Have $2500 to invest and have some questions

[aquaswim47]

I guess if I'm invested 20-30 years, I should definately choose DDM or SSO than since the longer the time horizon, the more risk that the individual investor can take. However, a person who may/will need their money with two to five years should invest their money conservatively, such as FASIX. I'm in that boat so I have only about 20% stocks. Hopefully, that arrangement will change very soon as I would like to at least take market risk (VTI, DIA, or SPY for example). You get rewarded for market risk by being able to keep up with inflation.

I find GIJoe9 and WallSt.Golfer to be of infinite wisdom. I think we all have our different strategy that we bring to the table. I agree with GIJoe about that everyone has a different strategy; it is imperative to find the strategy that works for you. For example, if you like options, investigate straddles, spreads, and combinations. Also learn about writing covered and naked options before actually doing so. The difference with options is you lose your entire investment if your strategy doesn't work, while investing in individual stocks requires a company meltdown and investing in an index requires a major slowdown (such as from robust to slow-growth) in the economy or depression before you will see a rapid depreciation in your share value. The key is to learn all you can about investing so that you don't lose real money not knowing what you're doing.

[gijoe9]

You see what I mean by your own way into the market. Three comments three different opinions. I bow down before Wall st's superior grasp and knowledge of the numbers and have 100% faith in his strategy achieving the goal he specified. I would like to point out that it is you with the $$'s and the desire to enter the market so it becomes imperitive that you find a way that inspires confidence in you. What about options? ETF's? It boils down to what you feel you are competent at and knowing someone like WSG who can tell you how the numbers work.
Once again welcome and good luck.

[Wilks]

Thank you all for your responses. I truly appreciate it!

I never really gave a thought to ETFs but I feel like that may be the route for me to go. I have a long time frame and what better way to watch my money grow than right along with the Dow, NASDAQ, and S&P.

Another question if anybody wants to take the time and answer:

What should I do with my monthly deposits? I was planning on depositing $200-300 a month. If I invest in the S&P with SPYDERs, and shares are going around $145, do I just buy 1 or 2 shares a month or can I invest all of my deposit and buy partial shares???? Sorry if that is a stupid question. Thanks again for all the responses and I look forward to many more because I know I will have a ton of questions.

Glad I found FIO.

Brian

[gijoe9]

Brian,
I am glad you decided on an approach which suits your comfort level and wish you well on it. I am sad to report that I do not know if you can do fractional shares with SPYDER's I know that you can with a DRIP as the shares are issued direct to you from the company once you have enrolled.

[WallStGolfer31]

Brian,

With $200-$300 per month deposits, you'll might not want to purchase shares like SPY every month. With this long investment time horizon, averaging in maybe 2-3 times a year with larger purchases may be the way to go. This is because with $7 per transaction as commission, that's about 4% of the current price, a noteworthy loss upon entry. If you bought shares every 6 months say $1500 worth every 6 months, that's only 0.4% every transaction.

But again, I'm not trying to give financial advice, I'm not qualified for that legally because I have no licence. I am however trying to give you a framework to work within. Like Joe was saying, learn as much as you can before investing.

-Dann

[aquaswim47]

I agree that it is best to average in every three, four, or six months based on the commission structure. Sharebuilder costs you $20 ($4 to buy $15.95 to sell and you can buy fractional shares). However, if you do it over a three to six month period, you can get very near full shares.

One option might be to buy a mutual fund so that you can get the returns of the ETF but not have to pay a commission. When you finally have the dollar-cost averaging goal reached, i.e. $2,500, than you buy after the first year the equivalent ETF. You might also buy another mutual fund, such as ValueLine and then DCA into that account.

For example, if you wanted to replicate IOO, you could buy FIGRX at $200 per month for 12-13 months at Fidelity and then buy the ETF with the proceeds from IOO. If you wanted to replicate the Dow Jones Industrial Average or S&P 500 index, you may want to get FDVLX, FBCVX, FBGRX, or FEQIX. Scottrade has Wilshire Funds that could replicate VTI, DIA, or SPY.

ValueLine Funds are good if you want to replicate VBK or PZI; however, ValueLIne has a $1K minimum so it would only work for the 2nd year. ValueLine's speciality is small cap. The fees for ValueLine aren't cheap.

[WallStGolfer31]

I wouldn't give mutual funds a dime of my money. ETF's like SPY have 0.08% (that's SPY's) fees, that's as close to nothing as you can get in terms of fees. Others like SPY has very similar fee rates.

[llamagatekeeper]

Believe it or not, I too have recently been debating and talking with my father about the issue of where to invest my recently aquired funds from my measly 5.2% CD. I personally lean torwards ETFs like Dan, but my father insists that they cost too much and likes Index funds better. I tell him for my age that the one time brokerage fee is worth the intial cost and with me holding long term those costs will almost be null. While with the Index fund I would be losing a % each year due to maintance. I am in the same situation as Brian mentioned and am going to invest around $3000.


On another note, Dan is SPY the best ETF to follow the S&P 500 with or is there a better fund?