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There are so many variables to the investing equation. Issues such as market volatility, future trends and fads, all change daily. But Time remains more of a constant. An investor knows the time frame by which he or she desires to achieve payoff.
I bring this up to ask you, the investor, what would you do right now, if you had a few hundred dollars a month to invest, and you had 50 years before you planned to use your dividends?
I am teaching my son about investing. He has a custodial account, as well as a handful of bonds, CDs a savings account. All will become his property at age 21, with my daily advice to roll it into an IRA when he starts working. But consider if he learns to invest now, anywhere from $100 to $300 a month (depending on how much extra I have to give him), where would YOU put that money ?
I have suggested a few things. He is still learning about mutual funds, And some sectors are performing poorly now, meaning that the shares can be had for cheap. Sectors like Real Estate, for example, can be bought at bargain basement prices, especially using dollar cost averaging monthly, and I think in 50 years it will build up value. Others such as finances and healthcare are performing well (he has some in there already) But like gold investments, may be overvalued for now.
Certificates of deposit are a joke right now. He has one, and says "that's it?" Of course I remember the CDs during the Carter/Reagan administration, which were a great investment for anyone who was lucky enough to have a job at the time and buy one. And some day, they will again, although it may be 40 years from now.
Time remains the one constant in the investing game, (along with the amount of money on hand)
What would you do if you had 50 years to work with?
If you know what you are doing, something aggressive growth.
If you don't know what you are doing and you don't to spend too much time learning about or attending to investing, then some sort of index fund, S&P500 for example.
I am teaching my son about investing. He has a custodial account, as well as a handful of bonds, CDs a savings account. All will become his property at age 21, with my daily advice to roll it into an IRA when he starts working.
Normally the context of "roll it" is moving money from a tax deferred 401(k) to an traditional IRA.
Learn and understand as much as you can about the U.S. stock markets.
How much time (and money?) should a person spend learning (or actively investing)?
An hour a week? How much will you learn?
Twenty hours a week? What is your time worth? For example, If 20 hours a week only yields you an extra $50 a week, it might not be worth it.
Personally, I don't spend too much time investing. If I earn a percent or two less a year by staying hands off, it's worth it to me for the time I have to do other things.
I would just start socking it away as soon as you can. The more time it compounds the better. Basic index funds (stocks, dividend, even mid cap growth) can do wonders with consistant investment and time (and are very low cost). Having a stable well diversified base can be wonderful for peace of mind. Dividend stocks would be a great investment in this type of account since they are normally tax inefficent.
Most mutual funds have high costs and have a hard time beating the general market. Learn more about what the funds performance has been, and what the fees are, before really diving into them. I was looking into some international growth funds, and while the 5 year performance was slightly better than the index funds...the fee difference was astonishing (.14% for the index, and 3% for the international). Plus you pay that no matter how they perform.
How much time (and money?) should a person spend learning (or actively investing)?
An hour a week? How much will you learn?
Twenty hours a week? What is your time worth? For example, If 20 hours a week only yields you an extra $50 a week, it might not be worth it.
That all depends on what you want to get out of it. I recommend for someone starting out to spend 1-2 hours every day learning and understanding how stocks work.
The more you learn, the more successful you will be in the long run.
I would study the investing greats, because their principles are timeless. I.e. a Warren Buffett or Ben Graham.
-I would understand the Federal Reserve. "The Creature from Jekyll Island" is a spectacular book. It explains much of 20th century economic history, the formation of the Federal Reserve, etc. Another good book is "Currency Wars" by Jim Rickards. Anyone that puts anything in a bank should understand those books.
If you have a long term time horizon, understand how the ground can shift under investors.
I would start with US stocks, then broaden my horizons. Other asset classes can do well for a long time.
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