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Enlighten Me On Investing

Iridemtb

Turbo Monkey
Feb 2, 2007
1,497
-1
Hey guys,
I have a few extra bucks saved up. I am 22. I am in college and am in zero debt currently as I am paying for school as I go. I am looking to put some money into investing. I have around $1,500 to work with. I was looking at buying some silver or potentially putting my money into an IRA or a mutual fund, or maybe a mix if I save more.

What are your thoughts, advice and wisdom to me?

Thanks Monkeys.
 

Iridemtb

Turbo Monkey
Feb 2, 2007
1,497
-1
I should note, I am avoiding buying stocks myself as the market is very unstable and questionable compared to ten years ago.
 
IRAs and mutual funds are now designed to siphon off the majority of any profits as fees, which eventually go into executive pockets.

If I had it to do over, land and buildings that you can afford to maintain don't lose over the long run. Downside is you wind up as a slumlord, don't know if you can stomach that.
 

stevew

resident influencer
Sep 21, 2001
40,494
9,525
everything I learned about investing I learned from william devane.
 

jimmydean

The Official Meat of Ridemonkey
Sep 10, 2001
40,939
13,133
Portland, OR
Buy as much beer as you can. Then when you are done drinking it, return the empties for the deposit. Win/Win.
 

djjohnr

Turbo Monkey
Apr 21, 2002
3,001
1,693
Northern California
Don't be afraid of stocks. If you have the time and inclination you can do it yourself with a solid value based approach. If not, look for an index fund as they generally carry lower fees (an S&P500 index fund is a good choice). There are funds out there with higher rates of return that warrant higher fees, however the better ones require a larger deposit then $1500.

A couple of really good books if you want to learn more: The Intelligent Investor by Benjamin Graham (this is basically the investment bible, and required reading at many business schools). One Up On Wall Street by Peter Lynch is very good introductory book that covers how to find potential investments TO BE RESEARCHED using your everyday experiences, and gives you a groundwork for how research (for example, you may see that your college is using a new system for online classes that you think is much better then Blackboard that the major investment houses haven't noticed yet, you can then go research that company too see if its worth putting your money in).
 
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eaterofdog

ass grabber
Sep 8, 2006
8,187
1,429
Central Florida
Investing is a complete and total crapshoot now. Stocks and bonds are a scam, gold and silver is for loons, bitcoins are for madmen. But if you keep it as cash, it will be inflated away to nothing.
 

stoney

Part of the unwashed, middle-American horde
Jul 26, 2006
21,516
7,064
Colorado
I have quite a few long financial diatribes on the forum. Feel free to start with reading those. Most of them are in PAWN, but some are in the Lounge.
On the basics, if you do not have at least 6 months worth of cash available on hand for emergencies, don't do anything but put that money into a high yield money market account. That money should be set aside for emergency savings, and only that.
 

Iridemtb

Turbo Monkey
Feb 2, 2007
1,497
-1
IRAs and mutual funds are now designed to siphon off the majority of any profits as fees, which eventually go into executive pockets.

If I had it to do over, land and buildings that you can afford to maintain don't lose over the long run. Downside is you wind up as a slumlord, don't know if you can stomach that.
I have a friend that told me (who is a very wealthy individual himself through investing and business), that mutual funds and IRA's may not be the smartest move for that very reason. That and bigger companies may change their contract agreements, and no body can really stop them from doing so since banks are in charge to a great extent. I have read that buying land and building is a good strategy, but it will be a while (5-8 years) till I am done school. At that point, I intend to live very cheaply so I can pay off student loans and build up my assets. I will most likely have a salary around 150-250k, so it may give me a little financial muscle to flex with. I appreciate it!

Don't be afraid of stocks. If you have the time and inclination you can do it yourself with a solid value based approach. If not, look for an index fund as they generally carry lower fees (an S&P500 index fund is a good choice). There are funds out there with higher rates of return that warrant higher fees, however the better ones require a larger deposit then $1500.

A couple of really good books if you want to learn more: The Intelligent Investor by Benjamin Graham (this is basically the investment bible, and required reading at many business schools). One Up On Wall Street by Peter Lynch is very good introductory book that covers how to find potential investments TO BE RESEARCHED using your everyday experiences, and gives you a groundwork for how research (for example, you may see that your college is using a new system for online classes that you think is much better then Blackboard that the major investment houses haven't noticed yet, you can then go research that company too see if its worth putting your money in).
Thank you! I have just finished a book called "Rich Dad Poor Dad". A lot of these basic principles my parents have taught me, but I learned a few things. I am now reading "Investing for Dummies" in what small amount of free time I have. I think I will get those books too. I think for now I will get look at index funds, but I am certainly willing to educate myself on the topic.

I have a friend around my parents age who does day trading for his living and does investment work. He basically told me that learning to invest is a rat's nest I should stay away from. What are your thoughts? In your opinion, why do you think he would say this, seeing this is how he makes his living and (from what I can tell) does well for himself? Thanks man!


I have quite a few long financial diatribes on the forum. Feel free to start with reading those. Most of them are in PAWN, but some are in the Lounge.
On the basics, if you do not have at least 6 months worth of cash available on hand for emergencies, don't do anything but put that money into a high yield money market account. That money should be set aside for emergency savings, and only that.
Thanks stoney. I looked in Political and World News. I did an advanced search on your posts. I found a lot of informative and insightful posts, but not too much in regards to investing specifically. Could you link me to a post or two you can remember or post something here or perhaps you could send me a PM? I am hungry to learn!
 
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dhmike

Turbo Monkey
Dec 20, 2006
4,304
43
Boise Idaho
Invest in hookers & blow you can't go wrong .I wish I did instead of investing in the stock market .
 
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djjohnr

Turbo Monkey
Apr 21, 2002
3,001
1,693
Northern California
Thank you! I have just finished a book called "Rich Dad Poor Dad". A lot of these basic principles my parents have taught me, but I learned a few things. I am now reading "Investing for Dummies" in what small amount of free time I have. I think I will get those books too. I think for now I will get look at index funds, but I am certainly willing to educate myself on the topic.

I have a friend around my parents age who does day trading for his living and does investment work. He basically told me that learning to invest is a rat's nest I should stay away from. What are your thoughts? In your opinion, why do you think he would say this, seeing this is how he makes his living and (from what I can tell) does well for himself? Thanks man!
Many people have read Rich Dad Poor Dad, it's definitely done a good job of getting people thinking about investing. Be aware though, that some his advice is dangerous, and in some cases flat out illegal. That book is best looked at as motivation.

What your friend is doing (daytrading) is called speculative investing. It's a total crapshoot, and I highly advise you stay away from it. With speculative investing, you are trying to make gains off of short term market performance. You are basically betting what market sentiment will be on something. To say that's risky is an understatement. It's attractive to many people because you can make a lot of money quickly, but you can also loose a lot quickly.

Value investing is where you look for securities that are undervalued. You purchase those securities and hold on to them until they are overvalued. You determine what securities to purchase by doing research (if you manage your own portfolio DO YOUR OWN RESEARCH). Rather then betting on the short term fluctuations of the market (which are largely based on psychology), you are betting on the long term correction of prices in the market and the upside value of a security.

I'd recommend Peter Lynch's book as a next step. His writing style is very approachable. After that look into Graham.

Whatever you do, STAY AWAY FROM SHORTING SECURITIES. If you don't know what that is, here's a description of what happens: You think a security is going to go DOWN in price. Let's say it's priced at $10. You then borrow 100 shares from an owner, and sell them at $10 a share. Then the price drops to $7.50 and you buy 100 shares. You return those hundred shares to the original owner and have just made $250. However, if the stock goes up you are still responsible for returning the 100 shares whenever the owner calls them in. So, if the price goes up to $100, you now owe $10,000. The key thing to point out here, is with a regular investment, the most you can loose is what you put in. When shorting stocks, the sky is the limit on what you can loose.
 

jimmydean

The Official Meat of Ridemonkey
Sep 10, 2001
40,939
13,133
Portland, OR
Invest in hookers & blow you can't go wrong .I wish I did instead of investing in the stock market .
My 401k is now all in hookers and blow with a little set aside for black tar heroin just in case I get took by the hookers.
 

kazlx

Patches O'Houlihan
Aug 7, 2006
6,985
1,957
Tustin, CA
Watch Breaking Bad until the scene with the stack of cash in the storage yard. Do that. Then stop.


OTOH, you really can't go wrong with large caps over the looooong term. Pretty sure you could buy Disney or Coca Cola stock and make money leaving it in there for 30 years...
 
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djjohnr

Turbo Monkey
Apr 21, 2002
3,001
1,693
Northern California
I have a friend that told me (who is a very wealthy individual himself through investing and business), that mutual funds and IRA's may not be the smartest move for that very reason. That and bigger companies may change their contract agreements, and no body can really stop them from doing so since banks are in charge to a great extent. I have read that buying land and building is a good strategy, but it will be a while (5-8 years) till I am done school. At that point, I intend to live very cheaply so I can pay off student loans and build up my assets. I will most likely have a salary around 150-250k, so it may give me a little financial muscle to flex with. I appreciate it!
There are significant advantages to retirement accounts that you should think about before making any decisions. For one thing, retirement accounts are generally protected from bankruptcy, so if life goes sideways on you (major medical issues, etc) you'll always have it.

If your employer offers any kind of 401k matching TAKE IT. It's FREE money (well, not totally free as maybe you can get a salary somewhere else that's higher then your current salary + 401k matching combined). Additionally there are tax benefits to be considered.

Two common retirement vehicles currently are the traditional 401k and Roth 401k. With a traditional 401k you pay no tax on the contributions, instead you pay taxes on the distribution of your contribution + earnings. With a Roth 401k you pay taxes on your contributions, however you pay no taxes at the time of distribution, including NO TAX on the EARNINGS.

As far as fees, just keep them in mind when researching funds. As I said above, you can find index funds that have low fees, and you can also find high performing funds that are worth the fees (great money managers expect to get paid).
 

stoney

Part of the unwashed, middle-American horde
Jul 26, 2006
21,516
7,064
Colorado
***I AM NOT GIVING FINANCIAL ADVICE! THE INFORMATION I AM PROVIDING CAN EASILY BE FOUND ON THE INTERNET BY SEARCHING. I HAVE ONLY CONSOLIDATED.***

I am limited as to what I can say because I don't want to put my licenses at risk.

I'm not going to repeat a lot of what I have already posted, but this was my major diatribe:
http://www.ridemonkey.com/forums/f2/ive-4k-kick-around-investment-options-199479/

On day trading:
http://www.ridemonkey.com/forums/f2/day-trading-chimps-243776/

More random stuff:
http://www.ridemonkey.com/forums/f2/i-have-conversation-least-30-times-per-day-257744/

Like I said before, if you don't have 6 months worth of expenses set aside, put the funds into a high yield mmkt and call it a day. Sometimes having cash when you need it is far more important than any immediate gains you might make. For context, there are quite a few positions that I would like to invest more into. I have the cash to do it, but I don't. I keep 6 months worth of cash in liquid assets (ie cash and equivalents).

Plus having cash on hand for an better opportunity does make sense. I tend to keep ~15% of my investment funds (taxable brokerage, IRA, and Roth IRA) in cash. You never know when you might have a great investment opportunity come up, and you need cash for it. Mind $1500 isn't much, but having cash is key sometimes.

As for the comments regarding mutual funds being designed solely to milk fees... Yes, you pay fees. That the nature of having a service done for you. The dig thing to look at is fees vs. returns. Returns have fees factored into the already. The return is the key number to look at. If you are going into funds, make sure that you have the same management team who got the returns historically. After Peter Lynch left the Magellan Fund, the returns went down. He was the key behind that fund.

If you don't want to get into a fund, know that you are putting all of your assets into a single stock. That's pretty much your only option. $1500 at best 3-ways is $500/stock. After trade costs, you have to make a reasonably large return to make money.

I am serious about the 6 months savings thing though. Don't be ansy and overly excited to get your money spent. And getting invested is just that. You might not have the liquidity (sitting on a loss) when you need it.

Invest for the 30 years. Look at boring stocks. The ones that don't do anything but slowly but surely go up and have great dividends. Reinvest your dividends and enjoy. For context, when Warren Buffet purchased Coca-Cola shares in 199?, his initial investment was around $50mm. With dividends reinvested, he is making that much annually.

Read these books, in this order:
1. The Little Book of Value Investing, by Christopher H. Browne and Roger Lowenstein
2. Chapters 8 and 20 of The Intelligent Investor, by Benjamin Graham
3. The Most Important Thing, by Howard Marks
4. The Little Book That Still Beats The Market, by Joel Greenblatt
5. Security Analysis, by Benjamin Graham *this is serious business*
 

stoney

Part of the unwashed, middle-American horde
Jul 26, 2006
21,516
7,064
Colorado
IRAs and mutual funds are now designed to siphon off the majority of any profits as fees, which eventually go into executive pockets.

If I had it to do over, land and buildings that you can afford to maintain don't lose over the long run. Downside is you wind up as a slumlord, don't know if you can stomach that.
He has $1500 bucks. What you are telling him has no value unless he has min $10k to invest in properties.

