Advice for a teenager

[LOL!]

Forget about all the mutual fund research. It's worthless. You can pretty much select from the investments listed at www.altruistfa.com/dfavanguard.htm and in the "here" links in the analysis section to get to other funds/ETFs besides DFA and Vanguard. Those are ALL you need to look at. Period.

Also read this link: Investment Guide
If you want more reading, then read the references found in the above and take a look at http://seekingalpha.com/article/15134-the-seeking-alpha-etf-investing-guide

 

[samclem]

leahcim,
-Congrats on your ambition and your focus on your goals.
- Regarding your investment approach: You're going to take some criticism from folks here, but it's not personal. Many of us tried the same thing you are doing, and we want to help you avoid costly mistakes.
- Bottom line up front: It is not feasible to research mutual funds, look at their prior returns, and pick the ones that will do best in the future. This is nothing like doing a lot of research and getting the best deal on a car, etc (take this from someone who spent months looking for the perfect toaster over--you can imagine how much research I did before plunking down my first few thousand $$ in mutual funds. And they turned out to be high-cost stinkers).

Keep putting you money in the bank or another safe place for right now-it wont hurt to wait a few months while you study up.

While it's not possible to pick the best funds by loooking at past results (really-it's not), you are in luck. A methodical mindset, especialy if you're comfortable with statistics, can let you appreciate the bets way to invest far more quickly than someone who does this bythe seat of their pants.

I recommend that you start with some free exploring at William Bernstein's site, or start with his book "the Four Pillars of Investing" then maybe pick up his book "The Intelligent Asset Allocator". If you want to understand investing from a quantitative approach, you'll ike this last book.

And, if you've truly got the "retire early" spirit, you won't buy any of these books--you'll check them out from the library and save that money!

 

[leahcim]

I'm so glad I procrastinated buying some stocks. Right now I have 6000$ to invest. I am going to start a new fund with 3000$, then dollar cost average the rest.

So, I was thinking the:

Vanguard Total Intl Stock Index VGTSX

I looked at the other mutual funds I have setup/my dad has for me, and 3 are large growth, 1 is large value, and 4 are large blend. Do I need some small/mid caps? The ones I already have had kinda high expense ratios and haven't done too well (except for Janus 20 JAVLX before this year).

 

[plex]

Nothing has done well this year (except treasuries/CDs/I-bonds/TIPS...things that are essentially not meant to go much further than beating inflation).

It has been an overall bear market, while financials have been hit the hardest, along with emerging markets (and possibly REITs, would have to look it up how the foreclosure situation is affecting them), everything else has been taking a pretty big beating as well

It sounds like you picked a better fund, it might also be good to checkout Vanguards ex-US fund (lookup the foreign tax credit). Are your other funds in US stocks or are they international? If they are not international then it would certainly be good to pickup a heavy dose of international.

You may want to get a small or mid cap fund, it depends on what sort of allocation you want, it is generally helpful though I believe. You may also want to eventually get some REITs.

 

[Razor]

I'm so glad I procrastinated buying some stocks. Right now I have 6000$ to invest. I am going to start a new fund with 3000$, then dollar cost average the rest.

So, I was thinking the:

Vanguard Total Intl Stock Index VGTSX

I looked at the other mutual funds I have setup/my dad has for me, and 3 are large growth, 1 is large value, and 4 are large blend. Do I need some small/mid caps? The ones I already have had kinda high expense ratios and haven't done too well (except for Janus 20 JAVLX before this year).

I don't think the market has hit bottom yet. If you are a gambler put it in a money market and see what happens. If the market drops another 20% you will be that much ahead.

 

[leahcim]

Ya, that sounds like a good idea too. I've had a few ideas, but I can't settle on any because I'm really not sure what to do.

like 3-4 of the funds I have are described on morning star as: "this funds can hold up to 20% in debt securities of non-us issuers, 5% in emerging markets, and 20% in REITS". This makes me think I have enough foreign stuff.

I think JSVAX looks good, but it is another large blend and I already have a lot of them. I've read online that small caps are good if you are young b/c they have a higher risk, but better reward. But, it seems small caps have not gone down as much with this recent problem. I'd like to take advantage of buying stuff that has gone down. JSVAX has gone down 33% this year.

My current plan I am leaning towards is:

Opening JSVAX with 3000 when the DJIA drops to like 9000.
Opening a small-cap (either an index fund, or DISSX) with 3000 when the dow is @ 8500.

