Ask MetaFilter posts tagged with investing

Buy low, sell high. And?

unSane — Thu, 24 Jul 2008 19:11:16 -0800

What are your trading rules? I'm collecting mob wisdom on trading stocks, on short, intermediate and long term bases. This list of rules is the kind of thing I'm looking to add to. What are your own trading rules? Which rules would you have tattoed to your forehead in mirror writing so you saw it in the mirror every morning before the market opened?

Resource for evaluating past stock recommendations?

ibmcginty — Mon, 21 Jul 2008 07:10:23 -0800

Is there anyone (especially online) who's collected reasonably well-informed stock picks from, say, 2, 5, or 15 years ago and explained why the recommendations did or did not work out? Is there a better way to track that stuff down than hunting around for old articles on financial websites? It seems like making the effort to learn from mistakes in the past would help guard against over-optimistic, irrationally exuberant picks today.

Do REITs have magical money trees?

undercoverhuwaaah — Thu, 17 Jul 2008 07:26:34 -0800

If a REIT has negative Cash Available for Distribution (CAD), how does it pay out its dividend? I'm doing some research on a particular lodging REIT, and read an analyst report that said its dividend coverage ratio was 1.4x, which is good. But when I looked at their cash flow, they have negative CAD. How do they manage to cover the dividend?

How would you invest $100000?

Anonymous — Mon, 07 Jul 2008 19:43:33 -0800

About $100 000 has been transfered to me, and I don't know how to properly invest it. For various reasons, I am now in charge of about $100 000, cash. Problem: I am 21 years old and I know absolutely nothing about investing on this scale.

Can anyone give me some advice on how to properly invest this much? I already have a discount brokerage and savings accounts holding about 30 grand of my own money, so I'm not completely helpless, but I've never had to even think about this many figures before. I'm terrified that I'm going to mismanage this situation into disaster.

Okay, so details:

-I live in Canada. My job doesn't offer any sort of investing plan or anything like that.
-I want this money to grow. At minimum, I would like to "keep up" with what other people do (I'm imagining this is around 7-10% growth per year, is that correct?)
-I don't want to spend any of it for the foreseeable future.
-Tax! Please tell me about how to deal with tax.
-I have a fairly low risk tolerance
-Diversification is important to me. Simplification is not really, although of course it's welcome.
-Property is out of the question. I spent most of last week thinking about buying a Playstation 3. I most certainly cannot handle owning land at this juncture in my life.
-I really don't want a financial advisor. Self management is important to me.
-I have established accounts at TD and ING Direct.

So basically, AskMe, I think I am asking how you would choose to invest this money, given these parameters. Please hold my hand and treat me like an idiot, since I am.

Any help would be much appreciated. Thanks!

What options are there for a low-risk hedge against inflation if I believe that Treasury Inflation Protected Securities (TIPS) aren't working?

diogenes — Mon, 07 Jul 2008 05:49:01 -0800

What options are there for a low-risk hedge against inflation if I believe that Treasury Inflation Protected Securities (TIPS) aren't working? I use an asset allocation strategy in my investment portfolio, and it calls for 15% in TIPS. The inflation premium for TIPS is based on the consumer price index, which is vastly understating inflation right now:

Bloomberg Article

The linked article suggests replacing TIPS with "derivatives tied to inflation expectations" and "corporate and agency bonds." I have no idea how to invest in derivatives, and corporate and agency bonds aren't low risk. It also isn't clear to me how they are an inflation hedge.

What do you think of those options? Are there any other options you would suggest?

Financial / 401k advice for a 23-year-old engineer.

decrescendo — Tue, 01 Jul 2008 06:26:06 -0800

Financial / 401k advice for a 23-year-old engineer. Considering the state of the economy and the price of oil, what should I do with my stocks. Also, I have the option for a 401k but I have no idea what type of 401k to choose. I have around 30k in McDonalds stock that is up 80% from when it was bought for me when I was a kid. Should I hold onto it and weather the storm? I keep reading rumblings of a recession and stock market crash but is that just a scare tactic? I don't want to get kicked back down to a 30% gain on that stock when it's been doing so well up until right now. It has defintely been a long-haul stock but I'm afraid I'm going to lose all that I've built up over the last 23 years.

Also, I've had the opportunity to enroll in a 401k from my company for the last 6 months. I haven't done it yet mostly because I have no idea what to fill out on the form. I have the following options. Any recommendations? I believe my company matches up to 15%.

Should I go with option 1 or option 2?

1. I elect to contribute ____% or ____$ (per pay period) of my compensation as before-tax contributions to the 401(k) Plan until
such time as I revoke or amend my election.

