Hi, I've got about $5000 (and more coming, steadily at about $300-$500/mo) that I seek to invest for roughly 7% annually for a 4-5 year total of around $60000 (which will be used as a down payment for a house).
I asked in the trader thread, but it seems that's a bit different than what I'm looking for. Also, this seems to be the latest thread on the subject. I'm looking for low-moderate risk investments (that i can continually add more cash to), dividends not required, and I can wait 4-5 years for it to mature. I have done my best to do some reading (but I am still noob) and I think I should invest in index funds. However, I have a few concerns, namely:
1. Everyone says to not trust anyone. Don't trust your bank, don't trust mutual fund managers, don't trust brokers. Don't trust TL advice. So, who exactly do I trust? I have no idea where to begin. 2. Index funds basically ride the market, amirite? So if the euro and/or the dollar crashes the market I'm going to be in deep shit?
On September 30 2011 05:11 ToxNub wrote: Hi, I've got about $5000 (and more coming, steadily at about $300-$500/mo) that I seek to invest for roughly 7% annually for a 4-5 year total of around $60000 (which will be used as a down payment for a house).
I asked in the trader thread, but it seems that's a bit different than what I'm looking for. Also, this seems to be the latest thread on the subject. I'm looking for low-moderate risk investments (that i can continually add more cash to), dividends not required, and I can wait 4-5 years for it to mature. I have done my best to do some reading (but I am still noob) and I think I should invest in index funds. However, I have a few concerns, namely:
1. Everyone says to not trust anyone. Don't trust your bank, don't trust mutual fund managers, don't trust brokers. Don't trust TL advice. So, who exactly do I trust? I have no idea where to begin. 2. Index funds basically ride the market, amirite? So if the euro and/or the dollar crashes the market I'm going to be in deep shit?
Can't really help you with anything investment-related. I guess my advice would be do what I'll eventually do, buy and read a book that'll teach you the nuances of investing in the stock market.
I think your math is off, though. If you average $400 a month into the pool, and it stays constant at ~7%, you'll end up with about $40,000 after 5 years. You'll have to maintain $650 a month to reach the $60,000 goal after 5 years.
Not really important I pay what I can pay, and my investment returns what it returns... And I buy whatever pos I can afford with the results Those numbers are flexible.
On September 30 2011 05:11 ToxNub wrote: Hi, I've got about $5000 (and more coming, steadily at about $300-$500/mo) that I seek to invest for roughly 7% annually for a 4-5 year total of around $60000 (which will be used as a down payment for a house).
I asked in the trader thread, but it seems that's a bit different than what I'm looking for. Also, this seems to be the latest thread on the subject. I'm looking for low-moderate risk investments (that i can continually add more cash to), dividends not required, and I can wait 4-5 years for it to mature.
I am sorry to be the bearer of bad news but you have unreasonable expectations. With a 4-5 year total investment horizon, the only things remotely approaching the suitable low-moderate risk are CDs and short-term bonds. In the current interest rate environment nothing safe with 4-5 year duration will yield above 3%.
Forget about stocks completely if your horizon is so short and you will need the money for a house downpayment.
On September 30 2011 05:11 ToxNub wrote: Hi, I've got about $5000 (and more coming, steadily at about $300-$500/mo) that I seek to invest for roughly 7% annually for a 4-5 year total of around $60000 (which will be used as a down payment for a house).
I asked in the trader thread, but it seems that's a bit different than what I'm looking for. Also, this seems to be the latest thread on the subject. I'm looking for low-moderate risk investments (that i can continually add more cash to), dividends not required, and I can wait 4-5 years for it to mature.
I am sorry to be the bearer of bad news but you have unreasonable expectations. With a 4-5 year total investment horizon, the only things remotely approaching the suitable low-moderate risk are CDs and short-term bonds. In the current interest rate environment nothing safe with 4-5 year duration will yield above 3%.
Forget about stocks completely if your horizon is so short and you will need the money for a house downpayment.
Hmm. Almost every place I can find states 7% to be a reasonable expectation for an index fund?
On September 30 2011 05:11 ToxNub wrote: Hi, I've got about $5000 (and more coming, steadily at about $300-$500/mo) that I seek to invest for roughly 7% annually for a 4-5 year total of around $60000 (which will be used as a down payment for a house).
