Self-directed Investing

asechrest

asechrest

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asechrest
I have gathered from posts that some of you do some self-directed investing, perhaps quite successfully. I am a neophyte but would like to do it a bit more seriously.

I'd love to hear what broker you use, your investment style, what books you read to gain knowledge, etc.

I'm youngish (34). I have a relatively small amount to invest for the moment, and I probably shouldn't sink all of it into assets that would hurt me to liquidate if I needed it. I have a dormant account at TradeKing (dabbled in swing trading) and a very small IRA with Sharebuilder that is invested in only three assets and mostly just sits there (though, it is growing because one of them is a S&P500 fund and I have it set up to automatically reinvest dividends). I also have an invitation to the new "zero commission" Robinhood broker that I could play around with.

Goals? Do something with my savings other than keeping it in a "high interest" (hah) savings account; save for retirement; learn about the markets and investing; grow my wealth.

This board is my internet home, so what better place to draw on the broad experience we have here?

Thanks.
 
*eman1200 knows jack squat about investing...

...but I think you should max out your 401k first, if you have that opportunity.
 
Buy index funds. I've never seen any evidence that any fund manager can consistently beat the market.

When I get home tonight, I can give you a rundown on the types of funds.
 
There are a ton of ETF choices these days. If you want to avoid "single company" risks, that is one way to go.

I always liked Peter Lynch's "one up on Wall Street". It's a bit dated now, but many of the principles are timeless.

I am thinking there might be a slight risk of experiencing something similar to Japan's "lost decade(s)" here. (Note, I said slight risk - I'm not making a prediction). Because of this, I have started buying some dividend paying ETFs and REITs.
 
Scratch tickets?:D Just kidding. I have three words for you: Vanguard index funds.
 
FormerHangie said:
Buy index funds. I've never seen any evidence that any fund manager can consistently beat the market.

When I get home tonight, I can give you a rundown on the types of funds.
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Good advice. Just remember that you don't need to rush into anything, and that you don't want to place your eggs in one basket. Recognize that there is a lot to learn and that the best place to start is a very broad basket of equities.

You might even consider picking one of the Target Date retirement funds (for example, a 2045 fund would probably be good) and just let it ride. If you do enjoy being more actively involved you still want to make sure you have a solid foundation -- I always suggest an S&P 500 index fund. Low or no commission, ultra low expense ratio, and beats a whole heck of a lot of other funds over time. Then you can start adding to that, perhaps with international or emerging markets funds, broad bond funds, commodities funds, etc. Add to your investments regularly and don't panic when the market wobbles day to day.

There's nothing inherently wrong with single-stock investing too, but you need to be a lot more careful about diversification and not being too dependent on any one investment. The further you go towards individual companies and away from index funds the more it becomes like gambling, so just be cautious and disciplined.
 
I had a full service broker for years and in January 2014 changed to a Scottrade account. I reduced total fees/commissions by over 5% and exceeded the annual return that I would have made staying with the broker. This was determined by tracking what funds were sold and which I purchased and comparing the two.

If you're a noob there is an Investing for Dummies book which has good basic information from which to build knowledge.

I have three pieces of advise if you're going out on your own: read, read, read. Oh, and be patient. Good luck!
 
Spend it. You might beat the market but the market will make it up in vigs. 34? The decades long boomer retirement experiment will be over long before your turn. Since we are working till we die investing is pointless.
 
My gain in 2013 was 17% my gain in 2014 was 22% [this was for our joint account [assets near 500k] and my IRA $250+] = my 2013 gain was 12% and then 17% for my mother in law's account at age 80 that is half cash] and then 12% in 2013 and 13% in 2014 for my wife who is risk averse as anyone I have ever seen -

Those numbers easily beat the market. Yet my portfolios report as balanced or slightly aggressive when rated by our brokerage company . . . I provide this information to establish a baseline for you to evaluate my comments.

At age 34 unless you are really good at stock picking - I don't recommend stock picking. I also do not recommend mixed mutual funds either - because you'll pick the wrong ones and the Lipper Index for mutual funds is barely at the S&P 500 point and often lower. . . . .