2. I elect to contribute ____% or ____$ (per pay period) of my compensation after-tax as a designated Roth contribution to the
401(k) Plan until such time as I revoke or amend my election.

Note: The total of your before-tax and Roth deferrals cannot exceed 100% or $15,500.00. Your before-tax and Roth deferrals must be specified consistently (both as a percent or both as a dollar amount). If I am 50 years of age or older and I am eligible for a catch-up contribution, I understand I may exceed this total.

I also have all of these to pick from. No idea what to go with here. Considering the economy and what I hear, I'd probably rather take a semi-conservative approach.

Maxim Aggressive Profile II
Maxim Moderate Profile II
Maxim Conservative Profile II
American Funds EuroPacific Growth R3
Oakmark International II
Oppenheimer Global A
First American Small Cap Select A
MainStay Small Cap Opportunity A
Maxim Index 600
RidgeWorth Small Cap Growth Fund I
Lord Abbett Mid-Cap Value A
Maxim Ariel Small-Cap Value
Fidelity Advisor Mid Cap T
Fidelity Advisor Leveraged Co Stk - T
American Funds Growth Fund of Amer R3
Davis NY Venture R
Marsico Focus
Maxim S & P 500 Index
Maxim T. Rowe Price Equity Income
Oppenheimer Capital Appreciation A
RiverSource Diversified Equity Income R3
Van Kampen Comstock - R
Maxim Bond Index
Maxim Loomis Sayles Bond Portfolio
Maxim US Government Securities Fund
PIMCO Total Return Admin
Guaranteed Certificate Fund 36 Month
Guaranteed Certificate Fund 60 Month
Guaranteed Certificate Fund 84 Month
Maxim Money Market

Any help would be fantastic.

The best things in life are free...

veryhappyheidi — Mon, 30 Jun 2008 14:45:16 -0800

My 13-month CD is just about up, and the current intrest rates are TERRIBLE! How should I invest 10k? I'm currently getting 5.25% on my CD which is up in two weeks. I'm young and carefree with no major responsibilities (ie no debt, no family to take care of, and my biggest expense is rent) and already max out the matching contributions on my 401K. Ideally, I would like to be able to get to this money in no longer than 3 years--bonus points if I can get to it in an emergency. Safe is probably better.

I know almost nothing about investing... what should I do? Thanks!

VTIVX FOF FTW?

selfnoise — Mon, 30 Jun 2008 07:24:57 -0800

What, if anything, is a "Target Retirement" fund like VTIVX missing? I am about to roll my 401k from a previous employer into an IRA at Vanguard. (The previous employer's plan doesn't have great plan options and the webacccess/customer service is crap).

I'm currently 29 years old, so I was thinking of putting a large portion of this rollover into VTIVX, which is a bundle of different Vanguard Index funds. It seems like a cost effective way of buying into funds that I would probably just have purchased separately otherwise.

My question is, should I be looking to add anything else from Vanguard's offerings to diversify or enhance my overall selection? For example, this fund of funds does not include REITs... would it make sense to invest in something like VGSIX in addition to it? Or am I overthinking this?

I realize that there probably isn't a scientific answer to this question. Any thoughts are appreciated.

Why invest in treasuries?

justkevin — Wed, 25 Jun 2008 09:21:57 -0800

What's the advantage of treasuries over savings accounts? A majority of my money is in the market, mostly index funds. I have some cash reserves as well (probably higher % than experts recommend for my age, but I'm overly cautious) currently sitting in a savings account.

Savings accounts currently pay 3-4%, but the yield on short term treasuries (under 5 years) currently seems to be below 2%. Even a 10-year note is only a slightly better investment, and that's assuming interest rates don't rise. Is there an advantage to treasuries that I'm missing?

Invest the house?

purenitrous — Thu, 19 Jun 2008 07:35:50 -0800

$75,000 to invest. Question: Do we put it down on our next house or invest for retirement? We (finally) just sold a house one of us brought to our marriage. We have paid off debt with the profits, are planning a family vacation, and need to decide what to do with the rest of the money. DH and I find ourselves in some disagreement about this. We've consulted with a financial planner/investment guy, but I have hesitation about his advice, so want to do some more research before we meet with him again. I'll give you more details here not because I expect the mefites to do our financial planning for us, but because I am new to this, and need to know which general direction to go.

The stats: We both are public employees in a relatively stable (knock on wood) public employee retirement system (Oregon). I have been there 14 years, DH has about 11 years in. We could retire at 54 and 60 respectively with full pensions (30 years in).

