@Tarantado wrote:
@Jill_L wrote:
@shoptastic @Tarantado,
I would love to get into stocks. I feel like I'm behind the 8 ball with no experience. Is there anything you would suggest in order to "break in?"
Stick with indexing. Index funds are "passively managed" funds that are a collection of auto selected stocks of a variety of stocks and relies on the market, as opposed to "actively managed" funds aka mutual funds that relies on a human to stock pick for you.... Which has been proven that more than 90% have NOT beaten the market (after accounting for fees, gains/losses and inflation). In other words, you have a good gamble in dumping your money into the market to watch your money grow. My personal advice is to automatically set aside a fixed amount every paycheck, week or month, something, to dedicated to your investments.
Stock-picking should be left for another day or left out altogether, unless you're the gambling type, which I am from time to time.
1.) I agree with, Tarantado, Jill on investing in an index fund - specifically a S&P 500 one, as Warren Buffett recommends to his wife and to lay investors:
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www.cnbc.com]
He says to do it consistently - whether monthly, bi-monthly, tri-monthly, quarterly, bi-annually, etc. I would think at least twice a year is needed, as a minimum, to capture market gains. Once a year just sounds too little, but that is probably subjective on my part. I don't have proof of that.
On average, the U.S. stock market has returned 10% annualized throughout history. Jurrien Timmer of Fidelity Investments (largest online brokerage) gives that figure. Buying a broad U.S. index fund, such as the S&P 500 or as Niner recommends, a "total stock market" fund, would capture that gain.
2.) I also agree with Tarantado to avoid single stock picking when first starting out in investing (really, I would only do this if you've spent time learning how to value businesses and reading up on investing a lot). And, I agree to avoid actively managed mutual funds when first starting (or, perhaps, altogether - heck, if Warren Buffett is okay with his wife having 90% of all her investments into an S&P 500 index fund, then probably so should most people). The fees and commissions eat into your profits much more than with low-cost index funds and that is not even taking into account that most active money managers cannot even beat the S&P 500. So, why pay these people?
3.) If you're just following Warren Buffett's advice and buying an S&P 500 index fund several times a year, then you don't probably won't need any of those "wealth advisor" brokerages. I would just use a large, well-known, and low-cost online brokerage, such as Fidelity, Vanguard, etc.
Many have gone to free trading now. Although, I still pay for my trades (i.e., buying and selling stocks/funds) and am sort of lazy to switch brokerages - it's a bunch of paper work. I don't mind paying a few dollars for a trade.
Make sure, however, your internet security is good with an online brokerage. You don't want to get hacked!
My parents used to use a "wealth advisor" brokerage service with Morgan Stanley. They will either charge 1% of your assets annually or charge a ridiculous trading fee. In return, you do get their advisor services and people may call you from the firm with stock recommendations. To me, it's not worth it. 1% is easily the difference between a few hundred thousand dollars if just investing $100-$200/month over 40 years. There is no guarantee these special services and stock recommendations turn out well. I'd rather just stick with the safe and easy Warren Buffett recommended S&P 500 index fund via a cheap, big (Fidelity is the largest) online brokerage.
There may be smaller online brokerages that offer competitive fees, but I personally would not use them. I want to use the largest (or one of the larger ones) for "safety" reasons. Big names like Fidelity have e-fraud protection (although, you have to do your part as well and use anti-virus and check your monthly statements for unusual activity and report it back quickly). If anything happens and it's not your fault, they will refund you your stolen gains. I'm not sure the smaller brokerages have that e-theft protection.
If you want to be extra careful, you can even use an online brokerage, but only place trades by phone through that online brokerage. It sounds weird, but you can do that. Trades by phone cost more than online trades, though.
SUMMARY: So, once you're ready to do the above, it's easy. Just a touch of the keyboard. No physical labor needed.
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4.)*** DISCLAIMER: I'm personally not buying U.S. broad index funds right now. Even though this is prudent advice from Warren Buffett for long-term investors, I think the U.S. is hyper-valued and there are many technical reasons why the stock market has gone up so much the past few months that have nothing to do with company valuations, nor the economy.
a.) There is extra liquidity in the financial system, due to the Federal Reserve pumping newly printed money (essentially QE - quantitative easing - even though they refuse to call it that) into markets to quell the bank "repo" issue that cropped up a few months ago. That money finds its way into the stock market.
b.) Year-end "chasing" by money managers who have lagged their benchmarks. This is a huge criticism of actively managed funds sometimes. Their portfolio managers can be fired if they have a couple of years of bad performance and their bonuses are tied to how well they match or beat their benchmarks. If a PM is behind near the end of the year, he or she is often incentivized to take your hard-earned money and "gamble" it up to try to eke out some more gains.
I've actually sold more funds/stocks this year than I've bought. Just keeping lots of cash in my brokerage money market account for better opportunities. I don't want to "chase" all-time, overvalued highs.
Edited 1 time(s). Last edit at 11/22/2019 08:01AM by shoptastic.