Post: #1

Hey ! whats up !

I've been lurking the forums for a few weeks and today finally decided to register and start posting !

The thing is I have about $3,500 from a university loan I took. I no longer need the money, so instead of returning it I'll invest it and pay it back when I graduate. Although I feel that a CD has a low yield when compared to the potential of a stock. I'd get about 1.5% for 2 years which would return about $53 which is a stupidly low return for me loaning money to the bank. I think it would be good to take $100 from that money and start investing in stocks, depending how I do, invest more and put the rest in a CD.

Any Advice?

Post: #2

I highly recommend that you stay away from CD's. The interest earned is next to nothing and banks usually have pretty stiff penalties if you try to take it out before the CD expires. Stocks are incredibly risky if you don't know what you're doing, and you're most likely going to get burned. My advice is to take the $3,500 and put it in a mutual fund. Check out Fidelity or Scottrade and find a mutual fund that best fits your needs. You can easily find one that correlates with your risk tolerance and desired interest.

Post: #3

I'm assuming that this loan has no interest or negligible interest or else you're unlikely to get a return that beats your interest rate and should just pay back the loan.

Investing a "test" $100 doesn't really make any sense because the scale is so small that you'll need to get ~15% return on your stock just to cover the your frictional losses (comissions, bid-ask spread). Also, even if you miraculously did cover your expenses, you shouldn't take this as a sign to invest more in stock because it's such a small sample, it'll likely be a lucky gamble.

There are other threads on here about investing in stock and the answers range from "you're going to lose your money because it's a suckers bet" to "you can make money, but it takes a lot of study and research."

My advice is the same as wi30, although I recommend checking out Vanguard since there are no commissions.

Post: #4

(05-19-2011 10:47 PM)wi30 Wrote:  I highly recommend that you stay away from CD's. The interest earned is next to nothing and banks usually have pretty stiff penalties if you try to take it out before the CD expires. Stocks are incredibly risky if you don't know what you're doing, and you're most likely going to get burned. My advice is to take the $3,500 and put it in a mutual fund. Check out Fidelity or Scottrade and find a mutual fund that best fits your needs. You can easily find one that correlates with your risk tolerance and desired interest.

Thanks man, I'll check out those brokers. But as I understand (please, correct me if I'm wrong) mutual funds have the same risks as stocks? I think I heard somethin' like that on my finance course, but I'm not 100% sure.

(05-20-2011 10:17 AM)Arobin Wrote:  I'm assuming that this loan has no interest or negligible interest or else you're unlikely to get a return that beats your interest rate and should just pay back the loan.

Investing a "test" $100 doesn't really make any sense because the scale is so small that you'll need to get ~15% return on your stock just to cover the your frictional losses (comissions, bid-ask spread). Also, even if you miraculously did cover your expenses, you shouldn't take this as a sign to invest more in stock because it's such a small sample, it'll likely be a lucky gamble.

There are other threads on here about investing in stock and the answers range from "you're going to lose your money because it's a suckers bet" to "you can make money, but it takes a lot of study and research."

My advice is the same as wi30, although I recommend checking out Vanguard since there are no commissions.

Yeah, the loan has no interest and no payments until 7 months after graduation I get some newsletters to my email account that give tips on stocks and have records of those tips being successful. Do you have any suggestions of newsletters or sites like that? Thanks to you too.

I've got to admit, I was checking out FOREX and made a practice account on OANDA and I didn't really understand it.

Any books you recommend on investing?

Post: #5

Well the difference with mutual funds is that you're giving your money to someone who's (at least in theory) an expert on stocks rather than just investing the money yourself without any experience. But overall 80% of mutual funds underperform the market. The benefit is that it'll be a little simpler for someone without a lot of knowledge because sites like Vanguard show risk / return ratings that are easy to understand as opposed to trying to evaluate the risk / returns of stocks yourself, where you'd likely be wrong since you don't have any experience.

(05-20-2011 11:04 AM)Pete Wrote:  I get some newsletters to my email account that give tips on stocks and have records of those tips being successful. Do you have any suggestions of newsletters or sites like that? Thanks to you too.

Ack! No. Be extremely skeptical of any kind of newletter giving you advice. They'll use all sorts of sleight of hand to make it seem as though their picks have historically been successful. To check you'd have to run the numbers yourself, simulating buys of all the picks at the times they were suggested and comparing the results to the performance of a major index (e.g. S&P 500, Dow).

(05-20-2011 11:04 AM)Pete Wrote:  Any books you recommend on investing?

The Motley Fool is a good beginner's introduction to investing and they've published several books. Benjamin Graham books (e.g. The Intelligent Investor, Security Analysis) are classics for value investing, but you'll see if you check those out that they're really dry and extremely hard to slog through but this is a taste of the kind of legwork you have to do to make investing profitable.

Post: #6

If your cool losing an extra $1k or so then put it in stocks. If not, then don't.

Until you have a few hundred grand to invest, you need to be spending your time making the cash, not investing pennies.

Post: #7

You should read The Zurich Axioms by Max Gunther. I downloaded it for free online.

Post: #8

for a safe play just wait until July-August and buy gold & silver (and yes I would go for physical)

unless the USA stops printing money to pay for debts those metals are going to rise dramatically