We currently contribute $500 a month to deferred compensation plans, that are pre-tax investments. We plan on upping that now that we've reduced debt payments, and could add another $500 without a problem. We've accumulated about $80K in various investments, in these accounts and in an old IRA DH has.

We have 2 children, 2 and 11, so college planning is important-we haven't done any saving here, though my folks have some-but we don't intend to pay all college costs.

We own the house we live in, with about $80 K in equity. We really do need to move-not a great neighborhood, house too small for us and all of our crap, and we'd like to live somewhere where we aren't so dependent on cars. We'd like our next move to be our last, as much as possible; a house that we can live in long term. We'd plan to get a 15 year mortgage so we could be free of it at retirement.

Question at hand: Our adviser believes strongly that it's better to take out a larger mortgage and use your cash to invest; that it will give you a better return over time, and, if you're not planning on selling your house, the return you get in property is irrelevant, since it's not money you have to spend. He advised friends of ours, with a lot of equity in their house, to take equity out to invest a year or so ago. They are, obviously, very glad they didn't.

This philosophy makes me really, really anxious. My preference would be to put the money down on our next house, continue investing, and increase our investments as our income increases and our mortgage stays the same. I like the idea of being less on the hook as far as mandatory monthly payments. It's also a good time to buy real estate (though probably a crap time to sell the house we're living in). Drawback, of course, is a smaller tax deduction this way.

DH is worried that we might not have enough for retirement. I am pretty blase about it and think we're doing well.

What's your advice? Any great website to help us way the pros and cons?

Is an index fund really a pot of gold at the end of the rainbow?

reenum — Wed, 18 Jun 2008 07:34:08 -0800

InvestingFilter: Is there anything inherently flawed about investing in index funds? I recently opened up a Roth IRA, and have invested in an S&P 500 Index Fund. I'll also be investing in a bond index soon.

I've been reading articles online and books such as 'The Lazy Person's Guide To Investing' by Paul Farrell. These books make it seem that investing in anything but index funds sets you up for a loss long term.

In my opinion, I'm a passive investor. I don't have the inclination to try and pick hot stocks. I'm fine getting a market average return. Farrell's book and some other sources such David Swenson make it seem that investing in anything but an index fund is lunacy. They harp on about load funds and how actively managed funds always underperform the market.

My question is: What's the catch about investing in index funds? It seems to good to be true. You keep putting money in and 30 years later, a nice pile is waiting for your retirement.

Some input from the more financial minded members of the Hive Mind would be much appreciated.

Index fund advice, please.

JamesJD — Sun, 15 Jun 2008 17:54:21 -0800

Should I put my savings into an index fund? If so, how? I have about $25,000 in savings, and I don't know all that much about investing. I'm looking to invest the money over a pretty long period of time (20 years or possibly even longer). I should also mention that I'm pretty young.

One thing I have heard time and again is that index funds are usually a pretty good bet (and that they almost invariably beat mutual funds) for anyone who doesn't want to invest actively because (a.) they're about as diversified as it gets (b.) the fees are lower since they aren't actively managed.

Here's what I'm wondering:
(i.) I've heard there are different types of index funds. Where can I learn about which type to pick?
(ii.) Once I've picked one, how do I go about putting my money into it?
(iii.) Are there any reasons why investing mostly in an index fund might be a bad idea?

How to invest proceeds from home sale short-term.

mumstheword — Tue, 10 Jun 2008 01:26:22 -0800

Where is the best (safe, short-term) place to invest money (over 200K) from the sale of our home until we purchase another one. Please don't make me learn a LOT about markets, etc. I'm packing and moving to a new area and already stressed. ; ) We are moving from Washington state to Oregon, and will be renting while we look for a home. Since the market is still going down in the area we're moving to, we won't be in a big hurry to buy but expect the market to hit bottom in late fall or winter, '08/09, so will probably only need a place for our money for 3-9 months. We'd like it to earn a little something to help w/ moving costs. Is there a safe mutual fund where the money could earn, but be easily accessed without a penalty? How and where would I go to find this out...or ???

Do socially responsible investments earn less?

espertus — Sat, 07 Jun 2008 14:53:38 -0800

Do socially-responsible mutual funds perform better or worse than similar non-screened funds? I haven't been able to find a recent objective report on the relative performance of socially-responsible mutual funds compared to mutual funds in similar sectors without social screens. Could anyone point me to such a report?

I understand that the term "socially responsible" is loaded. For my purposes, I'm just interested in the relative performance of funds that use this term, not whether they are really socially responsible.

