August 28, 2009 8:43 pm at 8:43 pm #590280
I thought I would start a thread for investment ideas, other than lottery tickets. Long-term, the market tends to go up 7% a year, although short-term fluctuations can make bonds a better buy in some periods. Plus, the market may do a “double-dip”. The Talmud says 1/3 business, 1/3 land, 1/3 cash. However, land back than was a solid investment, not the speculative venture it is today. A comparable investment today would be 1/3 stocks, 1/3 bonds, 1/3 liquid investments (although money market funds aren’t as safe as once assumed). Mutual funds have high fees and usually don’t beat the S&P500 long-term.
Open an online brokerage account (low fees) and DON’T PANIC no matter what. I have a coworker who liquidated his accounts in the end of February, which was the perfect contrarian buying signal. Store whatever money you will be needing short term (next 3-5 years) in a money market fund and various bank accounts. Take the rest and invest it as so. A sample portfolio:
20% of funds in SPY- s&p500. No need to attempt to pick stocks. Never sell.
20% in SDY- high-yield dividend stocks.
20% IWM- exposure to risky growth stocks.
20% AGG- bond fund. Safe.
20% JNK- slightly risky high-yield bond fund.August 30, 2009 2:24 am at 2:24 am #665341yitzy99Member
“Mutual funds have high fees and usually don’t beat the S&P500 long-term. “
An index fund with a low expense ratio, and there are several, will mirror the S&P 500.August 30, 2009 4:13 am at 4:13 am #665342
Joseph, if you are unfamiliar with even basic Sindarin then I am unable to help you.
Target date mutual funds suffer from the same problem as other actively managed mutual funds.
yitzy99, very true. The key is finding them. Vanguard has a few mutual funds with very low expense ratios (.3 percent I believe), while the typical mutual funds have expense ratios of 2% or so. This means that if the S&P goes up 8%, your Vanguard low-expense mutual fund goes up 7.7%, and your high expense ratio mutual fund, if it completely mirrored the S&P, goes up 6%. Furthermore, most mutual funds are actively managed, so they buy and sell a lot. This generates capital gains taxes which eat away at your gains. So you are paying taxes for the privilege of underperforming the S&P 500.S&P 500 index funds are passively managed. they only buy and sell when changes are made to the index. this reduces capital gains taxes. Furthermore, companies are usually removed from the S&P500 after severe underperformance. This creates losses which lower capital gains taxes.August 30, 2009 4:20 am at 4:20 am #665343
Yitzy, That was Jothar’s point. (A low expense S&P 500 ETF or index fund vs. a higher expense and not better performing mutual fund.)August 31, 2009 1:12 am at 1:12 am #665344
One idea I keep toying with and rejecting is buying a share in GAZ or UNG. Basically, these are stock-like creations (UNG is technically an etf, while GAZ is an etn) that are supposed to track the movement of natural gas. Natural gas is at a 7-year low, and is heading down while oil has been going up. With the stabilization of the economy, it’s just a question of time until it reverts to its usual price of 9 times cheaper than oil instead of 25 times cheaper.
There are 2 big problems:
1. Natural gas is still what they call a “falling knife”. Never try catching a falling knife, although I washed out a few losses doing just that in late February.
2. The etf’s and etn’s themselves are very flawed, and don’t track it so well when there is a lot of what’s known as Contango. Contango means the stocks lose money when they have to sell the current month’s futures contract and buy the next month’s. That said, when natural gas shows an upswing I will probably buy a small position of each, as there are very few truly undervalued stocks left.August 31, 2009 1:26 am at 1:26 am #665345
What do you think of GLD ?August 31, 2009 3:22 am at 3:22 am #665346
GLD- the devil’s etf. (not that I believe in devils chas veshalom- the satan is a malach of Hashem who is just doing his job -but that’s a discussion for another thread.) GLD is an etf (stock-like creation) where buying it is supposed to be the equivalent of buying gold, except you don’t have the really high storage fees of buying physical gold. Gold is a commodity, which is supposed to serve as a hedge against inflation. GLD is supposed to be the equivalent of gold. The problems:
1. Gold has underperformed silver and oil as hedges against inflation. It has also severely underperformed long-term as an asset class compared to stocks and bonds. It did well between 1999 and 2009, but otherwise it’s not so hot. Oil and silver are much more volatile than gold and are more sensitive to market movements and dollar weakening. Finally, the launch of etf’s mean that commodities are more closely correlated to stocks than they were historically. This means that you can’t count on commodities to zig if stocks are zagging. Diversification is not the same strategy it once was.
2. GLD itself is theoretically holding massive amounts of gold to correspond to its outstanding shares. The problem is that nobody ever verified that it is, in fact, holding the ginormous amount of gold that it is required to do. I heard one estimate that there are 3 paper ounces of gold per one genuine ounce of physical gold. GLD could implode even if gold stays high. There is a very low risk of that happening, but it is a risk.
I would recommend a small portion of your portfolio wide-range commodity etf like DBC. However, you do get nailed with short-term capital gains fees as it has to sell futures contracts regularly.August 31, 2009 3:32 am at 3:32 am #665347
There is SLV, if silver is your thing.
