I am actually really interested in investing, but I have a nagging feeling that I'd lose everything I invest, which kind of turns me off to it. Also, I feel like I would check the portfolio every day and start stressing out over it lol

How do you choose what stocks to invest in? I know a friend who only invests in penny stocks and he makes a nice profit every few months, but he also loses big sometimes as well. Is there a safer set of stocks to invest in? How about CDs/currency investment? What exactly are emerging market bond funds lol.

Also, I was recommended Scottrade, and I also have a guy at CitiBank that can help me invest.

I hope these questions aren't too shitlordtastic :P Thanks!

Nope, all good ones.

The key to investing, especially if you don't know a lot about it, is to diversify. I used to hate people who told me that because it sounds like a cop-out, but it's not. By owning a whole lot of different stocks, you reduce the risk that any particular stock goes bust and takes all your money. Find an index fund that spreads the money you invest across, say, the entire Dow Jones index, and you don't have to worry at all about any individual stock going bad. You just get returns equal to whatever percent the Dow Jones gained or lost over the term.

Investing in your local currency (i.e. CDs or bank deposits) will never beat inflation. Banks don't want to pay you more than it costs them to borrow in interest, so the only reason to use CDs and low-interest bank accounts is when you need the money soon and don't want to incur penalties/fees from withdrawing your money from a stock account. Keep a couple of months' salary/wages in your bank account as a good liquidity buffer, and invest whatever you're comfortable with investing.

The "emerging market bond fund" I recommended is a fund that buys bonds from countries like Brazil, Greece, and India. Every government issues its own bonds to fund its operations, and emerging economies' governments tend to have higher interest rates and borrowing costs than the US. That means a bond from Brazil will pay a lot more over time than a bond from the US. There's more risk, too, so again, buying a fund that invests in a lot of different countries gets rid of some of that risk while preserving the gains.

I use Schwab myself, but I haven't heard anything bad about Scottrade.

Asking me about individual stocks won't get very useful results - I am not a Wall Street analyst and I do not have the time to really dig into corporate financials and do investigative work. That means I won't be able to tell you with any degree of accuracy which stocks are likely to give greater returns than a simple index fund.

Ah, I see! Index funds seem like something that I should be interested in. I will look into that.

I've heard that about CDs and Bank Deposits before, but I wasn't too sure.

Emerging market bond funds seem cool haha, FUNDING A DEVELOPING NATION! It's like a Kickstarter but at a higher scale lol

Thanks for the info! :D

Except you don't get paid back in Kickstarter. And yeah, if you plop your money in a fund like the S&P 500 and check back every month or two, you're good.

Edit: I should mention that the emerging market bond fund is very risky. In the long run, that kind of risk SHOULD pay off - but we're talking 3-5 years minimum. You have to be very patient with your money for that sort of investment.

Should I diversify my investments in unusual hats?

Any particular good books/resources to read up on? Learning investment is my summer project.

I'm interested in investing but I'm not sure really where to start.
Do you have anything that is a good read on investing in general?

#6 If you really want a serious answer, I don't see unusuals as being a viable long-term investment. I'd just cash out and put the money in stocks. But if you don't want the serious answer, then obviously you need to be thinking ahead about the next big trend in unusuals. Maybe it's swarming flies.

#7 All my books were finance textbooks. Why are you learning investment? Is it for a career, or just to manage personal finances?

Serious post here.

People actually do invest in virtual items/goods. TF2 with it's population being so big and people wanting these hats so bad that they're willing to pay money for them is a really good thing for investors. I've heard of people buying unusual's in the 200-300 dollar range and selling them a few months later for 600-800 dollars.

tl;dr: If you have the doe and time. Yes.

Hey I have wanted to start investing for a while, except i'm broke right now. But like for when i do get money:

How much money should you have to start investing/ will lead to some significant payout.

or

What are some tipical investing senarios. like :

Hey i had __k 5 years ago, but now it's __k and all i had to do was ______ .