So what DO I recommend? Buy TWO S&P 500 index funds - one equal weight, one standard weight - split your money 50/50 between them - two choices are RSP and SPLV.

If you are interested in owing individual stocks - try the oil pipeline companies -they're really cheap right now because of the low price of oil - which makes no sense - plus they're in the 8% dividend range as well so they'll throw off some money every quarter as well or you can reinvest it.

If you want to test your instincts at stock picking - go to one of the simulator programs - take the 10k and create a portfolio out of it - do the research and see what you develop. . . if you can beat the market either upside or reduce your downside - thats the goal. if you can't do that - then the S&P 500 indexes are what you want -

The reason is the S&P on AVERAGE has gone up over 10% annually since 1955 - sure 0 there have been bad years - but what the bad years mean is you buy more shares those years so your upside is higher in the up years - its like a tail wind and an headwind -
 
I have an account with USAA, I bought a couple stocks in companies with products and development we need for the future.
 
My personal SHTF portfolio plan

10% each in the following asset classes. Some of this can be accomplished through ETF index funds which have the lowest fees. Fees are financial Armageddon to small investors.



• U.S. minimum volatility stocks

• International Developed minimum volatility stocks

• Emerging Markets minimum volatility stocks

• Global natural resource stocks

• US Real Estate Investment Trusts

• International Real Estate Investment Trusts

• 30-year zero coupon Treasury bonds

• 30-year TIPs

• Global bonds

• 2 - year Treasury bonds (cash equivalent)



Re-balance once per year. And convert some fiat to precious metals you hold physically at home in your hand in case we turn into Zimbabwe. I prefer platinum right now because it's trading 1 to 1 with gold, and Pt has industrial uses same as silver. If the economy tanks, Pt goes up. If the economy truly gets better, Pt goes up through industrial price pressure.

Precious metals are the only way to short Central banks. :)
 
Eagle I said:
Scratch tickets?:D Just kidding. I have three words for you: Vanguard index funds.
Click to expand...

Vanguard has been berry, berry good to me. I had to move some stuff around a few times, but so far they've been solid performers. Low mgmt comparatively speaking, and no churning. Quite happy so far.
 
Palladium is a pretty good metal to hold as well because it has a lot of industrial value in catalysts for pollution control and energy production.
 
Glen Beck told me that all my money should be in gold.

...I saw it on TV at 3:00am.

Actually most of my money is indeed tied up in metals...mostly in the shape of a C182!
 
eman1200 said:
*eman1200 knows jack squat about investing...

...but I think you should max out your 401k first, if you have that opportunity.
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You actually have to be careful with that - some of the employer-sponsored 401k plans are TERRIBLE deals even with matching...so you need to read and understand what it is you're buying

The best answer - depending on your income max out the Roth (if you can) or Traditional IRA (at your age $5,500 / yr and you still have until April to do 2014s contribution). Buy Low/No load mutual funds from a place like Vanguard (I'm a Bogle-ite). If you look at the math the management fees and distribution fees and the like can completely wipe-out any gain making an over-performing/over-indexing fund not worth it...

Know what you need to retire on? I don't know but I would try to get about $50k in a S&P500 index fund and then diversify from there. Multiply according to your needs...

Buying individual stocks can be good and can also be bad. It just depends. I don't believe in ALPHA so know what you are looking for...you may want a high-dividend low growth or value (Warren Buffet-style) or w/e...it's your money.

Depending on how much you have or will need, make sure you understand the tax management side of it too. You can get killed on taxes if you don't know what you're doing when it comes time to pull it out. Talk to a CFA/CFP/Estate planning tax specialist and come up with a plan if you're not comfortable doing it yourself...Remember, management fees are killers, if you're paying a Merrill Lynch advisor 2%, that means you have to beat me by more than 2% or it isn't worth it (if I make 10%, you have to make 12+ because that fee happens whether or not you made any money)...
 
dans2992 said:
There are a ton of ETF choices these days. If you want to avoid "single company" risks, that is one way to go.

I always liked Peter Lynch's "one up on Wall Street". It's a bit dated now, but many of the principles are timeless.