I believe the GLD vault is held at HSBC in London.November 3, 2009 12:24 am at 12:24 am #665348yswoMember
most of the advice here is good however first off i would recommend mutual funds over etfs. you should be dollar cost averaging and adding money to your account every month(or quarter). If you start young with 0 dollasrs and you put in even just 100 dollars a month in the s&p 500 you can literally have hundreds of thousands of dollars by the time you retire.
My recommended portfolio would be something like this(note this is meant for long term investors people far away from retirement and people who have high risk tolerance and im not just talking about people who can watch losing 50% of their money and not panicing i mean people who were buying stock during the tech crash and the most recent crash, if you sold then this advice is not for you)
for 99.99% of people including many “professional investors” you should be buying mostly mutual funds and not be investing in individual stocks.
I would structure my portgolio like this
1 80% stocks which have the best returns over long periods of time
2 10% bonds
3 10% reit
i would break down the stock structure into something like this
35& large cap value us
15% foreign large cap value
20% small cap value
10% foreign small cap value
10% emerging market( or even better if you can find it an emering market value fund)
I would put no money in growth funds since over time value has shown himself to far outperform growth. I would put a little money in the s&p for when growth has a crazy run like in the late 90s so you dont get frustrated and jump into growth stocks. small cap value have amazing long term returns and foreign small cap value have even better. thats why i would have them equal about 30% of my portfolio
i would mostly have long term bonds(however just a note right now with interest rates so low you will get killed when interest rates go up especially with long term treasuries yielding only around 4.6 %, so im not sure what % i would recommend for right now to invest in long term bonds) in general id put 65% in a long term bond fund, maybe you could also put afew percent in tips. Again however tips now have very low returns when tips were returning 3.5% plus cpi they were much more attractive.
20% foreign and emerging market bonds these provide some diversification in case intrest rates rise alot in us and us bonds go down alot in value
15% high yield bonds these historically have provided excellent returns(but are almost as volatile as stocks so be forewarned)
3 Reits have historic great returns and povide a good inflation hedge
i would not put money in gold historically it has basically returned nothing(inflation adjusted). Espcially after the huge run up in gold it is the worst time to buy( this in addition to being extremely volatile makes it a very unattractive investment)
if oyu want return from inflation REITs, tips and stocks(over long term) should provide more than enough protection
I would recommend putting as much money as possible in an IRA, dollar cost averaging, even if its only afew hundred dollars a year, and trying to invest even more when the market crashes.
I would recommend opening up a vanguard account or if oyu have alot of money i hear DFA is an excellent choice but i think the minimum is 250,000 to open an account. There is no reason you should pay high fees and especially for indexing it makes absolutely no sense. I owuld also recommend putting some of oyur money in active managed mutual funds only if oyu know what oyur doing. Even though dodge and cox is run by some of the best investors in the world it has so much money in assets it will be very hard for them to outperform the market. I would recommend sequia fund and royce funds for small cap funds. they have many many small cap funds and basically every single one of them has beaten their index the russell 2000 and russell 2000 value by a large margin for several decades. Note: i would look at their funds with not so much net assets. there are many other good funds out there i will tell anyone if they are interested.
one of the most important things about investing is read up a little if oyu read up about past crashes and how much the market went up afterwords, or how a huge bull run in the late 90s was bound to be followed by a huge crash you will have more confidence in your investments.
some good books i would recommend for starters(or even more experienced investors is )
10 contrarian investment strategies the next generation- dreman
john bogle on mutual funds- john bogle
the millionare next door Thomas J. Stanley and William D. Danko the book gewts very repatative the main thing is to get the general idea
the only investment guid youll ever need- andrew tobias
four pillars of investing william bernstein
intelligent investor benjamin graham(warren buffetts rebbe)
if i had to pick one and oyu are a new investor i would recommend four pillars of investing by william j bernstein
for more advanced investors i have more recommendations id be glad to tell you if oyu email me
the most important points for investing are stay patient and dont lose your nerve, figure out your risk tolerance, start investing young the younger you start the easier (far far easier) it is to retire comfortably this is the magic of compounding, put as much money as possible in your ira, and dollar cost average and invest additional amounts as much as possible even if it is just $50 at a time
EDITEDNovember 3, 2009 1:26 am at 1:26 am #665349yswoMember
if anyone wants more advice from me i think you can contact me through the moderator. id be happy to help youNovember 3, 2009 1:22 pm at 1:22 pm #665350A600KiloBearParticipant
There is a great investment vehicle called Unified Ponzi Fund (traded on OTC:BB as symbol DRK). Basically, this fund tracks Ponzi schemes which are still paying out and spreads your money among all of them so that you do not lose as long as you pull out at a profit. In addition, DRK, which is sold in units known as “shtiklach DRK” at licenced brokerages all along 13th Avenue that also sell esrogim in season, protects you from clawback should the scam be busted by the Feds because it is impossible to know who was invested where at what time.
The best broker for DRK right now is Gimpel’s Used and New Esrogim Sales on 13th Ave corner of Coney Island. He got burned with a shipment of big orange Yanover esrogim for October 31 that came without lulavim (broomsticks) so he needs all the commission he can get on his DRK issues.November 3, 2009 5:24 pm at 5:24 pm #665351PosterMember
I just read about another ponzi sceme.. you know what they see – if it seems to good to br true…it probably is!!!November 3, 2009 5:40 pm at 5:40 pm #665352A600KiloBearParticipant
All DRK ponzi schemes are certified by the Vaad haNarronim d’Kehilla Kedoishe Ponzi.
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