What should I invest in??
This is a very general thread with room for a lot of different opinions so sorry if it isn't more specialised!!
I have spent the last year or so paying off my debts with the income I have received from dancing. I am now at the point where I am able to save some extra cash but have no idea what to do with it. I am not really that well educated in the different areas of investment - just wondering if there are any semi 'idiot proof' ideas on what to do with my extra cash so as to set me up well for the future?
Re: What should I invest in??
BiancaNZ, after your debts have been paid off, the next thing that dancers usually need to do is to build up a reserve of 'ready cash'. Unless labor laws are vastly different in NZ than they are in north America, if a dancer should suffer a car accident or otherwise get sick or injured so that she can't work for several weeks there aren't any gov't programs which are going to provide her an 'unemployment check' or 'worker's compensation' check or otherwise pay for food and rent and utility bills while she's not dancing and therefore not earning money. Having a 'ready cash' reserve to fall back on means the difference between falling behind on rent and utility bills and car payments and ruining her credit rating, and also means the difference in not being forced to sell some other type of an investment at an inappropriate time thus being forced to take a 'loss' on the value of that investment and/or on additional taxes.
The usual wisdom is that the size of this 'ready cash' reserve should be in the range of 3 months worth of 'normal' after-tax dancing earnings, or six months worth of living expenses typically. The 'ready cash' reserve doesn't actually need to be cash, but needs to be a bank savings account or a money market account or several short term CD's with staggered maturity dates, or some other 'liquid' investment which can be 'cashed in' without penalty/loss to 'replace' normal dancing income if you should become unable to work.
My personal favorite is to buy a new $2000 6 month CD every month for six consecutive months, which can then be 'rolled over' into new 6 month CD's when the earlier CD's progressively mature. The fact that the money is in CD's with early withdrawl penalties tends to eliminate the temptation to 'spend' the money on something else, as is easy to do with a savings account or money market account. But because the CD's have staggered maturity dates, if something does happen they can provide a 'replacement income' of $2000 per month for six consecutive months as the CD's progressively mature and are not rolled over. 6 month CD's also usually provide a somewhat better interest rate than savings accounts or money market accounts, meaning that the CD interest earned and rolled over into new CD's should just about keep pace with inflation. And if something really disastrous happens, you can think about cashing non-mature CD's in early and paying the early withdrawl penalty if you really have no other choice (but you usually DO have a choice, i.e. cutting spending down to really essential things only if you are unable to work, in order to stay within your $2000 per month 'replacement income' budget).
Obviously, the $2000 amount I chose was based on my own monthly minimum living expenses i.e. mortgage payment plus car payment plus monthly utility bills plus food. To determine what amount you should be targeting, sit down and figure up what your own minimum monthly living expenses actually are. Also, since I first established my 'replacement income' reserve my 6 month CD's have rolled over with interest a few times causing their actual value to grow to like $2400. Good thing too, with rising taxes increasing my mortgage payment and rising energy prices increasing my utility bills ! A quick check shows that NZ$ 6 month CD's are now paying about a 6% interest rate, which would give you half a chance of staying even with NZ price inflation.
Once you have such a 'replacement income' reserve in place, THEN you can think about putting your future earnings into other types of investments.
~
Re: What should I invest in??
try : first, that will give you all the basics for nz investing. once you have the hang of it,consider going to a financial adviser if your really into it.
buying student accommodation and renting it out is reasonably good in akl and welly. low risk,low start up cost, and low/average returns...(i think, geez dont quote me on that, i only know a few ppl there with these apartments)
Re: What should I invest in??
At the moment nothing is a good investment. Money market rates at some places are at about 5%. Do that, to park your money till you can see what is going on with oil and
all of the moving parts of the world economy where there is potential from many tagent points for alot of negative news.
There is a great chance of losing principal and conservation of your money (with increasing money market rates) is a conservative bet when many many many things are uncertain.
Re: What should I invest in??
Quote:
At the moment nothing is a good investment
Perhaps nothing 'conventional' is a good investment right now. But it is possible and these days downright easy to play the 'downside' through new Exchange traded inverse funds like DOG , PSQ , SH and MYY etc. These are obviously high risk high potential return speculative investments, but they do offer the possibility of earning huge profits in declining stock markets.
Again, where girls are just beginning to establish themselves financially, they need to go through the process of establishing a 'replacement income' fund, then establish some stable 'passive income' investments, then establish some medium risk 'growth opportunity' investments, and finally if they still have income left over for investments they can consider playing around with 'high risk high potential return' stuff !
~
Re: What should I invest in??
Cool - thanks guys! I will get started on my savings again and start building up my ready cash reserve - at the moment it is sitting on about $500!!! - not very healthy needless to say!!
Re: What should I invest in??
I'm no investment whiz, but I'm going to plunk my future disposable income into solar energy products & maybe ethanol.....I started adult life as a greenie.
I'm going to ask my uncle for some advice on this. He's an honorary Jew for going from no-indoor plumbing, broke-ass hick to millionaire, so I bet he's got a few good ideas. (He also owns two Priuses, bought before the gas prices shot up. Smart man.)
