Historical Best Day of Month to Dollar Cost Average or Invest: UPDATED: 1950 to 2014

Historical Best Day of Month to Dollar Cost Average or Invest: Updated: 1950 to 2014

This article updates the previous "Best Day of Month to Dollar Cost Average".



1. This article now covers February 14, 1950 up to July 8, 2014.



2. The previous article used the Average S&P 500 methodology, which over weighed the S&P 500 when it is large (over 1500), and under weighed the S&P 500 when it was small (around 20 on the S&P 500 in 1950).



3. This article uses the "Percent Above 30 Trading Day Moving Average" methodology.   This way, whether the S&P 500 had a low value or high value, the results have equal weight.



4. To determine the best day of month to dollar cost average, choose the lowest "percent above 30 trading day moving average" value.



Chart:

The Results:

The best two days of the month to dollar cost average are on the 26th (#1) and 25th (#2) with the lowest value of percent above 30 trading day moving average.

#3a: 19th    (0.20%)
#3b: 27th    (0.20%)
#4a: 10th    (0.22%)
#4b: 24th    (0.22%)

The rest of the values can be seen in the chart above.

Beginning of the Month Boost:

At the beginning of the month, the percent above 30 trading day moving average seems to be at its highest values.

One possible reason why is because of investment in 401k and retirement funds close to the beginning of the month, which pushes the S&P 500 up during this time.

SDIV: Global, High Dividend Exchange Traded Fund (ETF), Good Diversity.

Are you looking for a single ETF or mutual fund to help give you great diversification and a high dividend?  You should consider an international ETF which produces a high dividend.  SDIV, an ETF (Exchange Traded Fund) from Global-X Funds, does that.


As of June 2014, the 12 Month Dividend Yield is 6.01%.   The Total Annual Fund Operating Expense is 0.58%.     


In terms of country breakdown, 25.81% is invested in the United States, 17.85% in Australia, 9.14% in Canada, 8.14% in France, 7.69% in the U.K., 6.01% in Singapore, and so on.


In terms of industry, Financials occupies 20% of the portfolio, REITs (Real Estate Investment Trusts) 15%, Utilities 13.5%, Telecom Services, 12.2%, Mortgage REITs 10.6%, Energy 9.2%, Industrials 5.03%, Consumer Discretionary, 4.8%, Health Care 2.8%, Materials 2.7%, and Info Tech at 2.1%.  


SDIV could be a great way to get high dividend diversification.   And if you can find SDIV in a commission free program by your broker, you could invest in SDIV cheaply (because you have no commission fee) in an automatic investment plan where you invest some regular sum at regular intervals.   Watch your reinvested dividends (especially in a high dividend ETF), grow.   Experts often say that reinvested dividends is a great way to grow your money.

PE to Growth Ratio for International ETFs

Vlada, from the Czech Republic (stockweb.blogspot.com), posted a great link.

Vlada looked at several international ETFs and calculated the PEG ratio (Price Earnings Ratio to Growth Ratio) based on a countries 2008 GDP growth and a countries P/E Ratio (the Economic PEG).

The countries with the highest 2008 GDP growth include China (9.3%), India (7.9%) and Russia (6.8%).

The countries with the lowest 2008 GDP growth include Italy (0.3%), the US (0.5%) and Canada (1.3%).

The countries with the lowest PE ratio are France and the U.K. (11) and Italy (11.1).

The countries with the lowest PEG ratios are China (1.6) and India (2.3).

The countries with the highest PEG ratios are Italy (37) and US (26.8)

While one could look at the Economic PEG on its own, I think one additional thing we can look into is the rate of GDP growth, or the direction of P/E ratios. At some point, will China and India growth slow? And will Italy and US Growth start to increase?

Finally an Exchange Traded Fund (ETF) focusing on India

WisdomTree now has an Exchanged Traded Fund (ETF) that focuses on Indian Investments. The ticker is "EPI"

Expense Ratio is 0.88%

Top Ten Holdings include (as of March 3, 2008)

1. Reliance Industries (13.18%)
   
2. Oil and Natural Gas Corporation (6.39%)
   
3. Infosys Technologies (5.43%)
   
4. Bharti Airtel Limited (3.75%)
   
5. Housing Development Finance (3.18%)
   
6. ICICI Bank Ltd (3.14%)
   
7. SAIL (2.40%)
   
8. Sterlite Industries (2.31%)
   
9. Tata Steel Limited (2.25%)
   
10. Indian Oil Corporation (1.99%)
    

There are a total of 146 Components in the Index.

Top Sectors:

1. Energy (25.05%)
   
2. Materials (15.86%)
   
3. Software and Services (11.78%)
   
4. Banks (10.67%)
   
5. Capital Goods (7.43%)
   
6. Utilities (5.79%)
   
7. Telecom Services (5.69%)
   
8. Automobiles and Components (4.00%)
   
9. Pharma, Biotech and Life Sciences (3.74%)
   
10. Food, Beverage, and Tobacco (2.40%)
    

WisdomTree does not use market cap weighted ETFs. Instead, WisdomTree weights the index based on dividends or earnings.

If you want to invest directly in some Indian Companies in the United States, you can check these resources.

Time to Accumulate and Buy SDS (Double Short S&P 500) after Breakout for a Trade?

If you look at the chart of SDS above, you might see a stock that is worth buying on the long side (profit when the stock goes up). SDS appears to have had strong resistance at around $59 and SDS has tested the resistance at least three times within the last year. Then early January 2008, SDS appears to have broken out.

As of February 28, 2008, SDS is pulling back towards the 50 day moving average. Some traders, and institutions such as Investors Business Daily, suggest to buy breakouts or if not at the breakout, to buy a stock after a breakout as it pulls back to the 50 day moving average (for a trade).

This appears to be the case now as SDS has broken out and has pulled back to the 50 day moving average with current resistance of $72.55.

Now what if you knew that SDS is really the Double Short S&P 500 Proshares.com ETF. On a given day, for every 1 percent that the S&P 500 index goes down, SDS goes up approximately 2 percent.

This means that there might be more downside ahead in the stock market (more upside in SDS), at least for a trade.

Today's Chart

A few days ago, Dan Fitzpatrick of TheStreet.com appeared on CNBC's Fast Money show to show the chart of SDS. He made a point that many investors are more used to buying on the long side. So when we show the chart of SDS, the stock chart appears to be a solid buy.

International Stock Exposure for Long Term Investor

There are many people out there who want International Exposure for their long term or retirement portfolio, but who do not want to choose individual international stocks.

One good way to approach this is through investing in ETFs, Exchange Traded Funds, which are usually indexed mutual funds that you buy and sell just like individual stocks.

Two core international holdings for a long term portfolio are Barlays' Ishares.com EFA and Vanguard's VWO:

1. EFA: Ishares ETF Covers Developed International Markets including Western Europe, Japan and Australia.

2. VWO: Vanguard's ETF Covers Emerging International Markets including Brazil, China, Russia, India, South Korea, Taiwan and Mexico.

EFA: Developed International Market ETF

EFA has a low expense ratio of 0.35% (the lower the better. Many actively managed mutual funds have expense ratios over 1%).

The top ten countries that the fund invests in are (as of June 30, 2007):

1. United Kingdom: 22.93%
   
2. Japan: 21.05%
   
3. France: 9.74%
   
4. Germany: 8.25%
   
5. Switzerland: 6.61%
   
6. