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There's been quite a few posts here that start to the tune of something like the following..
"I have X thousand dollars to invest.. what stocks should I buy?"
"I'm a 20-something at my first job and want to start saving for retirement. What stocks should I buy?"
For those of you who have asked questions of this sort (or are thinking of it), I commend you for taking the initiative to save your hard earned cash and let compound interest do its trick over time. However, the question "what stocks should I buy?" cannot be adequately answered before knowing your appropriate Asset Allocation.
Major Asset Classes include:
Equities (aka Stocks)
Hard Assets (Commodities, Real Estate, etc.)
Fixed Income (aka Bonds)
There are many subcategories for each major asset class (and some of these categories may overlap.) For example, Equities include Domestic Stocks, International Stocks, Growth Stocks, Value Stocks, etc. Fixed Income includes Government Bonds, Corporate Bonds, Junk Bonds, etc.
And to answer your question what stocks you should buy, it depends on what your risk tolerance is and ultimately, what % of your portfolio will be allocated to Equities. In general, the younger you are, the more equities you should hold and the less fixed income.
I don't claim to be an expert on guiding you to finding your ideal asset allocation but I do believe it needs to be addressed before you pick stocks.
I'm just a beginner but through my job I have 50 percent s&p index 25 percent small cap 25 percent international. It's through mass mutual. It's in addition to the pension system that I am in.
There's been quite a few posts here that start to the tune of something like the following..
"I have X thousand dollars to invest.. what stocks should I buy?"
"I'm a 20-something at my first job and want to start saving for retirement. What stocks should I buy?"
For those of you who have asked questions of this sort (or are thinking of it), I commend you for taking the initiative to save your hard earned cash and let compound interest do its trick over time. However, the question "what stocks should I buy?" cannot be adequately answered before knowing your appropriate Asset Allocation.
Major Asset Classes include:
Equities (aka Stocks)
Hard Assets (Commodities, Real Estate, etc.)
Fixed Income (aka Bonds)
There are many subcategories for each major asset class (and some of these categories may overlap.) For example, Equities include Domestic Stocks, International Stocks, Growth Stocks, Value Stocks, etc. Fixed Income includes Government Bonds, Corporate Bonds, Junk Bonds, etc.
And to answer your question what stocks you should buy, it depends on what your risk tolerance is and ultimately, what % of your portfolio will be allocated to Equities. In general, the younger you are, the more equities you should hold and the less fixed income.
I don't claim to be an expert on guiding you to finding your ideal asset allocation but I do believe it needs to be addressed before you pick stocks.
The short answer to asset allocation is to invest in a target date fund that gets more conservative as you age or in a balanced mutual fund that invests in a mix of stocks and bonds, usually 60-70% stocks and 30-40% bonds. The better balanced funds come close in performance to the overall stock market with less volatility. Funds like those below work well for most people:
Vanguard Wellington (very low expenses) Dodge & Cox Balanced (low expenses, team managed, so no big deal if one manager leaves) T. Rowe Price Capital Appreciation (top notch performance) Mairs & Power Balanced (close to top notch performance, low turnover, small asset base=flexible) Oakmark Equity & Income (low minimum, top notch performance)
This is not a comprehensive list by any means, but these are all top 10% performers over the long term with expenses ranging from below average to super low.
I'm just a beginner but through my job I have 50 percent s&p index 25 percent small cap 25 percent international. It's through mass mutual. It's in addition to the pension system that I am in.
100% equities can be tough sledding (especially if we have a period like we had at the end of 08-09)
I always advise people to err on the side of being conservative because if you bail because you don't know your risk tolerance, it could have devastating effects...
Unless you have hundreds of thousands, there is nothing wrong with a young person being 100% in equities. You just need to choose quality companies and be able to hold through crashes.
I Know I will probably get people that are going to give me the once over for what I am going to Say but oh well.
I have an investment opportunity for those who have $5 plus million to invest. This is an opportunity for people that have money to make more no investment to large. The program is no scam and is for the big boys to play. Investors of $5 million and even $500 million are already in the program. Making huge dividends.
Okay again start the nay saying or find out more info.
LOL. If you're going to try to scam people out of money on the internet you need to set the bar a whole lot lower than $5 million.
Unless you have hundreds of thousands, there is nothing wrong with a young person being 100% in equities. You just need to choose quality companies and be able to hold through crashes.
the only thing wrong would be if they bail and get scared every time there is a big drop.
to many youngins are in high equity positions but get scared out . i can't tell you how many in my own company were to aggressively invested for their tolerance ,got scared and never came back.
they lost soooooo much by being scared out of things.
as i say over and over age is not a criteria for allocations.
Unless you have hundreds of thousands, there is nothing wrong with a young person being 100% in equities. You just need to choose quality companies and be able to hold through crashes.
Of course there's nothing wrong w/being 100% in equities...
Until the person realizes that they can't tolerate the volatility that comes with it.
Its very easy for a young person to beat their chest and say they want to be 'all in' on equities until too much risk comes up and they bail.
Any seasoned investor will tell you that you have to go through periods like 08-09 to understand your true puker factor.
Of course there's nothing wrong w/being 100% in equities...
Until the person realizes that they can't tolerate the volatility that comes with it.
Its very easy for a young person to beat their chest and say they want to be 'all in' on equities until too much risk comes up and they bail.
Any seasoned investor will tell you that you have to go through periods like 08-09 to understand your true puker factor.
Exactly..
Although I'd probably recommend starting out with a 60/40 Stock/Bond combo to test the waters first before taking the plunge to 100% equities even if you honestly feel you can take the volatility.
Now What do you guys think of looking at your home as a 30 year bond? I've read a few books that's mention this.
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