Which online broker should I use?

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bwolf4
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Which online broker should I use?

Post by bwolf4 » Fri Jul 06, 2007 7:46 pm

I am a 19 year old college student and am new to investing. I have a couple thousand dollars that I would like to invest, but initially I only want to be investing a couple hundred. I think I have narrowed it down to Sharebuilder or Firstrade, possibly Scottrade. I would prefer an account with no minimum and no account maintanence fees (inactivity fees, etc.). I would like to invest in a couple of stocks, like Coca-Cola, and possibly some ETFs, like PBW, and mutual funds, like GAAEX. I don't anticipate doing a huge amount of trading, at least at this point. Does anybody have any suggestions from the three I listed? Is there another I should be considering for my situation? Thanks for the help!

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Blackhawkzone
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Post by Blackhawkzone » Fri Jul 06, 2007 8:14 pm

tradeking is a good online discount broker.

if you only plan on investing a small amount, i strongly suggest one etf, like a total market or s&p 500 etf.

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jeff mc
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Post by jeff mc » Fri Jul 06, 2007 8:14 pm

for someone starting out, i know it's hard to do, but choose 'boring'. meaning... avoid individual stocks (coke, etc) and stick w/ ETFs. you don't have enough funds yet to be fully diversified (need about 20+ stocks to create a diverse portfolio).

or, better yet, scare up enough to get into a lifecycle fund (target retirement 2045!). however, being so young, don't invest any money in equities unless you don't plan on touching it for 10+ years. do you have a future car to buy? house downpayment? education? wedding? maybe you should be looking at an even more boring money market or CD instead of looking at equity ETFs or individual stocks.

however, props for finding and posting on this board at 19... i'm sure all the graybacks around here are envious... if only they knew then what you know now...
Last edited by jeff mc on Fri Jul 06, 2007 8:15 pm, edited 1 time in total.

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NAVigator
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Post by NAVigator » Fri Jul 06, 2007 8:15 pm

Welcome to the forum and to investing as well. I understand your desire to start investing. It may seem like a new and exciting adventure. With all due respect, starting 'investing' with a couple hundred dollars is not going to be beneficial. I would like to make a recommendation for you to start investing; put your money into an online savings account like Emigrant Direct, currently earning around 5%. This is saving and not investing. I would like to suggest that you invest some time and energy in reading and learning. The most important aspect of investing is understanding what you are doing. It is far better to learn prior to handing your money to someone else than it is after. I certainly wouldn't start with a recommendation from a stranger on the internet, even here.

There are many fine books to start with here.

Best wishes,
Jerry
"I was born with nothing and I have most of it left."

bwolf4
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Post by bwolf4 » Fri Jul 06, 2007 8:34 pm

I appreciate the advice you guys have provided thus far. I understand NAVigator's regarding savings but I would really like to actually invest in something. I have done some research regarding ETFs and would like to possibly invest in some that deal with alternative energy sources. If need be, I am willing to invest about $1000 total to start with. Is this totally unfeasible? Should I heed NAVigator's advice and just forget about all this investing nonsense? Or should I go for it and actually buy some shares of some stocks and ETFs? Again, thanks for the advice![/u]

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Blackhawkzone
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Post by Blackhawkzone » Fri Jul 06, 2007 8:38 pm

why alternative energy sources?

a lot of them have been crap (solar power, ethenol, etc)

bwolf4
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Post by bwolf4 » Fri Jul 06, 2007 8:42 pm

I'll keep that in mind. Again, any advice would be great. Mainly I am trying to examine whether I should be throwing my hat into the investment ring and which broker I should go with. Would it be better to meet with an actual person rather than going it alone online? If so, which firm should I look to meet with? Personally, I would prefer to do it online. Thanks for the help!

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charles87530
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I like...

Post by charles87530 » Fri Jul 06, 2007 9:14 pm

I have a small amount that I invested with Scotttrade. This is just a "play" account if you will...some individual stocks I was wanting to buy. The commissions are $7 and their site is easy to navigate. Just keep in mind that low commissions usually equal low interest that your cash balances are paying. This is a big reason they have such low trade fees. Personally, I would get in a total mkt. fund or a Tgt. retirement like 2045 before i got into individual equities.

stebul
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Post by stebul » Fri Jul 06, 2007 9:16 pm

Stay away from the brick and mortar broker (eg Merrill Lynch). To be honest, they probably would not want to talk with someone with just a couple hundred dollars. If I was in your situation I would consider using Zecco which does not charge commissions for trades. Tradeking also seems to be popular.