I asked in the trader thread, but it seems that's a bit different than what I'm looking for. Also, this seems to be the latest thread on the subject. I'm looking for low-moderate risk investments (that i can continually add more cash to), dividends not required, and I can wait 4-5 years for it to mature.
I am sorry to be the bearer of bad news but you have unreasonable expectations. With a 4-5 year total investment horizon, the only things remotely approaching the suitable low-moderate risk are CDs and short-term bonds. In the current interest rate environment nothing safe with 4-5 year duration will yield above 3%.
Forget about stocks completely if your horizon is so short and you will need the money for a house downpayment.
Hmm. Almost every place I can find states 7% to be a reasonable expectation for an index fund?
For a stock index fund, sure, just not on a 4-5 year horizon. On a 10-15+ year horizon more like it.
As an example, the S&P500 (US large caps) for the past 10 years, including dividends is essentially flat aka 0% return (but a crazy rollercoaster ride of ups and downs throughout the period). The Wilshire 5000, which is the US Total Market indes that also includes small caps is up about 2% annually over the past 10 years, again with crazy ups and downs.
Japan, including dividends, has been flat over the past 20 years.
You can expect 12% or 4% or whatever you want to shoot for, but that doesn't mean it will happen. Index funds follow the market, and we're in a global recession/depression. Ideally, to make money, you'll have to learn how to research individual companies to see what are actually in good shape, by looking at their profit/loss, cash reserves, a whole bunch of technical ratios and formulas and stuff, and it helps if you actually know something about the industry a company is in to know if it's products are any good. Index funds are a grab bag of good and bad companies, and only perform well if everybody's doing great overall. I think the federal interest rate is still 0% right now. Has been for a few years.
If you need the money in 4-5 years, consider a savings account or CD somewhere. You're not gonna make much money off of interest though.
On September 30 2011 06:09 Kyrth wrote: You can expect 12% or 4% or whatever you want to shoot for, but that doesn't mean it will happen.
Exactly. Sadly the term "expected returns" is very very misleading. It may happen or it may not. Nobody knows and the ones who claim they do know are frauds, every single one of them. Nobody knows what stock market is going to do in the next few years. Warren Buffett freely admits he has absolutely no idea what's going to happen in the next few years and you'd figure the world's #3 richest man who made his fortune specifically by investing would know a thing or two.
On September 30 2011 06:09 Kyrth wrote:Ideally, to make money, you'll have to learn how to research individual companies to see what are actually in good shape, by looking at their profit/loss, cash reserves, a whole bunch of technical ratios and formulas and stuff, and it helps if you actually know something about the industry a company is in to know if it's products are any good.
This is true, alas, it takes time, lots and lots of time and effort (and a little bit of dumb luck) which most people are simply not ready to spend. And even then, things may or may not play out in the time framerate you have in mind. The shorter the time frame, the worse your odds get. In 5 years time you could be up 100% or your initial investment or you could be down 60%. Or anything in-between.
If I was saving for a house downpayment with a 4-5 year horison, the very riskiest range I'd go would be something like:
1/3 A very very widely diversified Total Bond fund (with average duration no longer then about 7 years) 1/3 Short term bond fund (average duration no longer than 3 years) 1/3 CDs
On April 20 2011 03:58 Yttrasil wrote: Just wondering, why do you think you guys will perform better than hedge funds and professional investors that has years of experience and more importantly amazing formulas and computerpower plus great information sources to use. While you guys are having it as almost a hobby and don't act in any rational way and constituting maybe at most 5% of the investors with no capital in comparison. How do you believe you can perform better than them, they will just take your money and some parts of what they make come from you guys.
Wish you luck but I'd love to hear a reasonable response, I'm studying economics have read stock books and these kinds of threads and I just don't get it. I know people love to gamble and this is the only thing I can compare it to, except that it sounds professional.
Edit: Buying property for long-long term and stocks as well in markets you really DO understand makes sense I'd say, but daytrading or changing stocks on whims, doesn't make sense to me.
Many hedge funds companies charge pretty ridiculous prices for rather marginal returns than what you would get yourself. Look at the 08/09 crashes...almost all those funds completely tanked with the rest of the market. People with their money in those funds did just as poorly as people with their own stocks.