#8 There's a lot of good resources out there, and there's a lot of not-so-good resources that want to sell you a particular fund/stock. If you are just looking for good return on investment for your personal finances, it's easiest to skip all the theoretical junk and do what works for most investors: put your money in a fund like the S&P 500. Or you could open an account with Vanguard (or a similar NO-FEE investment manager - more on that below) and stick the funds in a diverse portfolio. Vanguard doesn't let you dick around with individual stocks, and for good reason - there's no evidence to suggest that the average investor actually makes extra money by buying/selling individual stocks. On the contrary, people's biases tend to lose them money because they like to sell stocks that have made some money, and hold on to stocks that are in the red on paper "until they turn around" and make a profit. Obviously, stocks that have gone down from where you bought them are no more likely than stocks that have gone up to make you any more money - in fact, they may be more likely to continue to lose.

Don't choose mutual funds that charge fees. The evidence here is actually very clear: mutual fund and hedge fund managers, despite their intelligence, are no better than monkeys at picking stocks to outperform the market - at least, when you look at a long enough time period. If a fund charges high management fees, then you're taking your 50% chance to beat the market and reducing it by the amount of the fees!

I use to have about ~$1500 in tf2, and the main problem with its economy is that people are only looking to make profit in a bartering system. Like suln said, it's easy to make a profit if you have both the money and the time, but overall it's safer and better to use a stock market like a normal person.

#11 Typical investing scenarios are "Hey I had nothing in my 401(k) account 5 years ago, but I maxed out my contribution every year and now it's at $110,000."

To parse this - the maximum yearly contribution to a 401(k) retirement account is currently $17,000 per year. That means you are investing $17 grand of your own money for 5 years in stocks for a total of $85,000. The extra $25,000 came from the stock investment growing.

The purpose of a 401(k) account is to hopefully never touch it until you're retired. Keep putting money in your retirement account early and make sure the investment portfolio is very broadly diversified, and over the course of 30 years you should be able to retire pretty nicely.

You can invest with almost any amount of money. Just be aware that 10% of $20.00 is $2.00, so even if you're making 10% a year on your investments, it ain't gonna amount to much.

thx for doing this thread sal <3

now to get the 17k

Ultimately, to get to the point where you can invest money, you need to be making more than you spend. Sounds simple enough. Just make sure that when you get a job, you make yourself a budget and balance it against your income. Try to keep expenses lower than income and voila, you're saving some money.

The reason why I'm learning investment is because I'm interested in the stock market (I'm learning business so it's tangentially related) and I'd like to learn how to grow my finances I suppose.

#17 I'm not immediately seeing any good options for reading other than textbooks. If you want textbooks, let me know and I'll go see what looks good.

There is a hell of a lot to cover with regards to finance. If you really want to know how to do individual stock valuation, you'll need to take a couple of full classes: one on financial accounting (which covers how businesses report their profits/activities to Wall Street through the balance sheet, income statement and other disclosures) and one on actual stock valuation using models like Black-Scholes.

The theory behind "semi-strong market efficiency" is that stock market valuations reflect all current public and semi-public information pertaining to a stock. The actual value of a company can thus be measured by its market cap - the share price times the number of outstanding shares. The market cap is essentially a perpetuity that describes the present value of all future earnings by that company. When new information comes to light, the price of the stock changes, reflecting the most up-to-date assessment of the company's future earnings.

With that sort of theory, the only way to pick a stock that guarantees it will outperform the market is by having true insider information. For instance, if you knew that Exxon was about to acquire three huge new oil fields on the cheap, and nobody else knew it yet, you could buy Exxon stock that day and make a huge amount of money when the information became known.

Almost nobody agrees on that theory, though. Some savvy investors think that even with all information available to the market at large, stocks can still be under- and over-valued in day to day trading, leaving opportunities for them to make money.

Edit: I was slightly wrong, market cap reflects all future earnings AVAILABLE TO EQUITY HOLDERS.

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Nero, no matter what you do, you're investing. If you choose to hold cash, then you are investing in 100% cash. If you choose to spend all that cash on twinkies and stash the twinkies in a mattress, then you're investing in twinkies.

Investing in 100% cash is a terrible idea because cash loses value over time! Inflation will eat away at anything you save. If you want your money to be worth more in the long run, just sink your savings in something like the S&P 500 index, or open a Vanguard account and pick a few large-cap/value funds.

In order to make a significant amount of money in stocks/investments without making high risk investments you must have a lot of capital to put up.