You've been given two very good options: online savings account and a broad indexed ETF like the S&P 500 (ticker: SPY) or Total Stock Market (ticker: VTI).

If you think there is a chance you will need the money for tuition, car expenses, or summer travel I'd definitely go with the savings account.

Oh, and congratulations on thinking about savings and investing when you are 19.
Last edited by stebul on Fri Jul 06, 2007 9:17 pm, edited 1 time in total.

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White Coat Investor
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Post by White Coat Investor » Fri Jul 06, 2007 9:17 pm

What are you investing for? Next year's tuition? A car? A first house? Retirement? A child's college tuition? If you do not decide on this step it is difficult to move on to the next one.

At this stage it honestly doesn't matter much what you invest in. Your return won't have much effect in the long run. What should matter to you most now is how much you can sock away this year (your savings percentage.) You'll get more bang for your buck by coming up with an extra $200 to invest than you will by eeking out an extra 2% on your investment by taking uber-risk.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

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United
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Post by United » Fri Jul 06, 2007 10:50 pm

If you choose Scottrade, as I did, PM me for a referral. It will net us each 3 free trades.

Grt2bOutdoors
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Re: Which online broker should I use?

Post by Grt2bOutdoors » Fri Jul 06, 2007 11:01 pm

bwolf4 wrote:I am a 19 year old college student and am new to investing. I have a couple thousand dollars that I would like to invest, but initially I only want to be investing a couple hundred. I think I have narrowed it down to Sharebuilder or Firstrade, possibly Scottrade. I would prefer an account with no minimum and no account maintanence fees (inactivity fees, etc.). I would like to invest in a couple of stocks, like Coca-Cola, and possibly some ETFs, like PBW, and mutual funds, like GAAEX. I don't anticipate doing a huge amount of trading, at least at this point. Does anybody have any suggestions from the three I listed? Is there another I should be considering for my situation? Thanks for the help!



I would suggest you read books by William Bernstein "Four Pillars of Investing", Larry Swedroe "The Only Investment Guide You'll Ever Need", Rick Ferri "All About Indexing" or Charlie Ellis "Winning the Losers Game".
After you've read a couple of those books, then think about your goals.


Do you want to invest or speculate?
Assuming you want to go the route of investing in one or two individual companies, you mention KO specifically, are you able to understand financial statements, will you do the research necessary to defend the case to buy or sell? It's okay to buy individual stocks if you are willing to do this, just to get your feet wet. If not, then you are speculating!
Think about all those individuals who thought Enron was the way to go.

Easiest way would be to buy a broad-based ETF covering Total Stock Market Index - highly diversified, although covers domestic market only.
Another option might be the Vanguard Star fund, $1000 minimum.

Good Luck!

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RiskAverse
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Post by RiskAverse » Sat Jul 07, 2007 1:23 am

bwolf4 wrote:I appreciate the advice you guys have provided thus far. I understand NAVigator's regarding savings but I would really like to actually invest in something. I have done some research regarding ETFs and would like to possibly invest in some that deal with alternative energy sources. If need be, I am willing to invest about $1000 total to start with. Is this totally unfeasible? Should I heed NAVigator's advice and just forget about all this investing nonsense? Or should I go for it and actually buy some shares of some stocks and ETFs? Again, thanks for the advice![/u]


Alternative energy is a big bubble, there are plenty of clean energy etfs. If you want to buy $1000 worth of PBW or GEX go for it. Scottrade is cheap, and they have lots of real word branches.

grok87
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Sharebuilder?

Post by grok87 » Sat Jul 07, 2007 7:39 am

Given the size of your funds you might want to consider sharebuilder. You can do it directly or through Costco.

http://content.sharebuilder.com/mgdcon/ ... /standard/

good luck!

cheers
grok

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DaveTH
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Post by DaveTH » Sat Jul 07, 2007 8:10 am

Given the size of your funds you might want to consider sharebuilder. You can do it directly or through Costco.

