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Thread: Investing for the unskilled investor.

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    Default Investing for the unskilled investor.

    From time to time the question gets asked, how do I invest? Or, the derivative, I don't know how to invest, what do I do? Replies then get complicated. They don't need to. In the interest of full disclosure, I am a Berkshire Hathaway stockholder, and I spend a lot of time listening to and reading letters from Warren Buffet and Charlie Munger. I initially evaluated stocks, tracked them closely, bought individual issues and read evey word that my companies wrote. As my own business grew, I found I had less and less time to do this and it just isn't as much fun for me now. Back to Buffet and Munger, who are arguably the most successful investors of all time. in 2012, Buffet sent a letter to Berkshire Hathaway shareholders where he gave his investment advice to novices, people like me who no longer have the time to study companies carefully and the like. He suggested a simple two fund approach.

    Yes, two funds. His allocations are even simpler. Buffet suggests put 90% in a low cost S&P 500 fund such as Vanguard's VFIAX or VOO. That simple. (In the interest of full disclosure, I am invested in VOO.) He says the other 10% goes into a low cost short term U.S. Government Bond index fund such as Vanguard's VSBSX or VGSH. (Again in the interest of full disclosure, I am invested in VGSH.) I feel certain that he woud approve of the low cost funds from Fidelity, or Schwab too. It's important to note that he does not say these funds will outperform all other funds, just the high cost ones. He says American business has been very succesful over the long term and he sees noting that will keep it from being so in the future. Naturally, there will be ups and downs along the way, but investing is a long term thing, not something to be done overnight or for quick gains. (For the losses of such a strategy will be quicker.)

    I have followed Buffet and Munger's advice and am in the process of moving my investments totally to this set up. 90% low cost S&P 500 fund, 10% short term government bond funds. Further, this is the way I have my daughter's 529 fund invested and the way I have advised my BF to invest his money. Should I die, the advise I have given my trustee, (BF) on investing for our daughter's future is exactly the same.

    XOXO
    Z

    As always this is not investment advice, just investment information. I am not a financial advisor.

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    Default Re: Investing for the unskilled investor.

    If you want an even more diversified stock fund, the "Vanguard Total Stock Market Index Fund Admiral Shares" covers the entire stock market.

    https://investor.vanguard.com/mutual.../profile/vtsax

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    Default Re: Investing for the unskilled investor.

    Isn't the fund too big to start with? Or I'm wrong...

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    Default Re: Investing for the unskilled investor.

    Thank you Z for your helpful advice, do you know what the equivalent of this would be in Canada?

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    Default Re: Investing for the unskilled investor.

    Afaik Canadians can invest in the U.S. stock market. Unless you are asking for a fund composed of Canadian companies.
    A
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    Default Re: Investing for the unskilled investor.

    So there is a huge number of funds, tell me which one?

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    Default Re: Investing for the unskilled investor.

    Quote Originally Posted by Melindaswifo View Post
    So there is a huge number of funds, tell me which one?
    If I or anyone else did that it could be construed as offering investment advice. I and others have made general recommendations without touting a particular stock or fund. So either do your own research or open an account with a reputable broker , money manager or financial advisor.
    A
    The credit belongs to the man who is actually in the arena... who, at the best, knows in the end the triumph of high achievement, and who, at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those timid souls who know neither.
    Teddy Roosevelt

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    God/dess Zofia's Avatar
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    Default Re: Investing for the unskilled investor.

    Quote Originally Posted by Melindaswifo View Post
    So there is a huge number of funds, tell me which one?
    I believe I listed some examples.

    Z

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    Default Re: Investing for the unskilled investor.

    Hi, does anyone have advice on whether it's a good idea to buy a newly launched ETF, without any past performance data to look at? It ticks all the right boxes for me otherwise and I can't find anything comparable.

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    Default Re: Investing for the unskilled investor.

    Quote Originally Posted by JessaJade View Post
    Hi, does anyone have advice on whether it's a good idea to buy a newly launched ETF, without any past performance data to look at? It ticks all the right boxes for me otherwise and I can't find anything comparable.
    Honestly, I would not do it. Look for a fund with an ultra low expense ratio that tracks the S&P 500.

    HTH
    Z

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    Default Re: Investing for the unskilled investor.

    Thanks Zofia. I'm in the UK, and already have a few funds (one which tracks FTSE 250). I have an emerging markets fund but am looking to add another one that excludes China (and also has low TER, is of a decent size, and fulfils a few other criteria).
    I think I might wait until the one I like is a year old (in April).

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    Default Re: Investing for the unskilled investor.

    Quote Originally Posted by JessaJade View Post
    Thanks Zofia. I'm in the UK, and already have a few funds (one which tracks FTSE 250). I have an emerging markets fund but am looking to add another one that excludes China (and also has low TER, is of a decent size, and fulfils a few other criteria).
    I think I might wait until the one I like is a year old (in April).
    The following is simply MY OPINION. It should at most only encourage you to seek professional investment advice and /or do your own research. Any reliance or investment decisions that are in any way based on anything I post are completely AT YOUR OWN RISK !
    Be careful about investing in China. Please do your research FIRST. China has MAJOR long term problems that do not bode well for long term growth. They have been manipulating their currency and cooking the books for decades. Their population is rapidly aging and they do not have enough working age people to support their retirees. Their environmental problems are numerous and immense. That's just scratching the surface.

    That said, ETF's have proven to be very good investments. Unlike mutual funds there are no managers to pay. A DOW based ETF goes up as the DOW goes up; same for an S & P etc. Some are broad based and others have a more narrow focus ( e.g. Tech, Energy, etc. ).

    What I would shy away from for right now are cash and bonds. Thanks to inflation both are losing value.
    A
    The credit belongs to the man who is actually in the arena... who, at the best, knows in the end the triumph of high achievement, and who, at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those timid souls who know neither.
    Teddy Roosevelt

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    Default Re: Investing for the unskilled investor.

    Yes, the emerging markets ETF I have has a large chunk of China. I've recently been reading about the longer-term issues around that but I like emerging markets, so want to rebalance things.
    I only have ETFs - keeping things simple.

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    Default Re: Investing for the unskilled investor.

    Quote Originally Posted by JessaJade View Post
    Yes, the emerging markets ETF I have has a large chunk of China. I've recently been reading about the longer-term issues around that but I like emerging markets, so want to rebalance things.
    I only have ETFs - keeping things simple.
    That's fine. Most of my investments are in ETF's , Index funds and mutual funds. No muss , no fuss lol. I've done well the last 5 years or so.
    A
    The credit belongs to the man who is actually in the arena... who, at the best, knows in the end the triumph of high achievement, and who, at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those timid souls who know neither.
    Teddy Roosevelt

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    Default Re: Investing for the unskilled investor.

    If you want to diversify into real estate, REITs are a good way to do it without the hassle of becoming a landlord. You also don't need a lot of money to get started. Some REITs offer good dividends, if you want extra cash flow.

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    Default Re: Investing for the unskilled investor.

    ^I've read a little about those - I need to do more research but they sound interesting!

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    Default Re: Investing for the unskilled investor.

    Quote Originally Posted by Eric Stoner View Post
    The following is simply MY OPINION. It should at most only encourage you to seek professional investment advice and /or do your own research. Any reliance or investment decisions that are in any way based on anything I post are completely AT YOUR OWN RISK !
    Be careful about investing in China. Please do your research FIRST. China has MAJOR long term problems that do not bode well for long term growth. They have been manipulating their currency and cooking the books for decades. Their population is rapidly aging and they do not have enough working age people to support their retirees. Their environmental problems are numerous and immense. That's just scratching the surface.

    That said, ETF's have proven to be very good investments. Unlike mutual funds there are no managers to pay. A DOW based ETF goes up as the DOW goes up; same for an S & P etc. Some are broad based and others have a more narrow focus ( e.g. Tech, Energy, etc. ).

    What I would shy away from for right now are cash and bonds. Thanks to inflation both are losing value.
    One of my first stocks was LK. It was marketed as the Chinese version of Starbucks and was supposedly going to outcompete them.

    Damn near a month later the shit dropped 80%

    Come to find out the ceos lied about their profits and padded their books and the company wasn’t as valuable as they claimed.

    Got a letter about joining a class action lawsuit.

    Thankfully I only held a very small amount of shares.

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    Default Re: Investing for the unskilled investor.

    Quote Originally Posted by eagle2 View Post
    If you want to diversify into real estate, REITs are a good way to do it without the hassle of becoming a landlord. You also don't need a lot of money to get started. Some REITs offer good dividends, if you want extra cash flow.
    Good advice but find out WHERE they are investing. Some places are much better than others. If they own properties in areas where people are moving out = not so good. Or where people are moving in = much better.
    A
    The credit belongs to the man who is actually in the arena... who, at the best, knows in the end the triumph of high achievement, and who, at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those timid souls who know neither.
    Teddy Roosevelt

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    Default Re: Investing for the unskilled investor.

    Quote Originally Posted by miss.a.p1600 View Post
    One of my first stocks was LK. It was marketed as the Chinese version of Starbucks and was supposedly going to outcompete them.

    Damn near a month later the shit dropped 80%

    Come to find out the ceos lied about their profits and padded their books and the company wasn’t as valuable as they claimed.

    Got a letter about joining a class action lawsuit.

    Thankfully I only held a very small amount of shares.
    This highlights the problem with investing in the People's Republic of China. Honesty is not a part of their financial reporting system.

    Z

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    Default Re: Investing for the unskilled investor.

    It's not just China that has this problem.

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    Default Re: Investing for the unskilled investor.

    Stick with the tried and true. & Speak to a financial advisor.

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    Default Re: Investing for the unskilled investor.

    Even with financial advisors you have to be careful. If possible, it's best to find one that doesn't get commission from your investments. I remember there was a big scandal where stockbrokers were publicly recommending stocks, while in private emails were calling them 'shit'.

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    Default Re: Investing for the unskilled investor.

    I say go with companies that have a good name & have a good track record like Vanguard, Merrill Lynch, Scwab, Fidelity and such. There are plenty of podcast, youtube channels, MSNBC , Bloomberg and FoxBusiness to watch and learn from. Education and keeping yourself up to date on information is important. There is so much you can learn & absorb all on your own, but at least try to put $6000 away into an IRA account for the tax break and compounding interest. https://youtu.be/94LPgaf10Ck

    Some prefer to play it safe with Mutual funds & ETFs, like I do with my IRAs. Then I buy stock on cashapp that takes some risk like REITs, Ford and such. And I buy gold jewelry and silver coins to round it all out. I am too old to take risk with buying a stock from China or to put too much money into Crypto.

    Putting away the max amount you can in the U.S. into your IRA, ROTH IRA or SEP IRA & split it into monthly payments into a somewhat safe investment that you will get about an 8% growth year in & year out adds up with compounding interest. Then if you can afford it & depending upon age take more risk with buying stocks, crypto & bonds.

    You can borrow against your stock instead of cashing them out at a very low interest rate. https://youtu.be/4_XFqwN9zLU

    https://youtu.be/OTQbVkZtVFY

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    Default Re: Investing for the unskilled investor.

    Quote Originally Posted by eagle2 View Post
    It's not just China that has this problem.
    Um , hmmm. There are professionals who know where to invest and what info to rely on in doing so. The U.S. is about as transparent as it gets when it comes to investments. Yes, we have scammers and puffery but they usually get caught.
    A
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    Teddy Roosevelt

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    Default Re: Investing for the unskilled investor.

    Quote Originally Posted by Eric Stoner View Post
    Um , hmmm. There are professionals who know where to invest and what info to rely on in doing so. The U.S. is about as transparent as it gets when it comes to investments. Yes, we have scammers and puffery but they usually get caught.
    No they don't, at least not until billions or trillions of dollars were lost. At its peak, Enron was worth $70 billion.

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