As for the IRA's milking fees, know what you say before you say it. IRA's are a type of account, nothing more. They are tax advantaged accounts that allow you to grow funds with no tax liabilities (traditional IRA) until you retire and access the money then. You might be older than dirt, but that does not necessarily mean your knowledge is always correct.
 

stoney

Part of the unwashed, middle-American horde
Jul 26, 2006
21,516
7,064
Colorado
Investing is a complete and total crapshoot now. Stocks and bonds are a scam, gold and silver is for loons, bitcoins are for madmen. But if you keep it as cash, it will be inflated away to nothing.
Where the f* are you getting this from? A bond is a piece of debt. You are loaning somebody your money for a known interest rate and 100% of your capital at the end of the contract (duration). As long as you aren't stupid enough to sell when the value goes down, it shouldn't matter; you are still getting you initial capital back once the duration ends. As for stocks, they are ownership claims to a company. If you choose to invest in a solid company with a good balance sheet and solid history (MSFT, PG, KO, WMT, etc), you should be just fine. Again, invest for the long term, not the quick profit.

Just from your comments here and other threads, I'm going to assume you are the guy who sells once your investments are down, and buy in once things look "safe". That is probably why you feel you have been fleeced in your investments. I have had positive returns for the last 8 years, including through 2008. How you invest makes the biggest difference.

The only thing that you said here that is correct, is that if you hold cash, you have inflation risk. But when cash is held as reasonable amounts vs. overall assets, that is a risk you take and account for in your investments. Assume that the value of that cash is going down ~2%/year due to inflation. That means that when you factor returns, account that cash as a 2% loss on the year. Simple math to figure that calculation out.
 

stoney

Part of the unwashed, middle-American horde
Jul 26, 2006
21,516
7,064
Colorado
There are significant advantages to retirement accounts that you should think about before making any decisions. For one thing, retirement accounts are generally protected from bankruptcy, so if life goes sideways on you (major medical issues, etc) you'll always have it.
IRA's are not protected, only 401k plans. That is a VERY important difference.

If your employer offers any kind of 401k matching TAKE IT. It's FREE money (well, not totally free as maybe you can get a salary somewhere else that's higher then your current salary + 401k matching combined). Additionally there are tax benefits to be considered.
This.

Two common retirement vehicles currently are the traditional 401k and Roth 401k. With a traditional 401k you pay no tax on the contributions, instead you pay taxes on the distribution of your contribution + earnings. With a Roth 401k you pay taxes on your contributions, however you pay no taxes at the time of distribution, including NO TAX on the EARNINGS.

As far as fees, just keep them in mind when researching funds. As I said above, you can find index funds that have low fees, and you can also find high performing funds that are worth the fees (great money managers expect to get paid).
This guy is right on a lot here.
 

jdcamb

Tool Time!
Feb 17, 2002
19,799
8,383
Nowhere Man!
Didn't work well for Dirk. Just saying...
However if you are in a Biker Gang or the Mafia. Hookers and Blow are quite lucrative. For those on the ground floor the Medical Marijuana Business is insanely lucrative in Michigan and Colorado.
 

Nick

My name is Nick
Sep 21, 2001
23,927
14,442
where the trails are
Didn't work well for Dirk. Just saying...


To what Stoney said, boring companies who pay dividends regularly are what you should look at. There is a reason financial advisors are well paid, so don't think you can master this in your spare time, nor think about getting rich overnight. I can actually see a copy of "The Little Book of Value Investing" from where I'm sitting now.

Advice? You may be ahead of the game by being young and thinking about this stuff. Keep your debt low through school. If you finish school and can realistically pull in low six figures and aren't carrying a ton of debt and interest, you'll have plenty of time and resources to learn how to invest and reach your goals.
 
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djjohnr

Turbo Monkey
Apr 21, 2002
3,001
1,693
Northern California
On the basics, if you do not have at least 6 months worth of cash available on hand for emergencies, don't do anything but put that money into a high yield money market account. That money should be set aside for emergency savings, and only that.
Word. Build up a liquid emergency fund first and foremost.

Also, don't talk about how much money you make or think you'll make. It's impolite, and when done online could be outright dangerous.
 

valve bouncer

Master Dildoist
Feb 11, 2002
7,843
114
Japan
I'll take this one for you SS........For christ's sake you're 22, travel, see the world, have fun. There's plenty of time for "responsibilities" when you're old.
 

JohnE

filthy rascist
May 13, 2005
13,430
1,949
Front Range, dude...
No sh!t...have some fun for cryin out loud. For the rest of us old geezers...


