individual stocks Or mutual funds [Spain]

For residents of Spain.
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amin
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Joined: Thu Nov 22, 2012 9:28 am

individual stocks Or mutual funds [Spain]

Post by amin »

Hi folks,

I hit this site accidentally when looking for some entries about an online broker. By the way, i want to thank you all for this usefull space...
Well i'am a newbie and looking forward to invest or trade (cant make the difference at this moment), this is my first time and i'm willing to start with $1000 i dont know much about markets and financials but i have been reading a lot about it last year, at first i thought it's better to buy individual stocks then changed my mind and thought about mutual funds, im a bit confused what should i do? i'm starting and actually i just want to test the waters but at the same time i dont want to lose easily my 1000$.

Some facts: I live outside usa (bank account outside usa), but i want to invest in usa markets (at least that's what i was recomended).

Thank you in advance for your help.

Amin
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nisiprius
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Re: individual stocks Or mutual funds

Post by nisiprius »

amin wrote:i'm starting and actually i just want to test the waters but at the same time i dont want to lose easily my 1000$
Use mutual funds. Maybe ETFs, which are a kind of mutual fund that is traded just like an individual stock.

Do NOT use individual stocks. All stock investing has an element of gambling, but picking individual stocks adds extra gambling to the intrinsic risk of the market. Big wins are possible; big losses are possible. Since you do not sound like a gambler, you do not want to do this.

Decide what broad category of stock you want to invest in--for example, since all you have said is that it was recommended that you invest "in USA markets," very likely you want to invest in the whole, entire USA stock market. Find a mutual fund that invests in that category of stock in a broad, diversified way.

The Bogleheads investing philosophy calls for using "low cost index funds" when possible. These mutual funds that do not try to pick the best stocks in a category, but simply try to track the index for that whole category. For "the whole USA stock market," these would all be good choices:

--Vanguard Total Stock Market Index Fund, VTSMX (minimum purchase $3,000)
--Schwab Total Stock Market Index Fund, SWTSX‎ (minimum purchase $100)
--Vanguard Total Stock Market Index ETF, VTI
--iShares Russell 3000 Index ETF, IWV

I don't know what brokerages are like where you live; it's possible that the ETFs might be easier to deal with than mutual funds because they are handled just like individual stocks.
im a bit confused what should i do? i'm starting and actually i just want to test the waters but at the same time i dont want to lose easily my 1000$.
If you buy an individual stock you can lose most or all of your entire investment very easily, and very quickly.

Make no mistake about it, though, if you buy even the broadest, safest, stock mutual fund, such as the total market funds I mentioned fluctuate a lot. If you'd put $1,000 in in 2007, it would have been all the way down to $500 in 2008-2009.

I suggest that at the beginning, very seriously, do not put more money into the stock market than you can stand to lose.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
bpp
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Re: individual stocks Or mutual funds

Post by bpp »

amin wrote:Hi folks,

Some facts: I live outside usa (bank account outside usa), but i want to invest in usa markets (at least that's what i was recomended).
Critical question: are you a US taxpayer? I.e., U.S. citizen or green card holder?

If you are, then do NOT invest in mutual funds where you live, for tax reasons.
If you are not a US taxpayer, or are one and can get access to index funds or ETFs traded in the US, then index funds are your best bet.
Otherwise, you will need to cobble together your own "index fund" from individual stocks -- but you will need lots of them for diversification.
Topic Author
amin
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Joined: Thu Nov 22, 2012 9:28 am

Re: individual stocks Or mutual funds

Post by amin »

Thank you very much for responding, definitely i'll gor for mutual funds, about the last question : i'am not a US citizen nor do I have a green card and i dont pay taxes in USA either and mu bank account is in spain.

Regards.
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nedsaid
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Re: individual stocks Or mutual funds

Post by nedsaid »

It is possible to do pretty well with individual stocks. It burns up a lot of time if you do it right and there is no guarantee that you will outperform the indexes. I am gradually making my individual stocks a smaller and smaller part of my portfolio.

If I had it to do all over again, I would have started at Vanguard and put everything there. I would have indexed most of my investments.

The Bogleheads advice is really, really good and you will save yourself a lot of time. You will outperform most of your friends. You made an excellent decision to go with mutual funds.
A fool and his money are good for business.
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