Weekly add $250 to each.

 

[Finance Dave]

I don't think the market has hit bottom yet. If you are a gambler put it in a money market and see what happens. If the market drops another 20% you will be that much ahead.

And if the market goes up 20% you will be that much behind.

I like your idea of DCA on the remainder.

Dave

 

[Finance Dave]

Opening JSVAX with 3000 when the DJIA drops to like 9000.
Opening a small-cap (either an index fund, or DISSX) with 3000 when the dow is @ 8500.

Weekly add $250 to each.

How do you know it will drop to 9000? 8500?

What if it goes up?

I say set a time, not a market value, and invest at those times. i.e....today, in 90 days, and in 180 days...or something like that.

 

[samclem]

FD,
He's just going to have to get this out of his system. Stock picking and market timing--most of us have gone down this road at some point.

leacim,
The dollar cost averaging approach (DCA) is a great way to get into the market without making all you bets on one particular direction of market movement or another. Nobody know which way the market will move (there are indicators both ways) and if you buy in over time you'll, on average, buy more shares when the market is down, fewer when it is up. Studies have shown that the optimum approach is to just put all you money in as soon as you can, but there are psychological reasons 9that you are grapling with right now) that make this hard.
If you want to take a more "hands-on" aproach, you might want to consider using the "Value Averaging" method. It has even better long-term results than DCA does, but is a lot more involved.

Here's a comparison of the two approaches. If you want te details, Try to find (or buy) Michael Edelson's book on Value Averaging.

 

[leahcim]

FD,
He's just going to have to get this out of his system. Stock picking and market timing--most of us have gone down this road at some point.

leacim,
The dollar cost averaging approach (DCA) is a great way to get into the market without making all you bets on one particular direction of market movement or another. Nobody know which way the market will move (there are indicators both ways) and if you buy in over time you'll, on average, buy more shares when the market is down, fewer when it is up. Studies have shown that the optimum approach is to just put all you money in as soon as you can, but there are psychological reasons 9that you are grapling with right now) that make this hard.
If you want to take a more "hands-on" aproach, you might want to consider using the "Value Averaging" method. It has even better long-term results than DCA does, but is a lot more involved.

Here's a comparison of the two approaches. If you want te details, Try to find (or buy) Michael Edelson's book on Value Averaging.

Hey thanks. I read about DVA yesterday, but it seemed to hands on ( sometimes you sell too). Next monday I will buy definately...prolly. Right now I am leaning towards the vangaurd total stock market (VTSMX) and vangaurd mid class blend (VIMSX). I want to open both with 3k in each, then add 250 to both each week. The problem I see is that they both have minimums of $3000. I want both to be a roth IRA and the max for that is $5000. Do you know if vangaurd lets me open one with a total of $3000, but $2k in roth and $1k in non-ira?

After I max out my ira, should I look into ETFs, or is there anything better for taxes?

Thanks

 

[Razor]

And if the market goes up 20% you will be that much behind.

I like your idea of DCA on the remainder.

Dave

It is more likeky to drop 20%.
Do you believe it will go up 20% in the next 6 months? The worst is yet to come. I am not getting back in yet.

 

[Razor]

FD,
He's just going to have to get this out of his system. Stock picking and market timing--most of us have gone down this road at some point.

leacim,
The dollar cost averaging approach (DCA) is a great way to get into the market without making all you bets on one particular direction of market movement or another. Nobody know which way the market will move (there are indicators both ways) and if you buy in over time you'll, on average, buy more shares when the market is down, fewer when it is up. Studies have shown that the optimum approach is to just put all you money in as soon as you can, but there are psychological reasons 9that you are grapling with right now) that make this hard.
If you want to take a more "hands-on" aproach, you might want to consider using the "Value Averaging" method. It has even better long-term results than DCA does, but is a lot more involved.

Here's a comparison of the two approaches. If you want te details, Try to find (or buy) Michael Edelson's book on Value Averaging.

It really is different this time and I have lost too much money listening to the standard financial advisor lines. Market timing does work if you pay attention.

 

[jIMOh]

I have an engineering degree and cannot wait to find a career non engineering related without the income drop off.

