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Thread: Those Investment Basics

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    Member JustineTaylor's Avatar
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    Default Those Investment Basics

    My parents started buying into a Munder NetFun (tech stocks) about six years ago. They've invested $1000, and as of last week it was worth $361. I'm switching it into my name, and trying to decide what to do with it. Shoudl I switch brokers?

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    Senior Member commando's Avatar
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    Default Re: Those Investment Basics

    YES, for the love of god! $361 isn't a lot of money though; what's that... a halfway decent shift at the club? Damn. I hope they have other retirement savings. Pretty much your only option with that is to open up an online trading account.

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    God/dess Emily's Avatar
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    Default Re: Those Investment Basics

    yeah, a decent, reputable brokerage firm like Fidelity (who I use) requires a minimum of $2500 to open a brokerage acct.

    At least your parents taught you a valuable lesson on brokers and diversifying. Brokers are not all created equally. I think most of them suck and half of the "good" ones are just lucky. And tech stocks took a huge dive, bringing your entire portfolio down. If you research enough, you can do this on your own, imo. Set your goals and there are tons of tools out there that will tell you how do it.....like how much to invest and in what kinds of funds (all this stuff is on the fidelity website).

    edit: I forgot to add that there is SO much information on this in Dollar Den. Read on, particularly to Melonie. She's on the ball!
    Last edited by Emily; 11-19-2004 at 01:37 AM.

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    God/dess montythegeek's Avatar
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    Default Re: Those Investment Basics

    This is an example of 2 classic investment boo-boos---all the eggs in one basket and chasing lasy year's winner. Never put more than 20% of your money in one stock or one industry.

    I would recommend that until you have enough money to deal with diversification on your own that your way to go is to put it into an index fund for a broad-based index like the s&p500. Once you have $5-10K you can think about sectors and individual stocks.

    Index funds are low cost investment vehicles which buy you much more security at low cost.

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    Default Re: Those Investment Basics

    Where brokers are concerned, I actually use two different ones. For rock bottom prices trading plain vanilla stocks and options on US and Canadian exchanges, I use ScottTrade. But for trading stocks listed on foreign exchanges, for buying and selling options on specific thinly traded stocks, and for shuffling between different currencies etc., I use the full service broker Wachovia.

    Where 'risk management' is concerned, I personally do not ascribe to the economic theory that one should diversify to the point of only placing 20% of one's investment nest egg into one particular sector. Doing this guarantees that your investments will be so diversified that your gains in one sector will be offset by losses in another sector ! If you're sure that you've identified a winning sector, then my opinion is to A. make a heavy investment in that sector to maximize your gains, but B. protect yourself and your gains by using stop loss sell orders set at perhaps 10% below your purchase price, and C. re-evaluate your investment position at least once a week !

    Stop loss sell orders automatically cash you out if the market price of your investment falls below whatever threshold price you set when you place the order. This way, even if you don't re-eveluate your investments regularly, or if you're on the road without access to your brokerage account, or if the terrorists strike again crashing the stock markets, you'll still (theoretically) be able to walk away with 90% of your original investment intact.
    Last edited by Melonie; 11-23-2004 at 11:51 AM.

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