You can also access ShareBuilder thru Walmart.com

http://www.walmart.com/catalog/catalog.gsp?cat=592357

bwolf4
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Post by bwolf4 » Sat Jul 07, 2007 1:59 pm

As far as Sharebuilder, they do charge a monthly subscription fee. Is that a good way to go for a guy like me looking to invest in a select amount of stocks and ETFs and letting them sit. I don't plan on doing a tremendous amount of trading. I just want to initially invest a couple hundred dollars and let them hang out until I do further research and feel comfortable investing higher amounts of money. Thanks!

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DaveTH
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Post by DaveTH » Sat Jul 07, 2007 2:09 pm

bwolf4 wrote:As far as Sharebuilder, they do charge a monthly subscription fee. Is that a good way to go for a guy like me looking to invest in a select amount of stocks and ETFs and letting them sit. I don't plan on doing a tremendous amount of trading. I just want to initially invest a couple hundred dollars and let them hang out until I do further research and feel comfortable investing higher amounts of money. Thanks!

There is no subcription fee for the Sharebuilder basic service plan. However, It will cost $4 per automatic investment.

As others have pointed out, it really is not worth paying $7 (Firstrade, Scottrade) or more for a $200 transaction. Why not wait until you have a few thousand to invest?

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runthetrails
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Sharebuilder

Post by runthetrails » Sat Jul 07, 2007 2:22 pm

If you do choose Sharebuilder, I would only consider their Basic plan, which does not have a subscription fee. Sharebuilder can be okay if you're making infrequent purchases and plan on a buy-and-hold strategy. I wouldn't make multiple monthly purchases (DCA) as fees (subscription or commission) will eat you alive at the level of investment that you're considering. Their fees are $4.95 to buy (assumes you're willing to wait until the following Tuesday to buy) and $15.95 to sell. Realtime trades are $15.95.

I'm assuming we're talking about taxable investing -- if this is an IRA, Sharebuilder has a $25 maintenance fee as well.

Make sure you check out Zecco and TradeKing before choosing Sharebuilder.

bwolf4
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Post by bwolf4 » Sat Jul 07, 2007 2:23 pm

OK, here's what I think I'm going to do. Let me know if this seems at all sensible. I am going to open an account on Sharebuilder. I am going to buy a couple of shares of COKE because it has always seemed to be a wise long-term investment. I am also going to look into buying a couple hundred dollars worth of some ETFs. The pros of this plan are that I will only be risking a couple hundred dollars total ($500 tops) and it will be a great learning experience for my investment future. If I lose the money, I lose the money. It happens, but at least I will have learned something. If I see a gain on my investment, I will have learned something then as well. I am also going to do some research on online savings accounts and CDs. Does anybody have any tips regarding these types of things? Someone earlier mentioned Emigrant. Is ING another possiblity? What about some good CDs that I could put a couple hundred dollars in? Thanks for the help!

stebul
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Post by stebul » Sat Jul 07, 2007 2:26 pm

Folks, I was about 13 when my Dad opened a brokerage account at Merrill Lynch and gave me a few hundred dollars to buy Warner Communications stock (which owned Atari at the time). The purpose wasn't to make a killing, it was to learn about how the stock market works. My grandfather did the same for my father in the 1950s.

Its fine for a 19 year old to put a few hundred bucks into the stock market so he learns for himself the ups (and downs) of a free market economy. Online accounts and free trades at Zecco or $5 trades at Tradeking make this pretty easy.

bwolf4
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Post by bwolf4 » Sat Jul 07, 2007 2:32 pm

WOW! Zecco seems like a tremendous deal! Free trades? That's awesome. No minimums, no inactivity fees. So what's the catch? Are there any real downsides to using Zecco? Has anybody encountered problems? If not, I am definitely going with Zecco because it seems almost too good to be true. Thanks!

stebul
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Post by stebul » Sat Jul 07, 2007 2:57 pm

No catch at Zecco, except you get some advertisements on your web page (not that you don't get those at other brokers sites -- there are lots of Vanguard ads on the Vanguard website). Zecco doesn't have any bells and whistles like some of us have gotten used to. But for you, I think its a great option until you are ready to open an IRA -- then come back to Vanguard.

