I have looked for this question and cant seem to find a good answer. I am trying to set a plan in place for which to divide a portfolio when I begin investing. I have been researching trading in the market for quite a while and recently got a very rude answer from some 'hot shot"; so plz no criticizm. Everyone has to start somewhere..
I read somewhere a percent to which follow as a rule of thumb but this can be evaluated and calculated by the type of investor.
I'm thinking something like 10-20% in mutual funds then 70-80% in stock. I also wish to divide my plays of stock in percent such as mabe (im not sure) large percent into long investments, 1mo+(was what I had in mind) and much smaller percent for "short" investments. My idea is a little hard to explain on here..
Does this make sense to you? I'd appreciate any help from experience investors. FYI my start capital is 10K
TY This is all good advice. I'm taking notes! Thanks!!! Standard investment advice is that you should invest in a diversified mix of stocks, bonds, and money market funds.
You want to buy a diversified portfolio of stocks as individual stocks are too risky. Most folks have a dificult time buying a properly balanced portfoilio of stocks on their own. They will misbalance their portfolio by buying all small stocks or all growth stocks, or some other misbalanced assortment of stocks. Unless you know what you are doing, it is best to buy mutual funds. I like Vanguard.com, other people like Fidelity, TIAA-CREF, and DFA. Buy no-load, low cost funds. If you are like most people you will invest part of your money aggressively in stock funds, and part conservatively in money market funds and bond funds. Vanguard has an on-line questionnaire which will give you an idea of how to do "Asset Allocation," determining how much to put in each type of fund.
If your company offers a 401K plan at work, try to invest the most you can. The money grows tax free, and some companies will match your contribution. Investing in a mutual fund IRA is also a good idea. If you have children, you may want to consider a 529 plan or other college savings plan that grows tax free.
I like index funds. Because of their broad diversification, you are less likely to have a dramatic drop in value. They also have the lowest expenses. For stock funds, I would suggest putting ~70-80% of your money in the Vanguard Total Stock Market Index Fund. and ~20-30% in a foreign stock index fund. However, there are many different opinions out there on what the best mutual funds are. Read the links below and form your own opinion.
If you have high-interest debt, like credit cards, it is best to pay this off first before trying most of the investment ideas above. You should also have 3-6 months of salary saved up as an emergency fund in a bank or money market fund before trying more risky investments.
Believing advice you get on Yahoo answers can be risky, so read these websites for further information. If you find it too confusing, contact a professional financial advisor. They will charge you significant commissions, however.
Sources:
http://www.vanguard.com/VGApp/hnw/planni...
http://www.fool.com/school.htm
http://sec.gov/investor/pubs/assetalloca...
http://www.diehards.org/readsites.htm
http://finance.yahoo.com/education/begin...
http://finance.yahoo.com/funds/basics
Asset Allocation Calculators
(Determining how much to put in stocks and how much into bonds and money markets is a personal decision depending on your financial status. These Asset Allocation questionaires give you a rough idea how to do this. I like Vanguard best, but try some of the other sites as well.)
https://personal.vanguard.com/VGApp/hnw/...
https://ais2.tiaa-cref.org/cgi-bin/WebOb...
http://www.ifa.com/SurveyNET/index.aspx
Web forum: http://www.diehards.org/
(Many investment web forums are overrun by scam artists. This one seems the most legitimate site.)
529 plans: http://www.savingforcollege.com You make a lot of sense. Keep studying but be aware that there are no exact answers. A lot depends on your age, your long-term goals, your capital, your degree of risk aversion, and other factors. Diversification is the key. What you describe is good thinking, but it has to fit with your circumstances, which you don't provide. As you study investing, you will arrive at good solutions to the problem of diversification and they will change as situations change. There are no precise answers. Good luck. Sounds like you have yourself very together! If I were you, I would put half of my money in something safe, for example like on emigrant direct or amboy direct. They have savings accounts around 4.5%.
The rest of the money, I would open up a scottrade account and invest it in the market. I would diversify my investment. For example, buy something like Nike, Proctor and Gamble, Exxon, Microsoft, etc. and perhaps one risky stock. (THese are just examples of diversification) You have to do your homework.
I suggest you start watching cnbc at night. Jim Crammer from Mad money is a good place to start. He has written some really good books.
Instead of the mutual fund, check into a ROTH ira. They are one of the best investments going. You can always take out the principle at no charge. Not the interest. Just in case you ever need money.
Best of luck.
Remember, do your homework, research and then you will be fine. I wish you well. If your idea of a long term investment is one month you are headed for oblivion. Investing is a means towards an end. It is not a hobby or an end in itself. Focus on a future goal like retirement or a trip around the world and use investing as a way to get you there. Please send me an email and lets chat. Others reading this may email me as well. Are you going to be investing this money it a tax sheltered account, like a 401K or an IRA of any sort? Or will it be just a taxable account?
Either way, I'd recommend investing for the long term and not trying to buy and sell different stocks or funds on a weekly or monthly basis.
If you are younger and can handle a little bit more risk, then there's no need to put too much of your money, or any, into bonds. You can have a completely diversified portfolio with ETFs, which are genergally cheaper than mutual funds. I would put maybe 40% or so in VTI, which is the Vanguard ETF for the total US stock market, then maybe 25% in a foriegn ETF, and maybe about 10% into an emerging markets ETF like VWO or EEM. The rest I'd put in specialized ETFs that you think will give you a higher return, like an alt. energy ETF (GEX, QCLN)or water infrastructure ETF (PHO I think). Also you should own some commidites, like GLD, SLV, DBO, and even DBA. I don't think you can be properly diversified without commidities, and I'm going to start adding a few of those ETFs in my Roth IRA in the comming year.
good luck! http://www.diehards.org/forum/index.php
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