Getting into the financial markets

[jensieblue]

Invest?

Nobody can predict the future, but I for one like to read Warren Buffett's financial and investment advice. I do recommend diversification. Some in stocks, some in CD's (rates going up, by the way) and some cash reserves for opportunities that present themselves. My philosophy is that if you don't invest, you are betting that the American economy will collapse and I don't think that. Think about your financial investment ratio in terms of how much uncertanty can you comfortably tolerate. The greater your tollerance for risk, the more you should have in the market. The market is like other things in life, you have to pay to ride and if you don't ride you don't have a chance at winning. I also believe that when good stocks fall, that is the time to buy and buy what you know...what are you retail tastes. What do you see others buying and using. And last, stay fluid. Buying stock is not a marriage...you don't hold it because it was the first stock you bought. And enjoy the hunt...

 

[30ashopper]

(3) Personally, I think the 5-year horizon for stocks and RE is uber-risky--moreso now that we're in a recession. But if you want to roll the dice on the stock market...

I'm not sure I agree with the "uber-risky" statement. I'd say five years is a good min time horizon, and I don't see a ton of risk there. Shellys comments on what to buy are solid. Pay attention to yields and p/e, and if you can watch a little cnbc - Fast Money and Mad Money might be useful if you're looking for some good names to research.

 

[rancid]

Thanks to all. It is always helpful for me to get opinions from many different sources.

 

[Bob]

(1) Look at your 401K before you decided to do anything. I looked at mine on Friday--I recommend covering the keyboard with Saran Wrap before you do.

(2) What are your broker friends telling you? (other than "hire me")

(3) Personally, I think the 5-year horizon for stocks and RE is uber-risky--moreso now that we're in a recession. But if you want to roll the dice on the stock market, I'd look at large international companies with solid balance sheets, good cashflow, lots of cash, and a good record of paying out dividends (at these low prices you may even be able to eek out a solid 3-5% dividend yield) . The benefits of owning stocks over a chunk of dirt are many: low carrying costs; no annual property taxes; no liability problems; very, very low sales commissions; and--most important--liquidity (you can shave off a few shares to turn into cash if you need it--you can't do that with a dirt lot in Grayton). I'd also recommend dollar-cost-averaging into the stock(s) over the next several months depending on how big of a chunk of money you've got to invest.

If you want to take a safer route, you might want to opt for bonds. If you're investing outside your 401K, depending on your tax bracket, you might benefit from Muni's...otherwise keep in mind that the dividends on the bonds will be taxed at your ordinary income rate (whereas stock dividends are taxed at 15% in most circumstances).

Before you make any decisions, you may want to brush up on your understanding of the stock and bond markets to fill in the gray areas (you don't need to hire your "broker friends"--hey, given the current economy, all your friends are "broker" )--and especially read up on the companies whose stocks you consider purchasing.

low carrying costs, but high opportunity cost as you wait out the trough

 

[SHELLY]

I'm not sure I agree with the "uber-risky" statement. I'd say five years is a good min time horizon, and I don't see a ton of risk there.

...I'm guessing you don't have kids starting college in 5 years.

.

 

[SHELLY]

I do recommend diversification. Some in stocks, some in CD's (rates going up, by the way)

..I found this isn't the case with ING's CDs--some of their rates have gone down.

At the beginning of Oct, I noticed ING's CD rates jump--I managed to snag a 1yr for @4.25%; and 18Mth & 2yr @4.50%; but they quickly recalculated the rates down on Oct 9 after the Fed waved the magic rate-cut wand.

I'm betting the Fed will have to cut again before the year is out, so you may see the CD rates coming down again. You may find some banks who will be looking to bump up deposits and offering limited time deals, but if you find something appealing, I wouldn't hesitate too long.

Just my 2-cents <not adjusted for inflation>.



.

 

[30ashopper]

...I'm guessing you don't have kids starting college in 5 years.

.

Good point, and you are correct.

 

[6thGen]

For Mad Money, take everything Cramer says with a REALTOR(TM) sized bucket of salt. For the most part, he knows his stuff, but he is paid to entertain. Just start your day with Squawk Box.

As for investments, one thing to consider is to swim the other way. RE has taken a beating and the right property with a five year hold can offer a solid return. There are a several financials out there with incredible yields and cash heavy balance sheets to maintain them. Just make sure you do your homework.

 

[SHELLY]

RE has taken a beating and the right property with a five year hold can offer a solid return.

More info please...define what is a "solid return" in five years.

Are you talking about a full-cash purchase or leveraged--if so, at what interest rate.

.

 

[Bobskunk]

Not enough information.

I don't think that we have quite enouh information , but some people have made some good attempts at obtaining it. . As such, this is not really advice, but some things to consider.

As far as buying a lot, you did not mention whether you were financing or not. If a leveraged asset falls in price, you can lose all of your investment and then some. If you really did need to sell it in five years, you are taking a risk.

As for stocks, I have begun to look at 10 years as a minimum horizon for a wel-diversified portfolio, since I have witnessed some 5 year periods with significant negative returns. Anything that I felt I needed for college funding, I would keep in bonds.

If I were to truly give advice, I would want to know your ability to accept loss, you overall financial situation, emergency funds, retirement funds, et...

If this is "play" money, and you can risk it, then follow your own counsel. Real estate and stocks are apples and oranges to say the least. For money that I need, I look very long term, but if this is money that you can risk, you might get quite a pop in the stock market in the near term. I think it will be crazy with volatility for a while, so you had better have a strong stomach.