My advice:
--Start by investing in a Balanced Mutual fund at one of the premier fund families like Fidelity, Vanguard or Trowe price. First time around you have to pony up enough to meet the minimum requirement. This is typically around $2500. More on balanced funds later in the post.
--When you open an account, choose Automatic Investment Plan, where fund withdraws $100 every other week from your bank account or whatever small amount that you can budget.
As time goes on, increase this minimum amount.
So why this advice ? First let's start with Balanced fund. What is a balanced fund ? A balanced fund is a fund that would invest certain portion of portfolio in equity (i.e. stock market) and certain portion of portfolio in bond market (fixed income). Balanced funds provide you with a decent upside potential with less volatility. It also fares well in bear market years.
Next let's talk about Automatic Investment Plans. This is great for many reasons.
--Forces you to save
--dollar cost averaging. It is very hard to time the market. If you could time the market then you should be running a hedge fund.
Most of the new investors look at only year to date performance data of a mutual fund. Don't !! Look at the performance data provided by sites like http://finance.yahoo.com. Look for 10 year performance. Look at how funds behaved in last bear market.
Some of the balanced funds that I have owned or still own are:
- Fidelity Balanced Fund
- Vanguard STAR fund
- Vanguard Wellington Income Fund
- American Century Equity Income Inv.
I recently read an article on Yahoo Finance site that reflects this sentiment.
2 comments:
Good, smart insights you have here for inexperienced and seasoned traders. I just started writing articles for my investment blog at http://wcpowertechfund.blogspot.com on a variety of subjects and companies. While I agree investors just starting out should look to some balanced funds to get familiar, there is nothing like getting out there and investing in something you know and use every day and learning as you go. I'm not saying to plunk your life savings into the Banking Company that you do your daily banking with or anything like that. But for an investor starting out with a little money to try and start investing in the market, there's nothing like facing your own challenges, dealing with your own mistakes and doing your own research. And soon enough the "amateur" so to speak can act quicker and be more informed than those who run big Balanced Value based funds.
Keep up the writing my friend.
--
Chris
http://wcpowertechfund.blogspot.com
Chris,
Thanks for the kind words. I don't disagree with what you are saying in general. In fact, that's how I started. My first investment (actually a gamble) was CALL option on Cypress Semi way back in 1995. I was using Cypress SRAM parts in my design and I was amazed at the new part specification.
Since then I have come a long way. I have learned the lessons of disciplined investing.
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