Six Weeks to Investor?

January 14, 2012 8:52 AM

Aggressive investing with $3,000?

I have no investment experience whatsoever. I've got a small amount to invest, a willingness to risk it, and six weeks to research and learn in order to maximize the possibility of significant returns (either short or long-term). I'm not asking for the right companies, but the best sites to help me learn and buy. By the way, I'm a woman and would love (but realize it might not exist) a woman-friendly site (like LearnVest).

posted by thinkpiece to work & money (16 answers total)

It's almost impossible to have significant return in current investment environment without significant risk. Anything promise significant returns (either short of long term) is mostly likely speculation. The long term nominal return from stock market during last one hundred year is just 10% (accounted for inflation, the real return is closer to 7%).

Here are some good books that will get you started.

I like Bogleheads forum for learning about investing. People there are very knowledgeable, be sure to ask all questions before you start to invest. Get Rich Slowly actually get me started on investing.

Provided that you have already set aside an emergency fund, best thing you could do is probably to invest that money in a tax advantaged account such as Roth IRA.
posted by Carius at 9:24 AM on January 14 [2 favorites]

I like the site updown for learning purposes.

It lets you pick any amount of pretend money you want to invest in any stocks you want to invest in, and calculates your wins and losses.

If you have six weeks, I'd suggest reading some articles that interest you on morningstar, or Forbes, or smartmoney, or google money, and picking some stocks they mention that you think would fit your needs and do well, and "invest" in the stocks with updown. If you are looking for aggressive investments, 6 weeks can mean a significant change, either positively or negatively, and using updown will let you learn your reactions to fluctuations in the prices of your stocks without any risk.

If you are looking for short term investments, remember that you do have to pay taxes on your winnings, and remember to calculate the cost of each buying and selling transaction for each stock. Taxes can get a little tricky if you are doing short-term selling and buying. Just document the price you paid for your stocks and the amount, and the price you sold them for. It will help you with your records come tax time, and will help you calculate your true earnings after taxes.

As far as brokerage companies, l like Tradeking. They have $5 trades for all transactions, and lots of free info for investors. I've heard some brokerage places are a bit cheaper, like $4 transactions, but for my needs I've been happy with Tradeking.
posted by shortyJBot at 9:32 AM on January 14 [2 favorites]

Do you have an IRA? Do you have savings for an emergency? Do you own a home that needs or could benefit from some work? Do you have any debt? Do you foresee needing to borrow money any time in the near future? How's your car, if you own one? Could it plus $3000 in cash put you in a much more fuel efficient model?

There are many "investments" that pay better real returns than speculating as an amateur in the stock market. That is a sucker's game unless this is truly completely disposable income and you have absolutely no interest-carrying debt.
posted by spitbull at 9:47 AM on January 14 [4 favorites]

Morningstar investment tutorials could be helpful.
posted by the foreground at 9:53 AM on January 14

It is truly completely disposible income, and I have no interest-carrying debt.
posted by thinkpiece at 9:57 AM on January 14 [1 favorite]

Why six weeks? How long until you need the money back? How aggressive do you really need to be? How many hours of those six weeks can you allocate to learning? To me, the urgency and time frame of your Ask as written doesn't suggest this is retirement money.

There are a class of very high risk methods with the potential high returns, but I classify them more as gambling, so if this isn't an academic exercise / competition I wouldn't bother with any of these. First off there are options which let you profit from changes in volatility or general changes in value. Since the contract is usually cheaper than the stock itself, you can effectively lose or profit more from change. There are triple-etfs that use this to effectively "leverage" their investment. For every dollar they invest they borrow more and invest that too. The result is instead of losing 1 dollar they lose 3 and instead of gaining 1 dollar they gain 3. There are also shorts and other techniques that can push you higher on the risk/reward scale.

These are not good long-term investments. They might not even be good short term investments, if you choose the wrong direction. If long term investing is your goal, there's no urgency. You can put the money in a savings account or six month CD while you sit down and figure this out. Most investments are liquid, which means you can change your mind later. Carius recommends a good passive long term strategy. Most people would interpret "Aggressive" in the long term to mean more stocks, fewer bonds.

As far as educational resources go, I liked Shiller's Financial Markets, which covers the basics and math behind things you can invest in (financial markets). The recommended reading from that course is long but informative. for example Stocks for the Long Run has a chapter on Morningstar ratings, summarizing research showing that 5 star rated funds underperform the market going forward. This makes sense: past returns are not future returns so Morningstar's objective analysis is bound to be flawed. A Random Walk Down Wallstreet contains similar research based advice. I found both in my public library, along with a number of other interesting books.

My personal strategy is to find very very low cost index funds for stocks and bonds. Of course, I also have a well funded savings account that I use to finance things. For example, I did some analysis and discovered that the discount for prepaying my web hosting a year in advance was huge, and unless I had an investment opportunity exceeding 19% APY, I should totally take it. Anywhere you have prepayment discounts is a place where you can put a savings account to work for you!
posted by pwnguin at 10:10 AM on January 14 [1 favorite]

The best investments you can make come from your own knowledge and research. If you have the know-how or experience to start a unique company and make it successful, there is nothing better you can do with that money than to put it to use for yourself. Alternately, the best stock investments come from buying companies that are currently undervalued and in a position to make huge profits or grow, and knowing which companies these are takes a lot of research. It's also risky, as there is no telling how smart or accurate your evaluations are, or whether other market fluctuations will destroy your seemingly reasonable assessment. There's no simple, easy way to make good returns on investment.
posted by drethelin at 10:13 AM on January 14

Do you want this to be a very active hobby where you are buying and selling frequently (possibly multiple times a day) and watching the market continuously? Or do you want to just invest the $3,000 and then let it sit in that investment for a long time? That will make a big difference in the approach you take.
posted by alms at 10:22 AM on January 14

I like Warren Buffet's books.