So advice:
1) keep expenses low. Examples- avoid mortgage- might prevent you from moving (it is preventing me from moving to take other jobs in other areas for example)
2) invest early
3) have fun throughout life- do not wait for retirement to enjoy life.
4) invest in yourself after you graduate to give you options. I have worked for 11+ years and have changed my specialty at same company 4-5 times. If you work in a technology field, the technology you learned going into college will be different by the time you graduate. Being flexible and adaptable is more important than being good.

 

[Razor]

Jim Cramer: Time to get out of stocks - Today Technology & Money - MSNBC.com

 

[REWahoo]

Jim Cramer: Time to get out of stocks - Today Technology & Money - MSNBC.com

At last - capitulation!

 

[Razor]

At last - capitulation!

If everyone follows his advice there will be no one left to watch his show.

 

[wolfbay]

Do you have a years living expenses in some very conservative investment?(cd etc).If not that would be a good first step.Also maybe it's not different this time and this bubble bursting could cause stocks to languish for 20 years as they have in Japan. Timing the market is impossible unless you're just lucky but Dollar cost averaging might be a better strategy than a lump sum into equities.

 

[John23]

When I was in my late teens, early 20's (late 90's, early 00's), I got exposed to lots of different things (my goal was early retirement, or at least better than 9-5). And I live in southern california, where the idea of 9-5 salaried work is gone. That model hasn't worked here for 20 years.

Got exposed to...

-Stocks/investing. Started with Wade Cook, a guru of the late 90's. Invested some money in charting services, subscriptions (thestreet.com, etc). Didn't lose much money on them ($50 a month, $20 a month), but a waste of time.

In investing, I'd skip straight to the good stuff....buffett, charlie munger, jim rogers, classic books (intelligent investor, etc). You can waste alot of time studying the wrong things in the market. Contrary to popular opinion, you don't have to invest all the time, or spend every minute of the day worried about it in order to succeed. The key is being right, not how much time you spend on it.

There's alot of garbage in investing though. Lots of scams. Lots of fees. Lots of people that think they know something, and they don't know anything. Lots of "salesmen", but they have cards that say, "financial planner" or "Financial consultant". Be wary.

-Got exposed to tony robbbins, personal development. Some of it good, some of it not.

One really good author I like, jay abraham. A marketing consultant, author. He fascinates me. He teaches very powerful marketing, business strategies.

You can learn the same thing, similar things from classic marketing books, but they don't come alive, you don't know what to do with it.

I think a really simple, sensible plan for most people...

-Work, build up some money.
-Keep expenses low.
-Stay out of debt.
-Go out, have fun, do normal things.

Use common sense!!

In investing, there are these two schools of thought, fundamental analysis and technical analysis. Go to any book store, and that's what's there. Almost like a rivalry.

But in some stocks or investments, they don't mean diddly. These investment banks that went bust....from $90 to $2 in a few weeks or a few months. Looking at charts wouldn't have told you what lehman brothers was doing or the mistakes a bank made. Or bad loans made by a mortgage broker. You think about it, what more would you need to know?

The key in investing is to avoid big losses. Stocks that go from $70 to $3 don't recover. That's what you want to avoid at all cost.

Then in your spare time, get exposed to things, see what works. Replace tv with books or seminars. You're going to get very smart, early. Then it sets you up to do what you want.

My advice is avoid big mistakes that take you out of the game, or hurt you badly.

 

[leahcim]

Thanks for the advice. I finally pulled the trigger sometime last week. 6,000 in Cemex (CX) and 3,000 in Vangaurd Mid cap index fund (vimsx). I'm DCA'ing 2k more into vimsx...just wish I had thought about DCA'ing into Cemex.

 

[Texarkandy]

Hey, I'm 19 and I want to retire ASAP (after I start working of course). When I'm 21 I'll have a degree in Engineering and hopefully about 50-60k $ saved. When I get a full-time job my plan is to save as much as possible (maybe rent an apartment instead of buying a house)... Right now my plan is to max out my Roth IRA (so it is tax free later), and put the rest into mutual funds.
Is there anything else I can do better?

Thanks a lot!

You are 19. Good you are thinking ahead, but don't forget to have tons of fun, do interesting things, travel to places you want to see, (esp do some travel before you have kids - if you plan on kids)

(ah, to be 19 again, what I'd do different!)

And remember "If you want to make God laugh, tell him about your plans."

(some older folks might also want to think about that one in light of recent market events)