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There is more out there than just stocks but since your question mentions stocks explicitly, here is a practical suggestion: Pick an index fund. Boom, you're d

by HSO 16y ago

There is more out there than just stocks but since your question mentions stocks explicitly, here is a practical suggestion: Pick an index fund. Boom, you're diversified. Now, keep an eye on developments, read newspapers (I recommend FT, NYT, and Economist), something will start to tickle your fancy. When you feel like something looks interesting or resonates with you or your background, dig into it. Allocate, if you can, at least 2 full days, for example a weekend. Do on-the-side reading beforehand, gathering all sorts of material (reports, statements, articles, interviews, customer opinions, etc.), just read superficially, the goal is to get an idea and to narrow the sources down so you can do your final research in the 2 pre-allocated days. When after a while, your interest is still there or better yet growing as you find out more, and only then, pull the trigger and invest those 2 days. If you can't stomach the risk at the end of them, forget about the opportunity. If you feel good about it, pull the trigger again and take a position. Start with a small position, shifting some of your index fund into the stock. Maintain and see how it feels to have the position "on". If it feels good, take more (long _or_ short). If it feels wrong, get out, whether you're ahead or behind. Forget all about diversification too. Your goal is to iterate this until you have a portfolio of perhaps 4, 5, 6 positions. You are substituting "diversification" (you can't be better diversified than a broad index fund) with knowledge or insight or whatever you call it. Just my 2 cents (har har, I know... ;)

DeusExMachina 16y ago
There is more out there than just stocks I mentioned stocks because they are the only investment I was able to find that gives a decent return against inflation and is possible to do without huge amounts of money (like real estate). But if you would like to elaborate, I am interested.
- deleted 16y ago
  [deleted]
- slpsys 16y ago
  Options, warrants, futures, currencies, bonds, ETFs, et al. Check out: http://en.m.wikipedia.org/wiki/Financial_instrument http://en.m.wikipedia.org/wiki/Financial_instrument, but obviously, these are often or the more advanced (with the exception of ETFs, which are traded as stocks, or bonds).
cynicalkane 16y ago
It's worth pointing out that index funds can be overvalued and undervalued. For example, the S&P, up until recently, had been overvalued for a long time. The advantage, though, is that whereas it takes days to figure out whether a stock is overvalued, it takes minutes to do the same for a broad-market stock index. Just look at price:long term earnings ratio. In general, under 15 is a probable buy, over 20 means sell if there are better priced assets out there. And don't put all your eggs in one asset class.
yummyfajitas 16y ago
Don't pick an index fund, pick an ETF which tracks an index. The tax savings are considerable and they usually have lower fees.
- cynicalkane 16y ago
  Depends on the index fund and depends on the tax situation. Some index funds are extremely low-cost.
  - mcknz 16y ago
    One good thing about actively managed mutual funds (as opposed to index funds) is you get the experience of the money manager working in your favor. The majority of actively managed funds fail to beat the market, but if you do your research and find experienced managers who have been at their funds for a long time, an actively managed fund can be a good part of your portfolio. Index funds should probably be the bulk of anyone's retirement portfolio. Fidelity (for example) has a total market fund that's 0.07% expense and no transaction fees (min 10K investment) -- hard to beat even with an ETF. Read, read, read. Picking individual stocks is very hard -- stick to funds and ETFs.
    - count 16y ago
      Having an active money manager working on your behalf costs money that could otherwise be sunk into growth capital in an ETF tracking an index. See Burton Malkiel "A Random Walk Down Wallstreet" for a very detailed and full explanation.
      - mcknz 16y ago
        Sure, it costs money, but it also costs money to be in an index fund that falls 40-50%. No-load, low-expense index funds are extremely useful but not foolproof. Something to be said for cash right about now as well....
        16y ago

by HSO 16y ago

DeusExMachina 16y ago

There is more out there than just stocks I mentioned stocks because they are the only investment I was able to find that gives a decent return against inflation and is possible to do without huge amounts of money (like real estate). But if you would like to elaborate, I am interested.

deleted 16y ago
[deleted]
slpsys 16y ago
Options, warrants, futures, currencies, bonds, ETFs, et al. Check out: http://en.m.wikipedia.org/wiki/Financial_instrument http://en.m.wikipedia.org/wiki/Financial_instrument, but obviously, these are often or the more advanced (with the exception of ETFs, which are traded as stocks, or bonds).

cynicalkane 16y ago

It's worth pointing out that index funds can be overvalued and undervalued. For example, the S&P, up until recently, had been overvalued for a long time. The advantage, though, is that whereas it takes days to figure out whether a stock is overvalued, it takes minutes to do the same for a broad-market stock index. Just look at price:long term earnings ratio. In general, under 15 is a probable buy, over 20 means sell if there are better priced assets out there. And don't put all your eggs in one asset class.

yummyfajitas 16y ago

Don't pick an index fund, pick an ETF which tracks an index. The tax savings are considerable and they usually have lower fees.

cynicalkane 16y ago
Depends on the index fund and depends on the tax situation. Some index funds are extremely low-cost.
- mcknz 16y ago
  One good thing about actively managed mutual funds (as opposed to index funds) is you get the experience of the money manager working in your favor. The majority of actively managed funds fail to beat the market, but if you do your research and find experienced managers who have been at their funds for a long time, an actively managed fund can be a good part of your portfolio. Index funds should probably be the bulk of anyone's retirement portfolio. Fidelity (for example) has a total market fund that's 0.07% expense and no transaction fees (min 10K investment) -- hard to beat even with an ETF. Read, read, read. Picking individual stocks is very hard -- stick to funds and ETFs.
  - count 16y ago
    Having an active money manager working on your behalf costs money that could otherwise be sunk into growth capital in an ETF tracking an index. See Burton Malkiel "A Random Walk Down Wallstreet" for a very detailed and full explanation.
    - mcknz 16y ago
      Sure, it costs money, but it also costs money to be in an index fund that falls 40-50%. No-load, low-expense index funds are extremely useful but not foolproof. Something to be said for cash right about now as well....
      - 16y ago