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United States24769 Posts
There are a lot of self proclaimed finance experts on TL, and probably a few finance experts as well. These two groups often get into discussions on proper investing strategies and how to accumulate wealth. Usually I just can't follow what the heck they are talking about. I'm hoping by structuring a conversation specifically about what I'm interested in I can steer the discussion in a direction that is useful for me, as well as other people who aren't particularly knowledgeable in finance.
Optional reading about what I've been doing with some of my money:
+ Show Spoiler +This past summer I put 3,000 dollars (enough to play with but not enough to risk my livelihood) into a Scottrade account (if anyone wants free trades we can all refer each other), and have been buying/selling regular stocks. This has been going well and I am starting to really understand the basics of buying/selling stocks.
Reading (not as optional):
A while back I inherited 10,000 from a relative and have had it sitting in the savings account at my credit union it was placed into. It's currently getting 0.399% interest which I don't consider acceptable.
What I want to do:
I decided I want to try investing the 10,000 in order to get a better return on it (what is inflation... like 3%?). However, I don't want to expose it to as much risk as I do the 3,000 I've been playing with on the stock market. What are some of the safer methods of investment that earn you a better return than my savings account without locking up the money long-term? How do you get started? <-- purpose of thread
What I've looked into so far:
Although the safest way to store the money would be in my bank account or in a CD, I don't want to get beat out by inflation or lose access to the money. On the other hand, I may not spend the money for quite a few years so I'd like to do some planning now so I don't take a big hit after 5-10 years of inflation. I've been trying to research short term bond mutual funds (municipal VS taxable?), ETFs, and perhaps just individual bonds. This is very different from what I've already played around with while investing in regular stocks so I'm kinda at a loss.
I've been using the Scottrade screener to search for various bond mutual funds.
I've been using www.etfconnect.com and its fund screener to look at possible ETFs.
I don't know what to choose and how to choose it! Perhaps people actually have experience in this area or alternate suggestions?
The only rule I can really think of for this discussion is please don't post a suggestion without any justification. For example, don't post "BUY GOLD" or "DON'T BUY SILVER" and then end your post because that isn't helpful.
edit: here is a list of mutual funds a friend linked me to: http://money.usnews.com/funds/mutual-funds/rankings/short-term-bond
  
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are you afraid at all to possibly risk 10,000$?
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United States24769 Posts
On January 03 2012 02:49 Br3ezy wrote:
are you afraid at all to possibly risk 10,000$?
My understanding is... if I want to do better than I'm doing in the savings account without locking the money up long term I need to choose something that has at least a slight risk of losing some/all of the money. If so, I just want to be on the conservative side. If I'm not willing to take a little risk then the discussion is probably over and I should just keep the money in the savings account.
Anyone feel free to correct me if I'm wrong.
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Have you considered gold or silver?
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It really seems like you want all of profit, accessibility, and safety.
I don't think it's possible to have all of those.
I'd suggest CD's or a mutual fund for relative safety, even if it's not particularly accessible. Keep a small part of it in a savings account.
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Buy AUD (Australian Dollar) and you can get about 5.5% interest on term deposits.
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First thing that came to my mind are TIPS (Treasury Inflation Protected Securities). Maybe google these and try to find some TIPS funds or what not. (Sorry, saw this on the way out the door and wanted to get my 2 cents in.)
Oh, and short ACOM, what a terrible business model.
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United States24769 Posts
On January 03 2012 02:57 Ingenol wrote:
Have you considered gold or silver?
As I said in the OP, please don't just suggest gold/silver (or anything else) without explaining.
On January 03 2012 02:59 Lightwip wrote:
It really seems like you want all of profit, accessibility, and safety.
I don't think it's possible to have all of those. I don't expect as much profit as I get from stocks. I don't expect as much safety as I get from my bank account. I also don't expect quite as much accessibility as I get from my bank account. I'm looking for a reasonable balance of the three.
I'd suggest CD's or a mutual fund for relative safety, even if it's not particularly accessible. Keep a small part of it in a savings account. Don't CD's lock up the money for fairly long periods of time? I'm trying to avoid that. Also, regarding the mutual fund... how would I go about investing into a mutual fund? There's no "invest in a mutual fund" button on Scottrade that takes care of everything for you unfortunately :p I don't think I need to keep some of it in a savings account since this isn't the only money I have. It's not a tiny percentage either mind you XD
On January 03 2012 03:00 Azzur wrote:
Buy AUD (Australian Dollar) and you can get about 5.5% interest on term deposits.