Should a Canuck invest in non-Canuck markets?

sweet mister — Tue, 27 May 2008 19:44:13 -0800

As a Canadian investor with a discount brokerage account (TD Waterhouse), what are the downsides to investing in NYSE stocks as opposed to TSX stocks? What about stocks in European markets? What about ADR stocks? Most of my income is in US dollars and I have US dollar margin accounts. Some of my investing is personal non-RRSP, and some may be personal-RRSP.

(Motivation: Canadian stocks don't have great stock-screening facilities, and the exposure is heavily weighted towards either oil/resources or indigenous stocks without a massive upside).

S&P 500 for Companies Using Loonies

plaidrabbit — Mon, 12 May 2008 17:55:21 -0800

Can someone point me in towards something considered to be the Canadian equivalent to the S&P 500? While I'm not an investing genius or anything, I know little bits here and there. I have a friend who's coming into a little money soon, and is wanting to invest for his retirement. He's asking for advice on what he should do.

Normally, I tell people in his position to sock the thing in some form of low-fee S&P 500 Fund, as the returns on it usually beat any other fund or single stock in any given year. (I know, I know, it loses sometimes as well.) While the investment isn't fool-proof, it's probably the best option I know of for a "set-it-and-forget-it" style investor, which is exactly what this guy would be.

The kink in the whole thing is that he's Canadian - and he's wanting to use an RRSP. I am not 100% sure on what the limits are, but from what I understand, a majority of your RRSP has to be in Canadian companies, not foreign ones. So, he can only have a small amount of his investment in a true S&P 500 fund, as I figure.

Which brings the question: does anyone know of anything in Canadian funds that has such a tried and true, low-effort return? I'm not wanting to set the roof on fire with the returns, but anything between 7%-10%/yr on average would be about right. A quick Google on "Canadian Equivalent S&P 500" gives me the TSX 60, but that's not being very helpful.

Real Estate in NYC?

tessalations999 — Thu, 01 May 2008 12:47:06 -0800

What is a smart way to invest in real estate in New York City? My boyfriend and I want to start saving to invest in real estate in Manhattan. Does anyone have any experience with this that they could share? Any tips or trends? Thank you so much!

Stock Investor Gifts

gd779 — Tue, 22 Apr 2008 07:31:27 -0800

Gifts for a stock picker: I'm looking for a thoughtful gift for my secretary. She loves to play the market, so I thought that I could buy her a Vanguard gift certificate or something and let her speculate with the money, but that doesn't seem to be possible. Any suggestions? I'd like to spend around $100. Thanks!

What should a European do with this American savings account that is depreciating in value?

Anonymous — Mon, 21 Apr 2008 08:42:23 -0800

European who has USD in an American account - what should I do? I'm European, but lived in the US for a little while, where I had a very good paying job that allowed me to save money. I have a little over $10,000 in an American CD now. I came home to Europe and went back to school, thinking I could use that money to start up a business, make a downpayment on an apartment or something once I gradutae.

I have been watching in horror as the dollar went down against the euro and now that money I was counting on is shrinking away. Are there any suggestions on what I should do with it? Should I just leave it and wait for the dollar to recover? Should I buy something in the US that is likely to appreciate in value? If I had a good income now, I would buy an American apartment or something with it, but I'm a student living from paycheque to paycheque.

What should I do?

Socially Responsible Pension Fund Options?

ericbop — Wed, 09 Apr 2008 13:29:02 -0800

My union offers its members a pension plan that allows its participants to allocate their investments in several types of funds (large cap, small cap, money market, etc). How can I convince my association's pension plan fund manager that they can offer a socially responsible fund as an additional option without violating their fiduciary responsibility?

Please help me decide between Fidelity and Vanguard.

salvia — Sun, 06 Apr 2008 16:37:09 -0800

Questions about opening a Roth IRA -- particularly, does it matter where I open it? If so, Fidelity vs. Vanguard? I want to open my first Roth IRA. I've read past questions and some online resources, but I still have some questions.

- First, does it even matter where I open it? If I figure out I screwed up, how hard is it to switch from one of these to the other?

- I will (very soon) have a 403b with Vanguard through my employer. Does that tilt things in favor of Vanguard for an IRA? Would I be able to "pool" these funds? It sounds nice to make one phone call rather than two. But is there some reason that tilts things in favor of Fidelity? Would it be better to have them both as options? Then I could hold, say, some of both group's target retirement funds.

- To make a good decision, do I need to figure out where I would invest the money first? They have different expense ratios even for their S&P 500 index funds (VFINX is .15% vs. FSMKX is .10%). I realize this isn't much of a difference, but if they differ on the simplest index fund, they're going to differ by more in other things, right? (I'd be deciding between S&P 500 index funds, some index fund with non-US companies, or a target-date retirement fund.)