Stoney, what do you think of the Motley Fool guys and their advice? I have a colleague who loves them...
 

stoney

Part of the unwashed, middle-American horde
Jul 26, 2006
21,516
7,064
Colorado
No sh!t...have some fun for cryin out loud. For the rest of us old geezers...


Stoney, what do you think of the Motley Fool guys and their advice? I have a colleague who loves them...
It's free advice without a published track record. I pay a pretty penny for the research I use, and it's worth every penny. I don't really trust or put any confidence in free research. You never know what kind of secondary incentives the publisher might have.
 

Iridemtb

Turbo Monkey
Feb 2, 2007
1,497
-1
Word. Build up a liquid emergency fund first and foremost.

Also, don't talk about how much money you make or think you'll make. It's impolite, and when done online could be outright dangerous.
I'll take this one for you SS........For christ's sake you're 22, travel, see the world, have fun. There's plenty of time for "responsibilities" when you're old.
I will take that to heart djjohnr. Thanks for the advice, I don't want to look like a fool. I didn't think about it that way.

valve bouncer, I hear entirely too many people say... "Money doesn't matter, have fun in life while your young, enjoy your youth!" But then they complain that they have to go to a job they hate every monday, to make enough money so they can just scrape by paying their bills. Then they complain about their boss who either worked harder and smarter than them in the business world or are more highly educated; all the while if they had worked harder/smarter and potentially become more educated, they could be in their bosses position. There certainly are exceptions to this, and I know I am naive at my age, but I continuously see this pattern growing up in the blue collar area I live in.

I want to be able to love my job (even if I work some crazy hours some months out of the year), show people love and care through my job (no homo), and if I want to go on a nice vacation with my family, or own a nice car, I want to be able to do that without any debt, and without worrying about just making it to pay bills. However, I am willing to live within my means and invest/save/budget accordingly to achieve this.

Some people have fun and indulge and travel now, maybe I can do that later if I invest time now and grind away at some educational and financial goals. I must say, while school isn't always fun by any means, I do try to enjoy the learning experience and journey.

I just think, how cool would it be to work a set 40-60 hours a week to a job I love, own my house in full, own my car in full (and a few cool bikes), own some property and/or a small business on the side and be able to provide for my family and do things I love by the time I am 40-45 years old. By then, I bet the average male life expectancy will be up in the 80's as opposed to 76 now, which would leave over half of my life left. Maybe it is just a dream and things will get too terrible, but I'd love to see it happen.

Stoney, I'm going to send over a PM within the next few days. Thanks for your input!
 
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dan-o

Turbo Monkey
Jun 30, 2004
6,499
2,805
Iride, just to tap into the advice from VB, you can't always guarantee life will be there in the future.
Having watched literally dozens of people I care about get their lives cut short for various reasons, I decided early on to travel/live extensively when younger and rejected the traditional path.
I was fortunate enough to do this on the bike industry's dime and saw/visited/rode all over the world.

I'm financially secure, own my own biz (and about to start another) and have a couple kids now.
Despite having more 'means' than ever to travel, I now lack the time as school/sports/and my and my wifes career all dictate our schedule.

I'm not saying to go on Juggaloo Tour and give up on life, but use your youth to bang chicks, travel and make the kind of rash decisions you won't have time to make up for later in life.
Having nearly been killed several times in the last 5 years, I don't regret my lack of a bucket list one bit.
If you have a work ethic finances always work themselves out.
 

djjohnr

Turbo Monkey
Apr 21, 2002
3,001
1,693
Northern California
On the flip side I've seen people hit the retirement age who are basically f**ked because they either didn't plan appropriately or their plans fell apart (which also really means they didn't plan appropriately).

Definitely travel and be selfish with your time while you're young, it becomes much more difficult once you have a family. However, doing that doesn't need to be pricey. Throwing your bike on the car and heading out with a tent can be just as fulfilling and much cheaper then an extravagant trans-continental adventure.
 
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SkaredShtles

Michael Bolton
Sep 21, 2003
65,376
12,532
In a van.... down by the river
Iride, just to tap into the advice from VB, you can't always guarantee life will be there in the future.
Important bit.
Having watched literally dozens of people I care about get their lives cut short for various reasons, I decided early on to travel/live extensively when younger and rejected the traditional path.
More good stuff.

I'm not saying to go on Juggaloo Tour and give up on life, but use your youth to bang chicks, travel and make the kind of rash decisions you won't have time to make up for later in life.
Having nearly been killed several times in the last 5 years, I don't regret my lack of a bucket list one bit.
If you have a work ethic finances always work themselves out.
This.

Seriously - do $hit when you're young. You only get that part once.