I would recommend that you NOT sign up for a margin account (which lets you use your stocks as collateral to borrow money for buying more stocks). I have met multiple people who lost hundreds of thousands or even a million dollars during the .com bubble using margin accounts. Learning about the stock market is one thing, but working your way into debt through speculative margin trading is another!

I would also be very careful about what you read on the Zecco bulletin boards. Free trades attract a big community of rampant speculators. I think you'll find more millionaires on this board than on the Zecco boards, though. Come here for investment advice, then go to Zecco to trade.

livesoft
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Post by livesoft » Sat Jul 07, 2007 4:22 pm

sharebuilder is expensive, but does have the advantage that one can buy fractional shares. That way, if you only have $98.12, you can invest at least $94.12 in a stock or ETF and pay the $4 commssion. You do not need to leave any cash in the account earning little or no interest. You can even reinvest dividends and get another 0.281 shares. The problem arises when you want to get out or transfer to a real broker. Then the $16 fee to sell each position can be a killer.

I do not believe that zecco allows one to buy fractional shares. I do not know what it pays for a cash sweep.

IMHO, with less than $50,000 you might as well invest in mutual funds directly from the fund vendor. You will pay no commissions from places like Vanguard, TRowePrice and TIAA-CREF and get a whole host of advantages. If you don't believe me, take your money and divide into two even starting piles. Use one pile at zecco or sharebuilder and the other pile with a mutual fund company. Keep us informed about which pile gets bigger.

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RiskAverse
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Post by RiskAverse » Sat Jul 07, 2007 4:58 pm

bwolf4 wrote:OK, here's what I think I'm going to do. Let me know if this seems at all sensible. I am going to open an account on Sharebuilder. I am going to buy a couple of shares of COKE because it has always seemed to be a wise long-term investment. I am also going to look into buying a couple hundred dollars worth of some ETFs. The pros of this plan are that I will only be risking a couple hundred dollars total ($500 tops) and it will be a great learning experience for my investment future. If I lose the money, I lose the money. It happens, but at least I will have learned something. If I see a gain on my investment, I will have learned something then as well. I am also going to do some research on online savings accounts and CDs. Does anybody have any tips regarding these types of things? Someone earlier mentioned Emigrant. Is ING another possiblity? What about some good CDs that I could put a couple hundred dollars in? Thanks for the help!


Sharebuilder is lame, open up a real account at scottrade. If you want to buy KO, go for it. Free beverages at the

Our mission is to create value for you, our shareowners, over the long term. We are pleased to have you as a shareowner and grateful for the confidence you have demonstrated by entrusting us with your investment.

The Coca-Cola Company has paid dividends consecutively every year since 1920. That is a source of pride for us. Dividends are paid quarterly, usually on or about the first day of April, July and October, and on December 15.


With such small sums, I wouldn't worry too much about costs for trading. I think the benefits of all the local branches make SC the place to go.

Some stocks you might like (Being 100% stereotypical about teenagers)

ANF -- Abercrombie & Fitch
URBN -- Urban Outfitters
AEO -- American Eagle
LTD -- Victoria's Secret.
IFF -- Int Flavors & Fragrances

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CyberBob
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Post by CyberBob » Sat Jul 07, 2007 5:01 pm

livesoft wrote:IMHO, with less than $50,000 you might as well invest in mutual funds directly from the fund vendor.

I second that. With only a few hundred to invest, even small brokerage commissions are going to kill you. And brokerages are always looking for ways to nickel and dime you to death.
If you're seriously looking to invest, just buy Taylor's 4-Fund Portfolio directly from Vanguard - no fees involved.
If you're looking for thrills, hold back some money and go to Vegas.
Actually, start out with a fairly sizable Money Market fund before moving on to more long-term investments. As a college student, you may find you need some of that money sooner than you would have thought.

