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Thread: future.........

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    Featured Member la429's Avatar
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    Default future.........

    have a quesion for all of you veteran strippers.. whats a good way to start investing? real estate, stocks, bonds etc... I want to start preparing for my future and finding a way to make my money grow. Any suggestions?

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    God/dess Emily's Avatar
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    Default Re: future.........

    all of the above....number 1 rule of investing is diversification.

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    Default Re: future.........

    Actually, I'm not a big believer in diversification - at least not in terms of the 'diversification formula' that most cookie cutter financial advisors recommend. That sort of diversification guarantees from the onset that some of your investments will be rising, but that your other investments will be declining at the same time and eating into your overall profits.

    Instead I try to pick types of investments which have the greatest probability of increasing in value given today's world market/political conditions. Obviously right now this includes energy and commodities, and stock in companies that produce their products extremely cheaply outside of the USA. Real estate appears to be topping out, at least in terms of homebuilder profits. However that doesn't mean that investing in a home that you intend to live in for a while couldn't be a very good investment.

    However, the trade-off for lack of cookie cutter diversification is the need to keep track of changes on the horizon which could affect world market/political conditions, such that you can cash in on 'winning' investments at the first signs of a reversal in the rising trend. Both the energy and commodities sector are very sensitive to future demand, which could drop significantly if the US/world economy starts to slow down (and there are a number of leading indicators which are predicting this).

    Right now the clearest financial trend out there seems to be that US interest rates are rising. This is historically bad for bonds, historically bad for real estate, historically good for banks etc.
    ~
    Last edited by Melonie; 05-02-2006 at 02:16 AM.

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    Default Re: future.........

    ^^^^^Yep! If you don't want to do the work of tracking every event that could affect your investment--DON'T go there. Pick a field you know a lot about and enjoy tracking. So-called recession-proof businesses are a great move. Call me cynical today, but why not Halliburton and Exxon/Mobil?! Can't hurt!

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    Default Re: future.........

    I can only speak to equity investing (investing in the stock market).

    It depends on your goals and how much time you are willing to spend to learn how to invest. An active investor is someone who tracks the market on a daily basis and is able to make quick buy/sell decisions. Melonie is right. Oil and gold have been doing extremely well. And I totally agree with her opinion on the real estate market. If you plan on being an active investor, start following industries/companies that you know. Like technology, consumer products, etc. I would start learning the basics at investopia.com and reading the Wall Street Journal to get some investing ideas. The website also has a program where you can practice "trading" to see how your instincts are.

    I am a passive investor, which means that I invest over a long time horizon and I do not execute a lot of trades (buying/selling on a frequent basis). Because I am still relatively young, I personally like investing in the S&P 500. Historically, if you invest in the S&P over a 10 year period, you can expect average returns at around 11%. Over the ten year period, you can expect to double your money if you base your expectations on historical averages. See the link below for detailed historical data:

    http://www.mutualofamerica.com/artic...3/SandP500.htm

    I like Vanguard's S&P 500 Index fund. You don't need a broker and you save money on transactions/fees. If you invest in equities (stocks), then you will have to stomach an up and down market. However, if you are long term investor, everything seems to smooth out and you probably do better than trying to actively trade. Mutual funds are a good way to start, because you are able to decrease your risk by investing in a number of stocks rather than betting on only one. You may want to check out morningstar.com to see what kind of funds that are out there.

    I'm not sure if you also have a job on the side that pays you a paycheck. If you are, then I would highly suggest opening a Roth IRA account. You can invest about $3-4g/ year and when you retire you can withdraw your money (both the amount you put in and the appreciation) tax free. This is a big deal, because investments are usually taxed quite heavily, eating away at your capital appreciation. I'm not too familiar with retirement accounts for self-employed individuals, but I think that a SEP offers a similar deal.

    The reason why I highly suggest young people to invest in a Roth IRA are 1) saving a few thousand a year is achievable, a few hundred a month 2) you can make money on the appreciation in the long run without being taxed and 3) if you are dedicated, you can have a nice safety nest when you retire. Here are a few numbers to toy with:

    If you are now 30 years old, and deposit $250/month ($3000/year) into a Roth IRA and realize a 8% return on your money, when you retire you will have about $260K.

    If you are bored one day and want to look at the investing calculators at http://www.bankrate.com/brm/calculators/investing.asp

    Hope this helps...

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    Default Re: future.........

    Oh, one more thing. Everyone has their own opinion on investing and will usually downplay their losses and gloat about the last big stock that they made money on.

    Before taking any investment advise, you should always do your research before making your decision. A solid understanding will help make more educated decisions and reduce your overall risk.

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    Default Re: future.........

    but why not Halliburton and Exxon/Mobil?! Can't hurt!
    Actually, despite factoids printed in the mainstream press, the company profit margins thus stock price increases in these two stocks are far lower than a whole bunch of other possibilities in the same industries -->
    Savvy investors don't pay attention to headlines, they pay attention to bottom lines !

    However, if you are long term investor, everything seems to smooth out and you probably do better than trying to actively trade
    Over the past 20 years, this might be true. However, in terms of 'real' or inflation adjusted dollars, broad market performance over the past 6 years has sucked. Also, if you look at the market over a longer term say 100 years, there have definitely been periods where the broad market has sucked for a decade.

    It's also imperative to keep the concept of 'real' or inflation adjusted dollars in mind. 37 years from now, that $260,000 in IRA money may just about cover the cost of a new econobox car ! 37 years ago an econobox car cost $2,500, and 30 year olds at that time probably felt that retiring with a $50,000 retirement fund balance in 2006 would set them up very well.

    Put another way, an 11% average broad market return, even if exempt from tax, isn't really gaining much 'real' value if the actual inflation rate is averaging 4-5%. To achieve a REAL growth rate of 11%, the market return would need to be 15-16%. This sort of return is not hard to achieve, but you won't get it from a broad market fund.

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