Plus, any manager will tell you.......the stock market is ridiculously unpredictable. All the analysis in the world won't keep you from completely lucking out and having 90% of your investment go down the drain due to random and almost completely unrelated problems.
I'll take the current nuclear situation as a great example. Nuclear power isn't going anywhere........noone is cancelling currently-under-construction plants, supply isn't going down, and basically nothing practical has changed, and yet the stocks have completely tanked. It's just too random to be accurately predicted by anything. That is why people do it themselves. With a bit of luck you can do far better than the "professionals", and if you do it wisely, with just about the same amount of risk.
Funds have a 0.013 alpha (stat significant) in one large scale study. I doubt mom-and-pop individuals can generate this excess return.
Yeah. Interest rates are abysmal. Seriously, I was looking at canadian savings bonds the other day... 0.65%???? Are you fking kidding me? If I buy cheaper coffee I'll make more money than putting down 5k on those...
I looked at a couple CD and i'd be lucky to make 2-2.5%
Considering my lack of knowledge about the stockmarket, I have to wonder if it doesn't make more sense to find more "real-world" applications for my money. Yknow, like buying energy saving lightbulbs, or paying some kid to sell lemonade.
On April 20 2011 03:58 Yttrasil wrote: Plus, any manager will tell you.......the stock market is ridiculously unpredictable. All the analysis in the world won't keep you from completely lucking out and having 90% of your investment go down the drain due to random and almost completely unrelated problems.
I'll take the current nuclear situation as a great example. Nuclear power isn't going anywhere........noone is cancelling currently-under-construction plants, supply isn't going down, and basically nothing practical has changed, and yet the stocks have completely tanked.
Did you miss that Japan and 1/3 of Europe (Germany, Switzerland and several others) are giving up nuclear power completely? Not only are currently-under-construction plans cancelled, existing plants are being winded down.
EDIT: I just realize that the post I am quoting is from April 20 Oh well, it least it shows that it was a pretty good example of the market tanking ahead of what eventually happened.
This is a trading thread, not an investing thread, but still there are tidbits of what kinds of things we are trading for profit right now
Dollar index fund is where i would stick your money right now
My concern about trading is that you need to know what you are doing. And you have to actively work at it. The nice thing about index funds is that, well, you don't. You give them money, and if you wait long enough, they give you back more.
This is a trading thread, not an investing thread, but still there are tidbits of what kinds of things we are trading for profit right now
Dollar index fund is where i would stick your money right now
My concern about trading is that you need to know what you are doing. And you have to actively work at it. The nice thing about index funds is that, well, you don't. You give them money, and if you wait long enough, they give you back more.
good luck with that...
There are some extremely simple strategies you can execute which will not only outperform index funds by a huge margin, but will PROTECT your savings in a falling market
Unfortunately for most, active and passive funds are not allowed to hedge themselves against falling markets, resulting in the vast majority of peoples personal savings and wealth vanishing in recessions
Traders will obviously attempt to do one step further and make money in all circumstances, but at the very least investors should seek to protect their assets
This is a trading thread, not an investing thread, but still there are tidbits of what kinds of things we are trading for profit right now
Dollar index fund is where i would stick your money right now
My concern about trading is that you need to know what you are doing. And you have to actively work at it. The nice thing about index funds is that, well, you don't. You give them money, and if you wait long enough, they give you back more.
good luck with that...
There are some extremely simple strategies you can execute which will not only outperform index funds by a huge margin, but will PROTECT your savings in a falling market
Yet for some very strange reason, Berkshire, JPM, Goldman (or specifically their equity division) all lose money when the market is in a freefall. If these strategies were simple and reliable for the very term, all the big boys would flock to them and all the inefficiencies making the stategy possible would be quickly arbitraged away.
Sure every major recession and stock market freefall there are a few well-known people and institutions who manage to dodge it or even make money on it. Yet, it seems to be different people every time, there are no persistent methods that work every time.
For every person who both jumped out and back into the market at just the right times in 2008-2009, there were 100,000 who sold out low, missed the entire rally back up and then got back in when it was "safe", with half the portfolio up in smoke. While those who sat tight throughout the entire rollercoaster didn't actually end up losing ANY money. Better yet, if they sold out some bonds and went even more heavily into stocks right at the bottom, they made out like bandits.