I am thinking there might be a slight risk of experiencing something similar to Japan's "lost decade(s)" here. (Note, I said slight risk - I'm not making a prediction). Because of this, I have started buying some dividend paying ETFs and REITs.
Click to expand...

I would caution on ETFs for inexperienced investors...they aren't as straight forward as an index fund, their rebalances can hurt, they have fees built-in, etc. ETFs are fantastic for getting exposure to things you can't really do at a non-institutional level, but it sounds like this is too advanced for the current situation - let's build the foundation and then go from there
 
PaulS said:
Get rid of your debt first.
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Depends...what is the interest on the debt? What is your expected return in the market...use other people's money to make money sounds good to me...
 
comanchepilot said:
...its like a tail wind and an headwind -
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Meaning the tailwind lasts only a short time, but you buck the headwind forever?

OP, my entire IRA/401k is in low load S&P500 funds. If my 401k wasn't stuck with the management company picked by my employer I'd move that over as well; but within the options offered I've also picked a low-load large cap index matching fund. Actively managed funds would have to beat the baseline market return by at least 2 percentage points (about 1/5 above, considering a 10% return baseline) to even pay for themselves.
 
PaulS said:
Get rid of your debt first.
Click to expand...

I have pretty light debt, and it's all low or no-interest at the moment. A bit of old student loan debt still hanging on, a 1.99% $9k auto loan, a touch of CC debt at 0% interest until next year.

But I do get your point.
 
STOP.

Do you have debt? If so, seriously consider NOT investing and paying it off. Paying higher interest on debt than you can make in investments means you are losing money in the long run.

But before that, build an emergency fund. Many months of living expenses. You choose how many. Liquid capital. Cash.

And of course before that, a real balance sheet and budget. So you know what you're doing. You need the instruments working before you can fly it. ;)
 
asechrest said:
I have pretty light debt, and it's all low or no-interest at the moment. A bit of old student loan debt still hanging on, a 1.99% $9k auto loan, a touch of CC debt at 0% interest until next year.

But I do get your point.
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Nice job. Pay the cc off before the interest hits, build up a 6 month emergency fund, then have at it.
 
Henning said:
So, simply to grow personal wealth, no other result?
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Mostly, though there are some sub-goals involved with growing my wealth (retirement, etc). I've got my "life savings" sitting in my credit union savings account at .8% interest (which, remarkably, is a great rate for a traditional bank/credit union). I manage to grow my savings every month. And I believe I can make that money work better for me.

Part of it is also a general interest in investing and learning.
 
asechrest said:
Mostly, though there are some sub-goals involved with growing my wealth (retirement, etc). I've got my "life savings" sitting in my credit union savings account at .8% interest (which, remarkably, is a great rate for a traditional bank/credit union). I manage to grow my savings every month. And I believe I can make that money work better for me.

Part of it is also a general interest in investing and learning.
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Grow your wealth, get yourself set for retirement, as other's have said, I wouldn't count on SS at your age.

Make sure the money you put in is for the long run, there are many ups and downs in the stock market, people tend to panic and sell when things have fallen, don't be like that and don't try to chase the market, buy sound instruments, evaluate them periodically, then make adjustments as necessary.
 
FormerHangie said:
Buy index funds. I've never seen any evidence that any fund manager can consistently beat the market.
Click to expand...

Especially when viewed very long term.

I remember a weekend radio broadcast on investing that ran in 2002 or 2003 that, iirc, was saying the 10k-12k mark was the top end.

I check just now and we're in the 17's.

For the OP, at age 34, keep in mind you're in for the long haul for the long term gains and can weather the ups and downs in the short view.

One general advice I like is to split your investing
  • 25% in Small Cap
  • 25% in Large Cap
  • 25% in Index
  • 25% in Foreign
This helps spread out some of the risk when one sector isn't performing well, but another might make up for it.

The other general advice is dollar cost averaging, where on a routine schedule, you're putting in about the same amount each time. Helps you to keep to a sound cash flow budget, and takes advantage of market lows when the shares of your stocks and funds are "on sale".
 