Playing the stock market safe and with very little risk will only generate you roughly a 5% return on your investment as a pose to the 1-2% return banks will give you. Playing a little more risky will generate you a lot more cash but also generate a lot more risk to loose your cash. The stock market is not steady either, look back to 2008 when the market crashed, anyone who had a money in the market were left with a little over half of what they had invested.

My personal advice to anyone investing money is to invest in YOURSELF and start a business, or invest in someone else's business and become a shareholder so that you have a say in decisions. Say you like building computers and you have around 50 000 saved up, You will get a much greater return on your money using that 50 000 dollars to start a business in building/fixing computers then playing the stock market for a couple years, provided you have a good business plan, hire the right employees and go out and look for sales. When you generate enough capital you can draw a salary from your business, write off car expenses and on top of all that put any remaining profits the business generates into your pocket at the end of the year (provided your business doesn't need money to grow)

#21 If you kept your stocks from 2008 they'd be roughly recovered in value by now, I believe.

But yes, this is just what to do with a bit of extra money. Dope-wolf's point about investing in yourself is a great one. Best way to do that is usually to get more education.

They would be roughly recovered in value true. However instead of peoples stocks generating money for 5 years they spent 5 years trying to play catch up instead of flipping a profit for 5 years, that essentially isn't a good thing, you play the market to make money not spend 5 years trying to regain what you had in 2008.

There aren't many investments that would have done better. Salary/wages would be unaffected if you kept your job, which is great, but if you owned a small business you'd probably be facing the same demand slump that ate into the stock market, damaging your business's balance sheet.

Good point, everyone suffered even those without investments.

Also Sal, Do you know anything about futures? that's like gambling on the stock market I believe right? I'd like to try that out.

I do. I'm not currently authorized to use them on my Schwab account and have no real desire to play with them.

Futures can be used two ways - gambling or hedging. There's a big difference. Hedging is a 100% legit means of reducing risk exposure for a price. If you, for example, want to make sure that in one year you can get gasoline for a certain price, you can make a forward contract with a supplier. It will cost you some amount of money now if you want that price to be significantly lower than (or even the same as ) the current price. If you want to make it significantly higher, the fee will be minimal, but then you've entered into an agreement to purchase it for a high price in a year.

Of course, you can use combinations of forward contracts, buying, selling and short-selling to do almost anything from locking in prices to gambling on other people's housing debt.

If i'm not mistaken this can be done with currencies also I believe? Like you can lock today's exchange rate of euros for example for a year and import something from Europe and resell it in North America for a year without having to worry about the exchange rate fluctuating and fucking up your selling price.

Or on the flip side would you be able to also exchange usd for euros to people at a lower exchange rate than what is currently being offered by banks so on and so forth? provided again if the exchange rate goes up.

EDIT: Actually this wouldn't work because banks go with whatever the exchange rate currently is they don't buy currencies.

Congrats on graduating Sal. I don't know nearly as much about investing and the markets as I probably should but this is all great advice. From what I've seen investing in the general indexes is a great investment right now with even some major investors having issues matching the returns the markets have been giving lately.

Emerging markets is pretty big right now, especially over the last couple years with the slow recoveries Europe and the US have been having. It's a more risky investment though and people should probably do more research if they want to try out these markets.

So Sal, what are your opinions on using technical analysis vs fundamental analysis for you investment strategies?

#28 I've never done a serious valuation so I don't have an informed opinion. My instinct says fundamentals are far less volatile than stock price. Most businesses' investor relations strategy is to get the market to more accurately reflect what they view as the "true" value of the firm, making the stock price swings less volatile. But again, my investment strategy is to just dump money in broadly diversified funds, so my opinion on that kind of analysis doesn't even matter to my own investments.

And thanks, it'll be a huge load off my back to finish school!

#27 Yep, we did several currency hedging exercises in my international finance class. You can make all kinds of incredibly complicated instruments using combinations of the contracts I mentioned. If you want to give yourself room to make some money on the upside while limiting the downside risk of a future cash flow, you can do that. If you want to totally invert the curve on whether you're making money or losing it at any given exchange rate, you can do that too.

Currency markets can get extremely complicated, especially if you start working with cross rates.