This is a trading thread, not an investing thread, but still there are tidbits of what kinds of things we are trading for profit right now
Dollar index fund is where i would stick your money right now
My concern about trading is that you need to know what you are doing. And you have to actively work at it. The nice thing about index funds is that, well, you don't. You give them money, and if you wait long enough, they give you back more.
good luck with that...
There are some extremely simple strategies you can execute which will not only outperform index funds by a huge margin, but will PROTECT your savings in a falling market
Yet for some very strange reason, Berkshire, JPM, Goldman (or specifically their equity division) all lose money when the market is in a freefall. If these strategies were simple and reliable for the very term, all the big boys would flock to them and all the inefficiencies making the stategy possible would be quickly arbitraged away.
Sure every major recession and stock market freefall there are a few well-known people and institutions who manage to dodge it or even make money on it. Yet, it seems to be different people every time, there are no persistent methods that work every time.
For every person who both jumped out and back into the market at just the right times in 2008-2009, there were 100,000 who sold out low, missed the entire rally back up and then got back in when it was "safe", with half the portfolio up in smoke. While those who sat tight throughout the entire rollercoaster didn't actually end up losing ANY money. Better yet, if they sold out some bonds and went even more heavily into stocks right at the bottom, they made out like bandits.
Big banks rely on bull markets for their profits. What you thought all their money comes from shorting markets and being evil? Banks do MARKET MAKING. This is only a small portion of their profit, they do a WHOLE bunch of other stuff on top to make money. Every bank wants there to be a bullish market since all their employees get paid in stock options as at least half of their bonus
Let me introduce to you a fund that has made 10% a year over the last 10 years, that i invented myself.
Buy when the green line is below blue, and sell when above
Tadaa, look at the fantasticly large profits you just made, even better you make money in falling markets!
So you know, i invest in this fund by shorting or going long the markets. It's served me pretty well. So given the current situation, i suggest you should invest the same!
My concern about trading is that you need to know what you are doing. And you have to actively work at it. The nice thing about index funds is that, well, you don't. You give them money, and if you wait long enough, they give you back more.
discretionary trading requires active work. automated trading is about management and monitoring (less than 10 min a day). the computer does all the trading for me. i dont pay attention to news. i trust my stats skills.
keep an open mind. trading does require a lot of effort though, especially in the beginning.
also, you really have to believe in your intelligence (mainly undergraduate understanding of statistical theory and time series) to succeed. most people will tell you trading is impossible or too hard for the normal person. its true. you need to be smart if you are going to succeed alone.
I'm about to try my hand at this... currently 16 so I'm starting on Investopedia (is that a good idea?) and reading a few books in the meantime. I love playing the market in games so I think this will be quite enjoyable (obv I need to learn how to be patient)
On October 01 2011 10:54 Soulish wrote: I'm about to try my hand at this... currently 16 so I'm starting on Investopedia (is that a good idea?) and reading a few books in the meantime. I love playing the market in games so I think this will be quite enjoyable (obv I need to learn how to be patient)
market in games is similar to the market in real life before computers.
you have a long time to be knowledgable, dont believe everything on investopedia about trading strategies lol. ive programmed a few of them and the ones i did programme are trash.
On October 01 2011 10:54 Soulish wrote: I'm about to try my hand at this... currently 16 so I'm starting on Investopedia (is that a good idea?) and reading a few books in the meantime. I love playing the market in games so I think this will be quite enjoyable (obv I need to learn how to be patient)
market in games is similar to the market in real life before computers.
you have a long time to be knowledgable, dont believe everything on investopedia about trading strategies lol. ive programmed a few of them and the ones i did programme are trash.
I'm planning to put in many hours per day for a few years before I actually invest. We'll see how it goes. Do you have any books you recommend for absolute beginners?
EPT
I pay what I can pay, and my investment returns what it returns... And I buy whatever pos I can afford with the results 
Those numbers are flexible. 
Oh well, it least it shows that it was a pretty good example of the market tanking ahead of what eventually happened.![[image loading]](http://img31.imageshack.us/img31/6184/moveavg.png)