Why not take an interest in what the companies you invest in contribute to society?
 
asechrest said:
Mostly, though there are some sub-goals involved with growing my wealth (retirement, etc). I've got my "life savings" sitting in my credit union savings account at .8% interest (which, remarkably, is a great rate for a traditional bank/credit union). I manage to grow my savings every month. And I believe I can make that money work better for me.

Part of it is also a general interest in investing and learning.
Click to expand...

Check out Dave Ramsey's Baby Steps from his book "The Total Money Makeover".

From the sound of it, you're well within Step 3 and perhaps Step 4. (Save up a 6-month (or more) emergency fund, and work hard on paying off the mortgage).

So this life savings you speak of, sit down and figure out how much of it would fund 6-9 months of "survival" level budget so if your life became a sad mournful country song, you have a pile of money to get fresh employment and fix it. All the while not worrying where the rent or next meal comes from.

If all debt is gone, then pay off the house. Mathematically, the income tax deduction doesn't benefit you as much as a good investment plan.

Once that's done, do the investing thing you're asking about. Keep an eye out for and avoid consumer credit IED's, and do your best to save in advance for any big expenditures.

Again, read DR's book. Even if you don't agree with some bits of what he say's, the remainder will serve you well.
 
Geico266 said:
Gotta go with Berkshire Hathaway.
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Yep, I bought BRK/b back a few years ago when it split for $68/share. It has done well and like Buffet himself says...buy stock for long term. What he buys he has no plans to sell for many many years. Day trading is risky. That is the only individual stock I own. Everything else is target fund in my IRA and my 401k was picked based on my assessment of being a risk taker. It too has done 12% in 2014.
 
paying off the student loans should be job 1 - increase the payments on those and decrease payments - if possible - on the other low interest debt.

But you do need to be increasing your investment toward retirement.

Keep in mind, however, that sooner or later Nancy Pelosi and those just like her will soon decide that you have 'too much' and others have 'too little' and they will decide how much you can have . . . . sadly.
 
comanchepilot said:
paying off the student loans should be job 1 - increase the payments on those and decrease payments - if possible - on the other low interest debt.

But you do need to be increasing your investment toward retirement.

Keep in mind, however, that sooner or later Nancy Pelosi and those just like her will soon decide that you have 'too much' and others have 'too little' and they will decide how much you can have . . . . sadly.
Click to expand...

I don't know if I agree with paying off the student loan ahead of schedule, 1.9% unsecured loan, he's probably better to just make the payments. He has likely paid most of the principal anyway unless it's a simple loan. The car loan is just a cost of living that until you make some headway with savings will just be a fact of life........ as long as the interest rate is low.

There's a book I've mentioned before that you may want read, it's called "The Millionaire Next Door" by Stanley and Danko. It's a great book on how to deal with money, and how people become independent.
 
Joe, that's pretty good shootin'. Want a new client? ;)

OP, before you invest a dime, either subscribe to or go to the library and read Barron's religiously every week for at least two months. Cover to cover. No better survey of the market, and you'll learn about sectors, interest rates, long and short bonds, earnings, multiples, the works. Then decide what sectors you like, decide either index or managed, and dollar cost average into them. The SEC website has a pretty good tool to see exactly how much fees will cost, directly and through opportunity cost, over your investing horizon. Use it, don't cost nuthin'.

If there's one thing I've learned, it's patience. Time in the market will beat timing the market every time. Make investments that will let you sleep at night. And a cost avoided is as good as an investment return, and tax-free.
 
comanchepilot said:
Keep in mind, however, that sooner or later Nancy Pelosi and those just like her will soon decide that you have 'too much' and others have 'too little' and they will decide how much you can have . . . . sadly.
Click to expand...

Something tells me the OP is well below the threshhold to be worrying about that...
 
Get out of school, buy a car and a house, pay off your Student loans with credit cards then declare bankruptcy and live the rest of your life off cash.
 
Henning said:
Get out of school, buy a car and a house, pay off your Student loans with credit cards then declare bankruptcy and live the rest of your life off cash.
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:yes::yes::yes:

If only Fannie took plastic...
 
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