Could you explain more about this? I haven't heard of it before.
On January 03 2012 03:06 Sweepstakes wrote:
First thing that came to my mind are TIPS (Treasury Inflation Protected Securities). Maybe google these and try to find some TIPS funds or what not. (Sorry, saw this on the way out the door and wanted to get my 2 cents in.)
Oh, and short ACOM, what a terrible business model.
Lol when you get a chance please explain more about ACOM. I guess I can look into TIPS.
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On January 03 2012 03:07 micronesia wrote:Show nested quote +On January 03 2012 03:00 Azzur wrote:
Buy AUD (Australian Dollar) and you can get about 5.5% interest on term deposits. Could you explain more about this? I haven't heard of it before.
You can go to your bank and ask to purchase some AUD currency. When you deposit that AUD in the bank, they should give comparable interest rates in Australia. Ok, perhaps they won't give you term deposit rates but it should be similar to the cash rate in Australia, which is about 4.25%.
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I think if you really wanna beat inflation you should read "how to be rich" by kiyosaki and find a way to use ur 10k as an investment that yields a passive source of income.
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CD's do lock up the money for a period of time, and it looks like the rates aren't as impressive as they were 6 months ago. My fiancee manages most of our money through ING and she swears by it-- https://home.ingdirect.com/open/open.asp -- they offer investment accounts to invest in mutual funds and other products, but I haven't done it first-hand so I don't know how simple/complex the process is. We signed up with them primarily for the interest rate on the savings account, which was meaningfully better than either of our other banks.
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On January 03 2012 03:11 Azzur wrote:Show nested quote +On January 03 2012 03:07 micronesia wrote:On January 03 2012 03:00 Azzur wrote:
Buy AUD (Australian Dollar) and you can get about 5.5% interest on term deposits. Could you explain more about this? I haven't heard of it before. You can go to your bank and ask to purchase some AUD currency. When you deposit that AUD in the bank, they should give comparable interest rates in Australia. Ok, perhaps they won't give you term deposit rates but it should be similar to the cash rate in Australia, which is about 4.25%.
If that's possible, he should be able to do it with US currency too.
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I know it sounds weird, but investing in WWII memorabilia can be a very solid investment, as they are as much of a commodity as gold or silver, but are less affected by market fluctuation. The only real risk is that you accidentally damage whatever it is you buy. One drawback is that you'll have to do research in order to ensure you know what things are worth, and that you don't get ripped off. But it's easy to make money if you know where to look and what to look for. Additionally, WWII memorabilia only ever goes up in value (If you don't accidentally damage it). They never go down in value.
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Sorry, I either overlooked that last part or it wasn't there pre-edit when I posted. I suggested precious metals because they hold their value in times of hyperinflation (which is a very tangible danger at this point).
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United States24769 Posts
On January 03 2012 03:50 GoTuNk! wrote:
I think if you really wanna beat inflation you should read "how to be rich" by kiyosaki and find a way to use ur 10k as an investment that yields a passive source of income.
Can you link to the exact item you are talking about? I couldn't even find it.
On January 03 2012 03:52 jpditri wrote:CD's do lock up the money for a period of time, and it looks like the rates aren't as impressive as they were 6 months ago. My fiancee manages most of our money through ING and she swears by it-- https://home.ingdirect.com/open/open.asp -- they offer investment accounts to invest in mutual funds and other products, but I haven't done it first-hand so I don't know how simple/complex the process is. We signed up with them primarily for the interest rate on the savings account, which was meaningfully better than either of our other banks. I actually have my 403b retirement account through ING
On January 03 2012 04:01 RoosterSamurai wrote:
I know it sounds weird, but investing in WWII memorabilia can be a very solid investment, as they are as much of a commodity as gold or silver, but are less affected by market fluctuation. The only real risk is that you accidentally damage whatever it is you buy. One drawback is that you'll have to do research in order to ensure you know what things are worth, and that you don't get ripped off. But it's easy to make money if you know where to look and what to look for. Additionally, WWII memorabilia only ever goes up in value (If you don't accidentally damage it). They never go down in value.
