich.

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