On finance: Stocks or something else?
Question: "Do you have stock? I have shares of stock from my grandparents and I'm free to buy and sell or whatever as I please. ...but i was thinking of expanding my financial knowledge and at least figure out what to look for/what to do if i ever decide to touch it. Any resources or tips would be helpful. I dont' even know if you know about this stuff...but i feel like you do. "
Answer: "This is a tough question. I don't invest currently, but do know a few things.
First, having all investments in one stock is bad. Ideally you would hold at least 30-60 stocks, to diversify. I won't get technical on you, but basically diversifying maximizes your end return (good thing). (Ref: http://en.wikipedia.org/wiki/Diversification_(finance))
The easiest way to diversify is with futures contracts. Think of these as mutual funds basically. If you buy a S&P futures contract its like buying a small slice of 500 of the largest US companies. So diversification is built in. They are also cheaper to trade (so if you want to buy or sell them, they are cheaper than stocks) and you dont have to pay any management fee (like with Mutual Funds).
Now, you are young and its very likely that over the next 40 years the S&P will go up. So its not a bad idea to invest everything in S&P futures. (Advanced tip: If you were really feeling hot about the economy you could take out a line of credit using your current holdings as collateral and buy even more futures, thus leveraging your risk and return on the portfolio, but thats for another day...)
But if you feel risk averse (ie you think the economy won't do well over the next 40 years) you can put some (or all) of your money in long term US treasuries (us gov bonds) (or rather which ever government security gives you the best return, usually its the 30yr bonds, but not always).
According to my old finance professor, if you aren't an investing genius, than the only securities you should invest in are S&P futures and government bonds. This isn't completely black and white though. There are other good index futures out there in foreign markets as well, if you feel more aggressive about other markets.
This is a good place to start. Even if you move 50 percent into S&P futures you will be doing better, because you are diversified.
After that, you can get cheeky down the road and move money between futures and gov bonds depending on how you feel about the economy. You can also start moving a little money to stocks you like, but for now just get some futures.
The last thing I will say: if your broker (whoever you deal with to manage your portfolio for you) tells you to invest in a "managed fund" don't do it! Only invest in passive things (like futures) the returns are better because if its managed the manager takes a chunk and this almost never gives a good return. (Ref: http://www.fool.com/school/mutualfunds/performance/record.htm)
Hope this helps! Take it with a grain of salt, but don't get sucked into anything fancy!"
Answer: "This is a tough question. I don't invest currently, but do know a few things.
First, having all investments in one stock is bad. Ideally you would hold at least 30-60 stocks, to diversify. I won't get technical on you, but basically diversifying maximizes your end return (good thing). (Ref: http://en.wikipedia.org/wiki/Diversification_(finance))
The easiest way to diversify is with futures contracts. Think of these as mutual funds basically. If you buy a S&P futures contract its like buying a small slice of 500 of the largest US companies. So diversification is built in. They are also cheaper to trade (so if you want to buy or sell them, they are cheaper than stocks) and you dont have to pay any management fee (like with Mutual Funds).
Now, you are young and its very likely that over the next 40 years the S&P will go up. So its not a bad idea to invest everything in S&P futures. (Advanced tip: If you were really feeling hot about the economy you could take out a line of credit using your current holdings as collateral and buy even more futures, thus leveraging your risk and return on the portfolio, but thats for another day...)
But if you feel risk averse (ie you think the economy won't do well over the next 40 years) you can put some (or all) of your money in long term US treasuries (us gov bonds) (or rather which ever government security gives you the best return, usually its the 30yr bonds, but not always).
According to my old finance professor, if you aren't an investing genius, than the only securities you should invest in are S&P futures and government bonds. This isn't completely black and white though. There are other good index futures out there in foreign markets as well, if you feel more aggressive about other markets.
This is a good place to start. Even if you move 50 percent into S&P futures you will be doing better, because you are diversified.
After that, you can get cheeky down the road and move money between futures and gov bonds depending on how you feel about the economy. You can also start moving a little money to stocks you like, but for now just get some futures.
The last thing I will say: if your broker (whoever you deal with to manage your portfolio for you) tells you to invest in a "managed fund" don't do it! Only invest in passive things (like futures) the returns are better because if its managed the manager takes a chunk and this almost never gives a good return. (Ref: http://www.fool.com/school/mutualfunds/performance/record.htm)
Hope this helps! Take it with a grain of salt, but don't get sucked into anything fancy!"
posted by Trent Krupp at
9:12 AM
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