Re: What should I invest in??
Quote:
but I'm going to plunk my future disposable income into solar energy products & maybe ethanol.....I started adult life as a greenie.
No objection here, as long as you don't allow the 'green' of your personal politics blind you to the 'green' of the true economics behind some of these companies.
When I last discussed this issue with a VERY experienced professional investor (the fact that the discussion took place in a VIP room is beside the point LOL), he stated that the solar energy companies of today resemble the microchip companies of 20 years ago in regard to market development. He then suggested that I do some research and compare a company called Zilog to a company called Intel. Moral of his story was that there is likely to only be a small handful of companies that come out on top in the industry segment, that the companies that do come out on top don't necessarily accomplish this because their product is better or their costs are lower, and that betting on the wrong company can cost investors a LOT of money.
Re: What should I invest in??
Other than a down payment on home or a paid in full auto then I would say a good starter investment is to buy a bank CD or open an ira account.
AFTER you get all those then it's time to look into bigger investments (with bigger risks) such as stocks or mutual funds.
Now for my amateur opinion:
As for stocks and mutuals- I like select medical, alt energy and then some other basic needs companies like foods for examples. Personally, I like ADM. It's a solid and diverse company for the long haul.
Right now the market is pretty yucky. However, if you can afford to put a few grand on the market and LEAVE it there for the next 13-15 months (at a min.) then now isn't such a bad time to buy some stuff at a discount. But if you go that route, do it quick while things are rocky because of the newest batch of middle east wars. When things settle down there, then our stock prices should rise again and settle down for a bit.
Re: What should I invest in??
Quote:
Originally Posted by madmaxine
I'm no investment whiz, but I'm going to plunk my future disposable income into solar energy products & maybe ethanol.....I started adult life as a greenie.
I'm going to ask my uncle for some advice on this. He's an honorary Jew for going from no-indoor plumbing, broke-ass hick to millionaire, so I bet he's got a few good ideas. (He also owns two Priuses, bought before the gas prices shot up. Smart man.)
FYI:
Two of the US richest men, Bill Gates and Richard Branson, have bought big chunks of ethonal company stocks 8)
Re: What should I invest in??
^^^ Believe it or not I also like ADM (although I don't own any shares at the moment). Although the price was driven up last May during the 'hot money' rush into ethanol profits, the true strength of ADM lies in corn 'services'. It is speculated that the heavy additional demand for corn due to the 'diversion' of much of this year's corn crop into ethanol productionis going to convince a lot of farmers to expand their corn farming acres, and ADM supplies not only the seed but also the transportation and storage of the crop itself.
I also agree to some extent that if/when the US stock markets tank there will be some opportunities to buy stock shares at a bargain. I'm watching for an opportunity to pick up some ADM shares at a lower price than the stock has recently been selling for, but it has just gone through a 'double top' pattern so a further price decline is pretty likely soon.
But there is also opportunity right now to play the 'down side', although the knowledge / ability of how to to do so isn't anywhere near as widespread as playing the 'upside'. One way to profit in declining markets is to buy put options on stocks you are certain will fall in value, or you can buy 'inverse' index tracking ETF shares which rise when the corresponding Index falls. I don't recommend outright shorting of shares (i.e. borrowing shares from your broker, selling the borrowed shares, and then buying back the same shares a few weeks later to replace the ones you borrowed at a hopefully lower future price), because the downside risk is major if you guess wrong. At least with put options, the maximum amount of money that you can lose if you guess wrong is the price you paid to buy the put options in the first place.
The other encouraging fact about making money on the 'down side' is that Joe Sixpack usually can't do this because his 401k stock / fund plan only gives him the choice of buying or selling. In other words, all Joe Sixpack can do to avoid 'down side' losses is to sell out of his stock and bond funds and shift the money into his money market account. But with put options or inverse ETF's you can actually make a lot of money when specific shares or broad markets decline. Right now I do own some shares of DOG in anticipation that the Dow Jones is going to take a pretty deep reversal.
Quote:
Two of the US richest men, Bill Gates and Richard Branson, have bought big chunks of ethonal company stocks
Yes, but they bought them prior to last May's rapid rise in ethanol company share prices. You don't suppose somebody was whispering from Washington ?
~
Re: What should I invest in??
One of the best bits of advice I ever got was rthat risky investments demand more time. Compared with conservative investments, you have to spend a lot more time monitoring performance, checking the continued validity of the reasons why you expect a good return, etc.
So take a sober look at your lifestyle. Do you really have a lifestyle that permits you devote a lot of time to asset management, and to be confident that you will be informed and able to move quickly when things change? If not, then the best gift you can give yourself is to admit it, and go with more conservative investments.
I do a full quarterly review of all investments, and keep up with financial press on a weekly basis. I am pretty disciplined about that, but that is not enough time for a lot of individual stock picking, and it certainly is not enough time to mess with options and other derivatives. So I keep it pretty simple -- a few mutual funds, balanced between large cap equity and bonds, some international equities, some small cap equities, and some real estate.