Interesting, but I don't think I'm going to do this lol
On January 03 2012 04:03 Ingenol wrote:
Sorry, I either overlooked that last part or it wasn't there pre-edit when I posted. I suggested precious metals because they hold their value in times of hyperinflation (which is a very tangible danger at this point).
If I wanted to invest in precious metals, how would I even go about that?
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i like the fact that you are only using 3k. That is a very smart move and prove that you are matured and know how to handle money.
tbh im clueless how econ in western world work especially stock markets even though both my parents work in the field. The only thing i know is that stock market is a dangerous place to mess around, you earn fast, you burn fast. Most of my relative after earned a respectable amount of money from stock are falling back and invest into estates. Buying/selling lands houses etc.. you know. Worst case you could just find a place near a campus and rent it for college students. My uncle now is considering quitting his job in the next 3 years simply because his houses earning him more than enough money :D.
Good luck man 
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On January 03 2012 04:14 micronesia wrote:
If I wanted to invest in precious metals, how would I even go about that?
The most straightforward way is just to buy some. Either from a local dealer or online from sites like www.goldline.com. You can pay a fee to have your gold kept somewhere by many of these places, or you can opt to keep it in your own safety deposit box or under your mattress!
Other options to consider include precious metals ETF's or investing in mining companies. There are some funds that are an index of various gold mining operations, for example.
I'm far from an expert on any of this, but if one of your primary goals is hedging against inflation, precious metals are a popular choice.
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I would stay away from any kind of ETF, they tend to lose money over time. I dont have any scientific analysis to back this up but it has been my observation. Also why would you want that kind of overhead if you can pick stocks yourself.
If i were in your shoes i would only invest that 10k USD if you have a stable income so you can steadily add shares on a regular basis (each month or every quarter or whatever you feel comfortable).
Buy in small chunks and pick a wide array of stocks in different sectors and steadily, slowly, add to your positions.
To give you some ideas how such a portfolio might look like.
However, trust nobody, read as much as you can and buy stuff you are comfortable holding and you believe has value for now and 30 years from now.
And for the love of good, dont check stock prices every minute if you decide to go forward.
Technology
Intel Corporation NASDAQ:INTC
NVIDIA Corporation NASDAQ:NVDA
...
Finance
Goldman Sachs Group, Inc. NYSE:GS
Citigroup Inc. NYSE:C
...
Energy
Western Refining, Inc. NYSE:WNR
Valero Energy Corporation NYSE:VLO
...
Basic Materials
North American Palladium Ltd. NYSEAMEX AL
Stillwater Mining Company NYSE:SWC
...
Food....
....
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I think what the majority of investing experts will tell you is that the degree of risk you take on in your investments should be proportional to the length of time the investment will have to mature. If you are very young and your investment horizon is several decades, then you should take on plenty of risk and invest 100% in stocks, because in the long-term stocks beat every other investment. In the short-term however, stocks are subject to losses, and so the older a person gets or the shorter their investment horizon is, the more they should switch a percentage of their investments into safer choices such as bonds or treasuries. When a person is near retirement age, their focus will be much more on preserving their nest egg instead of growing it, and so they should have very safe investments with little interest, such as CD's.
So if you are looking for just a short term investment, bonds probably are the best place to look. Unfortunately I've never invested in bonds so I can't really give much advice about them. If you want to diversify your bond purchases to be extra safe, don't want to research individual bonds, and also don't want your money locked up for a specific period of time, then you could consider an ETF which deals specifically in bonds, which can be sold at any time. For those who don't know what an ETF is, it's pretty much like a mutual fund or index fund which can be traded or sold as easily as any stock, without the possible tax consequences that selling other investments early might have.
When buying funds I prefer vanguard, because they typically have the lowest fund management rates in the industry. Take a look at funds like BIV- intermediate treasury bonds, BLV- long term treasury bonds, VCIT- intermediate corporate bonds, VCLT- long term corporate bonds.
The corporate bonds tend to have much better returns than government bonds, but they also entail slightly more risk. Good luck.
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Cash is trash right now. One option is blue chip stocks that pay dividends. The dividend yield itself will outperform any savings account you're using. Obviously, you're exposed to market dips, though.
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EPT
