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Alright Shelley! Here's what I like to see. You caught me at a great time too, because I got out of work early! Very happy. Let's get cranking.
As far as research, any newspaper will do for now, basically because the Vanguard 5 directly follows the S&P 500, an index that is published in practically every newspaper I've read. When you get a chance though, you'll want to pick up a subscription for the Wall Street Journal. The reason so many people love the WSJ is because it's the ultimate source for anything and everything going on, in a format built for investors. You can get an online version if you would prefer, or there is a print version, but I would call WSJ to make sure there is a carrier in your area, otherwise it will come with your regular mail and by then, it's only good for building fires. Taking a look at the WSJ, you'll notice that the front page has two columns on the front page called "What's news-". Here you've got Bus/Finance news and World news. For investors, both are very important. Know the top 100 holdings of the Vanguard 5, and you'll probably see at least one name in this box every day. Key thing to remember is that news=money. Whether it's red money or green money is the difference. Let's do an example:
Top 3 holdings are as follows...XOM(Exxon), GE(GenElect.), and C(citi), acting as 3.35%, 2.85%, and 1.95% respectively. This totals to 8.15%, so right off the bat, these three stocks are responsible for over 8% of the fund's activity. Soo...
Today, XOM filed for a reevaluation of the Valdez spill in 89. They're looking to bring the $2.5 billion fine down to $25 million. In addition, more on the topic of World News, Hurrican Dean did not effect operations in Mexico all that much, so another plus for XOM. As news comes in positive, XOM finishes with a green day.
GE really didn't do much today, but lost .02, just because of regular volatility.
C, or Citigroup had a rougher day as they were all over the media. It's become apparent to the general public that lenders are running out of money. They have room to stretch their feet, as they are a commercial bank with enough in assets to wait for better market conditions to pay off that debt. Overall...an expected red day, not a bad one though.
So let's overview. Of the 3 stocks that make up 8% of the fund, 2 were down on the day. Look at the Vanguard 500 now and you'll notice that it is down as well, about .10%. Now, you've learned how to interpret news and see how it effects share price, you've learned how an index works, and you've learned how diversification is crutial. 3 stocks, 3 different industries. Say these 3 stocks were all in say, the insurance brokerage intustry, which was down almost 2% today. You would have noticed that the fund would have been down much more than .10%.
Next we'll look at other news sources that you may or may not want to look into. Another newspaper some investors like is "Investors Business Daily", or IBD. I personally don't like IBD because it is too straight foward and a lot of times actually does say things like, "company xyz is a great buy, and company abc is going downhill". Are they right all the time? Of course not, it would be too easy for anyone to invest if they were. To me, IBD is a very sophisticated editorial page, where the writers basically jot down their opinions on the market. Granted, they are extremely intelligent market professionals, but you won't optimize your profits following every word they say, in fact you'll probably be in the same boat as Vanguard 500 investors, but you'll be wasting money on commissions, fees, etc. for buying the stocks individually. I wouldn't say not to get it, just because it does provide some great charts on a daily basis and will show you the mathematical side of stocks that the WSJ doesn't have space to show.
To start a conclusion, picking stocks is not an easy business. If it were, I would be making a mere fraction of what I make, if I had a job to begin with. I personally have a MBA in Finance, with countless hours of research in quantitative and computational finance, risk management, and applied mathematics. I'm also a Chartered Financial Analyst, as of January. I don't mean to toot my own horn too loud, but to be honest, it's a job that very few people can do as good as I can. There's a good possibility that you'll never be great at it. But, that doesn't mean you can't take a share of the profits. You will get better at picking stocks eventually, but remember that absolutely nothing is a sure thing, and sometimes the best thing to do is sit back and let a professional do the work.
That being said, look into the Vanguard 500, invest and follow it for a while, then when and only when you feel comfortable, start to pick a few of your own.
I'll give you a basic outline of my personal investment strategy, with some rough estimates of my numbers.
Assets= $4.5mil $2mil in investments
Growth= 25%/yr
Now, I'm personally invested 65% in stocks, 20% in mutuals, 10% in a particular hedge fund, and 5% in junk bonds(because I happen to like them just a bit. I DO NOT RECOMMEND THEM FOR ANYBODY) I'm young(25). When I'm 35, it will be St-40%, Mu-40&, Hedge-20%(assuming I still like it). At 45, I'll retire and switch to Mu-80%, Hedge-20%. By 55, it changes completely. 100%, which should be about $20mil, in good old fashioned 4-5% guarunteed Treasury bonds. I figure roughly $1mil/yr in tax-free income should be good when I'm 55 and not working, paired with my life savings. I'm still debating whether or not I'll want to put in a bit on the New York Giants at this point, haha.
So, without futher a do. Get out there and strut your stuff. Or just ask more questions if you need too.
Open an account at Vanguard. they have the lowest expense ration. Start putting money into a good index fund, like the vanguard 500. Put in a little at a time and leave it there.
DING DING DING.....Best post I've read on this forum since joining.
Marble Girl, it seems that the theme of the messages that you have received so far are anti-broker and pro-discount brokerage. Let me give a contrary view. Wealthy people outperform the rest of investors because they have:
- better information,
- access to better equity managers
- access to better firms and advisers
- better discipline and less emotion.
1. The market by definition is volitile. There would be no opportunity for profit without it.
2. There is a lot of information out there and making sense of it is a full time job. I would suggest that its better to use someone that does this for a living.
3. Not all financial professional are alike. Choosing one is the biggest decisions that you will make.
4. Also there are two types of financial professionals, Advisors and Traders.
- Traders make their money based on the transactions you do with them. If you believe that you can predict the best times to buy low and sell high then go with an experienced trader.
- Advisers are paid a precentage of your portfolio value. They advise you on how best to create a long-term investment portfolio that is diversified to take advantage of gains in the market over time and minimze the losses.
Look at the stock market over any 10 year period and you will se that you will end up with a gain.
I would also suggest that when you use a firm like Vanguard, you are being underserved. Vanguard sells only Vanguard funds. If you actually compare funds you will see that there are better funds in the market. If you choose wisely, the return on your investment will make up for the cost compared to no-load funds
Because the market is fluid, todays profitable investment will be out of favor in the future. You would be better served to rely on the knowledge and experience of someone who can position your portfolio strategically for consistant reurns.
I've invested both ways. it's best not to go into this Blind. If you have confidence in your investment strategy, you will be able to sleep at night when when the market dips.
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