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I am kind of stunned that someone would suggest a total beginner research and pick their own stocks. It may have worked for bmw but he is by far the exception, unless you agree that a total beginner can outperform trained, seasoned, professionals. That's nonsense.
My suggestion is do what the vast majority of individual investors do, invest in mutual funds which are a collection of individual stock and/ or bonds etc. It reduces the risk as you are not tied to the performance of 3-4 stocks which can drop substantially at any moment.
As mentioned at your age you want to be in stocks as long as you do not need the money anytime soon. Over time stocks will outperform every other form of investing by a huge margin. You can either do some research, Morningstar has a good way of rating funds, or go to a pro. Of course by going to an investment advisor you will pay a small fee every month for that service and that will whittle away at your returns.
I helped a lot of my friends get started with investing. A young person such as the OP in my opinion is better off researching and buying individual stocks. He/she will learn faster that way and can make much higher returns. Someone who is young is able to take on more risk and challenge themselves. Think of it like this, you can either open your own business and put your money at risk, but your potential gains could be substantial and success primarily is connected to you or you could be an entry level employee and make a little money with less risk. Mutual funds are still no safe haven, just ask the people in late 2008 / early 2009. I would rather hand pick the stocks I own rather than own a bunch of things I couldn't even tell you what they were. I personally would put half your money into something like SPY (I'm not sure what the Australian equivalent would be) and then invest the remaining half in individual stocks. The Australian stock market is less volatile, at least it was when I lived there 10-12 or so years ago .
I helped a lot of my friends get started with investing. A young person such as the OP in my opinion is better off researching and buying individual stocks. He/she will learn faster that way and can make much higher returns. Someone who is young is able to take on more risk and challenge themselves. Think of it like this, you can either open your own business and put your money at risk, but your potential gains could be substantial and success primarily is connected to you or you could be an entry level employee and make a little money with less risk. Mutual funds are still no safe haven, just ask the people in late 2008 / early 2009. I would rather hand pick the stocks I own rather than own a bunch of things I couldn't even tell you what they were. I personally would put half your money into something like SPY (I'm not sure what the Australian equivalent would be) and then invest the remaining half in individual stocks. The Australian stock market is less volatile, at least it was when I lived there 10-12 or so years ago .
Do you really believe that if this thread was started in January 2008 the OP would not have gotten destroyed like everyone else had she made educated individual stock investments? Come on now, that was the bear market of a lifetime. The masses lost their asses and few were immune regardless of how they were invested. You can't use that market to claim that mutual funds are not a good way for an individual to invest because those invested in individual stocks got punked in '08 too. As for your analogy putting your money in the bank at 1% is the low risk/low return "entry level" position Investing in funds is not that at all. There is still plenty of money to be made in the stock market with less risk by investing in funds.
It comes down to this: does Pamela really think she will know more than professional money managers by reading a few books. Again that's just not realistic IMO. I know I don't pretend to know more than they do and I've been investing for 30 years.
Last edited by DaveinMtAiry; 08-15-2014 at 03:11 PM..
Do you really believe that if this thread was started in 2007 the OP would not have gotten her ass kicked in 2008 like everyone else? Come on now, that was the bear of a lifetime and nobody was immune. You can't use that to market to claim that mutual funds are not a good way for an individual to invest
It comes down to this: does Pamela really think she will know more than professional money managers by reading a few books. Again that's just not realistic IMO. I know I don't pretend to know more than they do and I've been investing for 30 years.
Where did I say mutual funds are a bad investment?
What I said is a mutual fund is NOT risk free. Too many newbies, including yourself because you created a thread asking for basic investment advice think, "oh I can put all my money into a mutual fund and there is no risk." That is a false belief because when the s*** hits the fan, everything goes down including mutual funds.
And of course I can use the stock market crash as proof of that because crashes happen and will continue to happen for as long as there is a stock market. If there were no stock market crashes, there would be virtually no risk investing in any profitable company. I rate risk in stocks by predicting how they would act during a stock market crash. For example, Disney is more likely to recover than Tesla. If there were no stock market crashes, then I would own 100% stocks like Tesla.
Once again, you seem to think mutual funds are risk free, well they aren't and I'd advise any person against putting their life savings all into a mutual fund.
Where did I say mutual funds are a bad investment?
What I said is a mutual fund is NOT risk free. Too many newbies, including yourself because you created a thread asking for basic investment advice think, "oh I can put all my money into a mutual fund and there is no risk." That is a false belief because when the s*** hits the fan, everything goes down including mutual funds.
And of course I can use the stock market crash as proof of that because crashes happen and will continue to happen for as long as there is a stock market. If there were no stock market crashes, there would be virtually no risk investing in any profitable company. I rate risk in stocks by predicting how they would act during a stock market crash. For example, Disney is more likely to recover than Tesla. If there were no stock market crashes, then I would own 100% stocks like Tesla.
Once again, you seem to think mutual funds are risk free, well they aren't and I'd advise any person against putting their life savings all into a mutual fund.
I'll turn it around. When did I say mutual funds are risk free?
Quote:
Originally Posted by DaveinMtAiry
invest in mutual funds which are a collection of individual stock and/ or bonds etc. It reduces the risk as you are not tied to the performance of 3-4 stocks which can drop substantially at any moment.
Quote:
Originally Posted by DaveinMtAiry
As for your analogy putting your money in the bank at 1% is the low risk/low return "entry level" position Investing in funds is not that at all. There is still plenty of money to be made in the stock market with less risk by investing in funds..
This entire disagreement has escalated because you did not bother to read my posts and totally missed my position, then followed it up with what appears to be a lecture and a shot at my knowledge. No that's not annoying at all. I never claimed that investing in the stock market through mutual funds is risk free or even low risk. I said it was less risky than picking individual stocks. Said it twice in fact yet for some reason you took that to me I said "risk free" which is hard to understand coming from someone with such investment knowledge.
I stand by that position. Learning to pick stocks may have worked out for you and your friends and that's impressive. However I would not recommend a novice try this strategy, the odds do not favor her outperforming professionals in my opinion.
Last edited by DaveinMtAiry; 08-16-2014 at 04:33 AM..
For beginners funds are the way to go for investing. You can buy a stock for speculation but it should be just for getting your feet wet while your funds do the heavy lifting.
Last edited by mathjak107; 08-16-2014 at 04:47 AM..
Funds are volatile but there is only market risk to deal with. Stocks can be more volatile and have greater risk since you are dealing with not only market risk but individual company risk and competitor risk since any competitor can have something on the drawing board that your stock never recovers from.
While you are in greater control with individual stocks bad decisions and choices in those stocks take on greater risk than the markets as a whole.
A young person such as the OP in my opinion is better off researching and buying individual stocks. He/she will learn faster that way and can make much higher returns.
OR he/she will have WORSE returns. You certainly can't assume that a novice (or even a non-novice, in many cases) picking individual stocks will outperform the market. I would say it would pretty much be a roll of the dice, and that's assuming he/she holds on for the long term and doesn't trade his/her way to under-performance.
The reality is, the majority of investors aren't going to be suited for investing in individual stocks--EVER--so to start out by investing in them is not the way to go for most people, IMO (unless it's with a small part of the overall portfolio).
And no, none of the above is to be taken as any kind of knock against investing/trading in individual stocks for those who are suited for it and knowledgeable enough to do so.
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