Bob

Gregory
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play money

Post by Gregory » Sat Jul 07, 2007 5:17 pm

This is the kid's play money. He doesn't have an IPS. He talks about opening CD's , investing in KO (a great company, I own the stock individually as well), ETF's -- you can't do all those things with a couple of thousand bucks. He'll play, he'll learn. (It's this kind of investor that keeps the markets efficient, right :wink: )
Pecuniae imperare oportet, non servire. | Fortuna vitrea est; tum cum splendit frangitur. -Syrus

mwgr5
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Post by mwgr5 » Sat Jul 07, 2007 6:15 pm

Has anyone here actually used Zecco? I am thinking of opening an online brokerage account to buy an ETF.

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Bounca
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Post by Bounca » Sat Jul 07, 2007 6:33 pm

bwolf4 wrote:If I lose the money, I lose the money. It happens, but at least I will have learned something. If I see a gain on my investment, I will have learned something then as well.


You need to learn and invest with virtual play money. You're not nearly ready. Set up a mock portfolio at anyone of Smartmoney, Moneycentral, Morningstar, etc. ..and see how you do. Or in the least do it in conjunction with your real $$$. I do the same, i'm always learning. But dont dive headfirst in a 2ft pool, unless you cannonball :wink:

http://moneycentral.msn.com/investor/home.asp

jhl
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Post by jhl » Sat Jul 07, 2007 6:40 pm

Having been in your position, I strongly recommend saving up a bit and investing directly in a fund. Take a look at Vanguard's Star fund, it has the lowest minimum investment of $1,000, and you'll be immediately invested in a bunch of stock & bond funds, most of which have a good track record. If you can bring that minimum up to $3,000, consider the target retirement funds. Speaking of which, Vanguard should consider lowering the minimum investments on these to $1,000, it's a hindrance to young investors.

I started out in a similar position... after first getting ripped off by a Bank of America load fund broker, began investing in individual stocks and etfs at sharebuilder. I eventually discovered this forum, and although it took a while, gradually came to the realization that I had no idea what I was doing and it was counter-productive. I moved everything over to Star initially, over time branched out to other funds, and have never regretted it.

If you really feel the need to go the sharebuilder/zecco route, invest in broad market etfs rather than stocks.

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LH
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Post by LH » Sat Jul 07, 2007 6:49 pm

NAVigator wrote: With all due respect, starting 'investing' with a couple hundred dollars is not going to be beneficial.


For what its worth, I disagree with that strongly : )

Unless you have something to save for near term, starting saving now long term is highly beneficial, as you will have more doubling periods, ie more chance to take advantage of compound interest.

I agree with what he said after the quote and such, very good advice.

In parting: rule of 72. Take whatever interest rate you think stocks will get long term, and divide it into 72, this will give you the number of years it will take to double your money. If you think its a little over 10 percent, which is a pretty good historical average, then roughly, your money will double every seven years.

So at 19 years old, invested until say age 69, you will have 7 doubling periods.
2 4 8 16 32 64 128

So any money invested now, you may reasonably expect to get 128 times that in the future. Now if you wait just 7 more years until you start, you will only get 64 times your money, which is a huge, huge, huge, difference.

Invest now my friend, invest long term : )

bwolf4
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Post by bwolf4 » Sat Jul 07, 2007 6:57 pm

Hey LH, thanks for the advice!

As far as the Vanguard STAR Fund, is VGSTX on the Vanguard site the one you guys are talking about?

Would putting $1000 into this fund be a good starting point? Has anybody else gone this route? Have you seen a solid return on your investment? What kind of return could I expect?

Thanks!

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DaveTH
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Post by DaveTH » Sat Jul 07, 2007 7:02 pm

bwolf4
wrote:
Would putting $1000 into this fund be a good starting point? Has anybody else gone this route? Have you seen a solid return on your investment? What kind of return could I expect?

I wouldn't hold this fund in a taxable account since it not tax efficient. It is however a good fund for a Roth IRA.

bwolf4
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Post by bwolf4 » Sat Jul 07, 2007 7:06 pm

If Vanguard isn't the way to go, is there another fund out there that will be better for my $1000 investment? Someone earlier mentioned Emigrant Direct. Is that a good a idea? Are there any other funds out there that people have had good experiences with?

Thanks!

I am beginning to love this forum!