If you're willing to risk it, index and mutual funds are too safe. You should probably buy a few different stocks, with an understanding of the company profiles. I would start off learning how to read financial statements, and think about the sectors that you're personally familiar with through your hobbies or career, and invest within those.
posted by redlines at 10:42 AM on January 14

Thanks for all the great questions to help clarify my own. That's right, it's not retirement money, and yes, I'm looking to "gamble" the 3K on something that might be high risk for high return with no pressing need for the money to come back within any specific timeframe.

I understand that meaningful investing is long-term investing, but that's not what I'm interested in for this pot of money which I will receive in 6 weeks. I won't be watching the market continuously, I am business-savvy, a global trend-watcher for my job, and willing to let the money sit once the investment is made.

Hope this clears it up, I'll step out now, with thanks!
posted by thinkpiece at 10:43 AM on January 14 [1 favorite]

"Do you want this to be a very active hobby where you are buying and selling frequently (possibly multiple times a day) and watching the market continuously?"


It would be very difficult to make money that way with only $3k. Among other things, commissions will eat up any profit in no time flat.

If you really want to bet aggressively and maximize the chance of making a big profit, options are one way to go. Lots of leverage there.

However, it would be really tough to learn how to trade options well within only six weeks. Unless you have some very good intel on a specific company, you might as well take your money to the dog track.

Sorry for not being so helpful...
posted by mikeand1 at 10:45 AM on January 14

^^^ Just saw your response.

Yes, high risk/high return investing would be options trading. The nice thing about buying options (as compared with selling them) is that your loss would be capped at the price of the options. In other words, you could buy $3k worth of options, and that's the most you could lose. But if you bet right, you could earn several times your money back in a fairly short period.

So if you have some kind of knowledge about a company that the public doesn't have (and of course, I'm assuming that you acquired it legally), e.g. you know they're going to miss their earnings this quarter, you can buy $3k in put options and get back $10k or whatever when their stock drops.

I dabbled in put options for a while, but it is very, very tricky and risky. Not advised unless you truly know what you're doing, or you really really don't care what happens to the money!
posted by mikeand1 at 10:54 AM on January 14

I'm looking to "gamble" the 3K on something that might be high risk for high return

Why not play craps then (not kidding)? There are bets you can make where the house has little to no edge. This is only if you are indeed willing to lose your money, but if you play judiciously and quit when you're ahead, your returns could be much better than the stock market.
posted by Wordwoman at 1:05 PM on January 14

Currency trading. Check out Oanda.com or FXtrade.
No commissions, they make their money on the spreads.
It is gambling, however. I did this for a while a few years ago, and trading conservatively and cutting my losses and taking small gains I made a few hundred dollars a day, up to a couple of thousand a week. Then I had a bad day and wiped out a weeks worth of gains in one afternoon and that was a very good lesson for me to learn, and currency trading lost it's glow for me.
They have practice accounts for you to self teach.
Be careful, though, because you are trading on margin, and you can easily end up losing more than what you've put in your kitty (aka your trading account).
Again....It is gambling, but with tenths of pennies instead of chips...
posted by newpotato at 1:23 PM on January 14 [1 favorite]

For high risk / high reward (or losses), I agree with the above on options and currency trading. Other options include:

• Open foreign CD or saving account in a volatile country - you get exposure to both high interest rates as well as exchange rates. Interest rates are over double digits in certain countries.
• Invest in penny stocks (do your research)
• Invest in any stocks that been beaten up in the last X time frame. For example, you can look up any stocks that are in their 52 lows (stock price) or stocks that have dropped more than 50% in last week, etc. Netflix, Bank of America, Yahoo, RIMM (Blackberry) etc. are household name stocks in this general category.
• Life policy trading
• Gambling in Las Vegas
• REITs
• Corporate Bonds

Slightly related, if you're looking at the possibility of getting a huge return, then I would recommend that you open a Roth account if you meet the requirements. All your earnings will be tax-free (saving you 15 to 28%, depending on your marginal tax rate) and you can withdrawal the initial $3k whenever you want.

However, you should also check out tax loss harvesting if you don't qualify for Roth account or you think there's higher probability you'll lose this money or depending on your tax situation, you'll save more in taxes if you do lose your money.
posted by vocpanda at 7:47 PM on January 14

"So if you have some kind of knowledge about a company that the public doesn't have (and of course, I'm assuming that you acquired it legally), e.g. you know they're going to miss their earnings this quarter, you can buy $3k in put options and get back $10k or whatever when their stock drops."

I just want to throw it out there that trading on non-public information is definitely insider trading, even if you "acquired it legally."
posted by benbenson at 12:35 AM on January 15 [1 favorite]