- If you do think I should decide where to put the money first by actually looking at fees, how do I find that out? There are these scare stories (eg) about hidden fees. Are they still hidden if I look at Morningstar's front load %, back load %, and expense ratio? Or is there a better place to find all this out?

- All over the web people are saying that Fidelity's customer service is better and more informed. This has me leaning toward Fidelity. Do you think this still holds true?

- Lastly, what does this comment from jak68 mean, "Also -- in case you didnt know -- there is a small difference between buying funds via a trading account at a brokerage house (as with fidelity, schwab, ameritrade etc), VS. buying the fund directly from the fund family's website (vanguard, etc)?" Should this influence me in some way?

Thanks for your help. I'm interested in learning more over the long term, but I also have the feeling that I'm making this too complicated and should find a way to make this simple.

Help me understand US Treasury securities.

Flunkie — Fri, 04 Apr 2008 22:18:56 -0800

Help me understand US Treasury securities. I've invested in the stock market for quite some time. I've recently decided that I want to also invest some money in less risky securities, such as those offered by the US Treasury. I've been investigating, but there are still questions that I haven't found answers for.

Question 1. Is the only real difference between "treasury bills", "treasury notes", and "treasury bonds" the length of time until they mature? I understand that their price and interest rates will differ as well, but that obviously depends on the maturity length. So I guess I mean something along these lines: If the Treasury started offering "30 year treasury notes", under exactly the same rules as their current treasury notes except that they have a 30 year maturity, should an intelligent market value them exactly the same as it would "30 year treasury bonds" offered at exactly the same time?

Question 2. Let's say I use TreasuryDirect.gov (which seems like a good idea). How is periodic interest paid out? I don't mean "when" or "how often"; rather, I mean for example "Does it automatically get plopped back into the bank account that I linked to my TreasuryDirect account?"

Question 3. I use Quicken. Investigation reveals a profound lack of information on how to deal with this stuff in Quicken, but seems to indicate that it can't automatically track your US Treasury securities' values like it can your stocks' values. But this is almost unbelievable. So, my question is: Seriously? Quicken can't deal with United States Treasury securities, except manually? And if the answer is "Yes, seriously", then a followup: How do you personally deal with this?

Question 4. I gather that these things are only sold on very specific days. Do I have to log on to Treasury Direct that day, between some hour and some other, and tell it "Hey, I want some of that"? Or can I just tell it in advance that I want to buy such-and-such an amount of security such-and-such, at the noncompetitive price, whenever it becomes available? If the latter, how far in advance can I do so?

Any other hints that you think might be helpful would also be appreciated. Thanks in advance.

Gadget components

erd0c — Wed, 26 Mar 2008 17:16:44 -0800

Does anyone know a website that takes apart new gadgets to see the components? In an effort to invest in component makers, I'm curious to see what components certain companies are using. For example, who is Apple buying their flash memory to supply iPhone etc. Some people enjoy tearing these gadgets apart only to display their insides. However, I can't find a website that does it consistently for a slew of gadgets.
Thanks

Calculating standard deviation on compounded investment returns

stuehler — Tue, 25 Mar 2008 01:20:18 -0800

Is it possible to estimate the standard deviation of an investment's return after "y" years, if you know the investment's mean annual return and standard deviation? In other words, I understand how to estimate the probability that next year's return might be n standard deviations above the mean, or between +n and -n standard devations around the mean.

But what if you bought and held that investment for y years. Is there a way you could estimate the standard deviation of the investment's value then?

E.g., let's say that i put $10,000 into an index fund. That fund has an average return of 8%, and a standard deviation of 16%, and I plan to hold it for 20 years. According to Excel's FV function, the portfolio's expected value will be $46,609.57 by then.

But I don't know how to estimate the standard deviation of the portfolio's possible value after 20 years of compounded growth. Is it possible to calculate/estimate it from just these measures?

I figure that simulation will get me an answer, but I'm hoping for something more generalizable...

Many thanks in advance for any advice or insight (or better yet, a formula!)

Why does Manulife want me to sell my shares?

climalene — Sun, 23 Mar 2008 06:21:11 -0800

Why does Manulife want me to sell my shares? A few years ago I was given 15 shares of Manulife stock. Nothing much happened with it until this year, when they started sending me "voluntary small shareholder sales program" announcements. If I participate, they will sell all my shares along with a bunch of others and pay me the average selling price per share from the week in which my stocks were sold.

Is this kind of program common? Are they just doing it because dealing with small shareholders isn't worth it, or does it indicate something about the state of the company? And is there any compelling reason to participate or not participate? I would feel equally okay about keeping these shares or selling them; I have other investments, and I don't need the cash right now.