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DaveTH
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Post by DaveTH » Sat Jul 07, 2007 7:25 pm

I think the first step is to determine the goal of the investment. Are you planning to use the money for college, a house, a car, retirement?

When will you need the money? 1 year, 5 years, 10+ years?
Do you already have an emergency reserve?
Do you have credit card and other debts paid off?
Are you contributing to a company 401K?

bwolf4
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Post by bwolf4 » Sat Jul 07, 2007 7:57 pm

I don't have any specific plans for the money. I just feel like I am missing out by having it sit in a savings account. I want my money to "work for me" as the cliche goes and am looking for the best way to go about doing that. I don't really know when I'll need the money. I just want to have my money be doing something for me. I don't have any credit cards and don't have any debts. My current college expenses are being taken care of by a college account my family set up for me many years ago, so presently I have no debts as far as school is concerned. I am not contributing to a 401(k) at this time. I simply have about $4000 in the bank and would like to start investing some of it in something, whether it be stocks, ETFs, mutual funds, etc.

Thanks!

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jeff mc
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Post by jeff mc » Sat Jul 07, 2007 8:13 pm

bwolf4 wrote:I simply have about $4000 in the bank and would like to start investing some of it in something, whether it be stocks, ETFs, mutual funds, etc.

Thanks!


red. invest it all on red. catch a flight to vegas w/ $500 of it. put the remaining $3500 on red. can't miss. it'll be exciting. you'll get comped a (young)adult beverage of your choosing. (go for red bull). you'll learn something from the experience if you win. or lose.

you've received pretty good advice from ~15 folks here, but your proposed actions don't seem to have wavered your original post. so why bother posting here? just put it all in KO or some penny stocks. live your life.

bwolf4
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Post by bwolf4 » Sat Jul 07, 2007 8:18 pm

I disagree with the assertion that I have not wavered from my original post. If my current funds are insufficient to start buying stocks and ETFs, then I am totally open to looking into solid mutual funds, bonds, or CDs. I am just accumulating as much advice as I can to make an informed decision. I have been reading various books, such as The Four Pillars, The Only Guide to a Winning Investment Strategy You'll Ever Need, The Intelligent Investor, Warren Buffet's biography, and want to have enough info to make the best, informed decision about how to make money off of my money.

Thanks!

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White Coat Investor
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Post by White Coat Investor » Sat Jul 07, 2007 8:35 pm

bwolf4 wrote:I don't have any specific plans for the money.


Then it doesn't much matter what you do with it. PM me for my address and you can send the check.

:D

Seriously though, without at least some sort of goal, investing is merely entertainment. If nothing else, I'm sure you'd like to retire someday. Why don't you decide when you'd like that to be, open a Roth IRA with Vanguard, and buy the target retirement fund appropriate for your selected retirement date?
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

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DaveTH
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Post by DaveTH » Sat Jul 07, 2007 8:41 pm

The problem is that there is an infinite number of investment choices when you don't have a specific purpose for the money or a plan. The only practical way to get the list down to a reasonable number is to have a specific purpose, time frame and plan. With over 9,000 mutual funds , 500 ETFs and 10,000+ stocks you are likely to get endless conflicting recommendations. I'm not sure what your expectations were when you decided to come to this forum with a vague request on how best to invest $4000. That is just not specific enough to get meaningful responses.

bwolf4
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Post by bwolf4 » Sat Jul 07, 2007 10:42 pm

Ok, it has become clear that I need an explicit goal. My end goal for this investment endeavor is to have money at hand when I graduate from college and am fully on my own. That should be within the next 4 years or so, maybe a couple more if I decide to go to graduate school. If I were to invest $1000 so that it accumulates in that amount of time so that I have a good return on that investment when I go into the job market, what would be my best choice? I'm looking at around 5 years down the road.

Thanks!

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Abciximab
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Post by Abciximab » Sat Jul 07, 2007 10:56 pm

I started an account at Vanguard at 17 by sheer luck. I wanted to go into the medical field and invested in Vanguard's Health Care Fund for only that reason. Since then I've purchased individual stocks, funds at Oakmark and Dodge & Cox, and had savings/CDs at ING Direct. Sure, I've stumbled a little, and I probably didn't make as much money as I could've, but I learned a lot.

