Investments for Dummies

June 26, 2006 7:02 AM

Just inherited a bit of cash, need eschatological investment pointers

Its in the tens of thousands. I know crap about investment compared to most current eventish things.

I'd like to place it somewhere more liquid than real estate and somewhere it'll still grow if the dollar drops. I have no real inclination to put in the stock market but am curious about commodities. I have a pretty negative outlook on the American economy in coming years and would like to put my bets in that direction. I guess I'm looking for solid, but not rapid, growth with the expectation of more instability in the world.

Kicker: I have five days to do this before moving to China for a year.

posted by trinarian to work & money (14 comments total)

Check out Exchange Traded Funds, or ETFs. These are mutual funds that trade just like stocks, so they are more liquid than the traditional mutual fund.

You can buy ETFs that hold stocks, bonds, commodities... you name it. I've had some success with EWY, which is an ETF that holds South Korean stocks. Another interesting ETF is DVY, which holds dividend-yielding stocks.

Note: These are just suggestions to get you started. As with any investment decision, do your own Due Dilligence and invest accordingly. Good Luck!
posted by Fuzzy Monster at 7:19 AM on June 26, 2006

Do you save in Dollars?

Then the dollar itself dropping doesn't effect you. What will effect you is inflation. Best solution is inflation protected treasuries.

If you feel strongly that America is collapsing then you might be best off placing this small amount of money into a non-US index fund. I don't know if there is anything out there that tracks MSCI Developed World ex-US but that would a place to start. (MSCI = Morgan Stanley Capital International = a broad market cap & free float weighted index of most of the largest stocks in the developed world). If you feel very strongly that the dollar is collapsing make sure you purchase a non-hedged fund.

Do not invest in commodities or emerging markets unless you have a strong personal view on why that would not just be like buying internet funds in '99. Also those are more volitile asset classes that would require more attention from you.
posted by JPD at 7:23 AM on June 26, 2006

Barclay's iShares. (A specific example of Fuzzy Monster's suggestions)
posted by SeizeTheDay at 7:25 AM on June 26, 2006

Here is the fixed EWY link: EWY.

JPD raises a good point about commodities. Many commodities, including gold and copper, are at multiyear highs and are beginning to pull back. The Big Guns (aka 'The Smart Money') are selling commodities now rather than buying, with oil being an exception.
posted by Fuzzy Monster at 7:39 AM on June 26, 2006

Get an investment counselor. Figure out a clear plan for your retirement goals and they'll sell you some funds that will help you get there. Pay off your debts if you have any. And buy yourself a little something right now.
posted by CrazyJoel at 7:52 AM on June 26, 2006

I've had nothing but good experiences with USAA's finacial advisors. They can work with you while you're in China, too, I suspect.
posted by The corpse in the library at 8:07 AM on June 26, 2006

The first rule of investing mirrors Goldman's Law of Hollywood: No one knows anything. Or to put it differently, for every exquisitely reasoned financial prediction stated by a highly credentialed, intelligent, knowledgeable and experienced observer, there's an equal and opposite prediction from someone as well qualified.

So you pick the strategy that makes sense to you. Assuming this isn't your emergency fund - if so, just put it into a good money market fund - my counsel is to pick a stock fund where, in your judgment, the long-term economic/social trends will work for you. For me, that's funds that are invested in: international stocks (dollar's got to fall) energy, and leisure (boomers are retiring.) Your mileage, etc. Fidelity offers many sector funds.

But the best made plans, etc: In the early 90's after their stock market bubble burst, I made a big bet on the Japanese market. I knew it might take a few years, but nothing would keep this industrious and highly educated country's economy from booming. Whoops.
posted by mojohand at 8:07 AM on June 26, 2006

Unless you're a professional, investing money is like playing someone else's game without knowing the rules. You may be able to learn how the bishop and the rook move, but you don't know the Najdorf defense or the Ruy Lopez.

So whatever you do, keep it simple. If you really do have cash, you could walk down to the Treasury (TreasuryDirect, q.v.), lock in a decent interest rate on fixed bonds (4.8% or so at the moment), or pick up some TIPS (inflation adjusted Treasuries, they yield lower than fixed bonds but their yield rises with inflation.)

Or you could walk down to your local gold dealer, buy a couple dozen ounces of gold or platinum, put it in a safety deposit box in your local bank, and fly away. That's commodities investing in its simplest form.
posted by ikkyu2 at 8:59 AM on June 26, 2006

I think ING's savings rates are at 4.75% right now.

Liquid and FDIC insured....
posted by jimmy0x52 at 9:13 AM on June 26, 2006

Citi is at 5%
posted by crewshell at 11:02 AM on June 26, 2006

Citi is at 5%

Fine print on Citi's e-savings account:

If at any time your e-Savings Account is not statement linked to a checking account in a qualifying relationship package listed below, your e-Savings Account will earn interest at the rate (currently: 0.70%) paid on the Citibank Day-to-Day savings account.

Qualifying relationship packages are Citibank® EZ Checking, Citibank Account, Citibank Everything Counts® and CitiGold®. To open a Citibank e-Savings Account you must have or open a checking account in a qualifying relationship package. Your Citibank e-Savings Account must also appear on the same statement as your checking account

Fine print on the 'free' checking account you have to have to use e-savings at 5%:

Citibank® EZ Checking
Includes a Regular Checking account, unlimited free checkwriting & no monthly fee if you make two monthly bill payments, use Direct Deposit, or meet the combined average balance of $1,500.

Otherwise these fees apply: $.50 per check in CA and NV; in all other markets you get 10 free checks: after that, it's $1 each. There is also a monthly service fee of $7.50 fee in NY, NJ and CT and $9.50 in all other states.

And I mis-stated above, ING is @ 4.25% right now, but here's ING's fine print (which actually is stated prominately, not in fine print at the bottom):

Earn 4.25% Annual Percentage Yield on an FDIC-insured savings account with no fees, required minimums or service charges… no matter how much you have on deposit.

Your decision ;)
posted by jimmy0x52 at 12:35 PM on June 26, 2006

HSBC and GMAC also have relatively low-strings high-interest savings offers, with better rates. (GMAC wants a modest minimum balance, HSBC wants you to jump through hoops to open an account.) I'd go with either of them over Citi or ING.
posted by kindall at 1:52 PM on June 26, 2006

How old are you? If your investment horizon is longer, you can (probably) afford to take on more risk.

But yeah, most people think the boat on commodities like coppr has sailed...
posted by runkelfinker at 2:50 PM on June 26, 2006

If you 'know crap about investment', please don't blow that money. You will likely lose it
posted by growabrain at 12:56 AM on June 27, 2006