You won't be able to build a perfect portfolio with $4,000, but you have to start somewhere. I'd recommend the Vanguard STAR Fund because it's only $1,000 to get started and you get instant diversification (11 funds). Sure it's not terribly tax efficient, but I'm sure you're in a low tax bracket anyway. Later on when you build up some money in the fund, you can sell it and move the money to another fund.

My biggest piece of advice is to read The Bogleheads Guide to Investing. This is the most comprehensive and easiest to read of any investment book I've ever read. It'll teach you almost everything you need to know. Stick with books, avoid the magazines.

If you want to invest in Coke, buy some KO shares. It'll be good for you.
An investment in knowledge always pays the best interest - Benjamin Franklin

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Abciximab
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Post by Abciximab » Sat Jul 07, 2007 11:02 pm

If your time period is about 5 years from now, you really shouldn't be in the stock market. If you want the money that soon it should be in savings or CDs.

Why not take some money to invest (realizing you might have less 5 years from now), and put the rest in savings?

If you have a job, have you thought about opening an IRA?
An investment in knowledge always pays the best interest - Benjamin Franklin

bwolf4
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Post by bwolf4 » Sat Jul 07, 2007 11:41 pm

If I took $1000, put it into the Vanguard STAR Fund, and let it sit for five years, what sort of return could I expect? Would this be a smart investment? The STAR Fund seems to be popular, at least among the people on this site.

Thanks!

livesoft
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Post by livesoft » Sat Jul 07, 2007 11:46 pm

At the end of 5 years, I would think you would have anywhere between $800 and $1800, but it's just my guess.

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Abciximab
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Post by Abciximab » Sun Jul 08, 2007 12:10 am

The STAR Fund is a "fund of funds". That means that it's made up of other mutual funds. Go to the Vanguard website and check it out. It's a balanced fund that has large-cap, small-cap, international, and bond holdings. It will pretty much go as the stock market goes. I think livesoft's possible end value is a good guess.
An investment in knowledge always pays the best interest - Benjamin Franklin

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RiskAverse
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Post by RiskAverse » Sun Jul 08, 2007 9:27 am

bwolf4 wrote:Ok, it has become clear that I need an explicit goal. My end goal for this investment endeavor is to have money at hand when I graduate from college and am fully on my own. That should be within the next 4 years or so, maybe a couple more if I decide to go to graduate school. If I were to invest $1000 so that it accumulates in that amount of time so that I have a good return on that investment when I go into the job market, what would be my best choice? I'm looking at around 5 years down the road.

Thanks!


Probably an Online savings account from HSBCDirect etc or some kind of bank CD. Any other option puts your principal at risk, such that you could have less than $1000, in five years.

Generally, the threshhold for making useful investments in mutual funds etc is around $3000 or so. The VG STAR fund is fairly unique in having only a $1000 minimum. That fund is a "Fund of Funds" which invests in other VG Funds accoding to a "moderate" investment policy.

For less than $3000, it may make sense to "roll your own" fund by buying ETFs in a SC account. Eg. you could buy $1500 worth of BND (VG's bond ETF) and $750 Each of VTI and VEU.

----
The whole "make my money work for me" merits further exploration. How exactly would your money "work for you"? How would you know if it was working or not?

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United
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Post by United » Sun Jul 08, 2007 2:57 pm

There seems to be a lot of conflicting advice in this thread.

1) Some people say 4 years is too short of a time horizon to be investing in stocks. If you can accept the possibility of loss (which it seems you can), then investing in the stock market is fine.

2) Some have also said that commissions will eat you alive. However, at places like Zecco (or even SogoInvest, FirsTrade, or Scottrade, to name a few), commissions are very low. You can buy and sell ETFs or stocks very inexpensively these days. If you do choose to go the brokerage route, try to make as few trades as possible so as not to pay unnecessary commissions.

As far as the Vanguard STAR Fund, is VGSTX on the Vanguard site the one you guys are talking about?

Would putting $1000 into this fund be a good starting point? Has anybody else gone this route? Have you seen a solid return on your investment? What kind of return could I expect?


This would a great way to start.

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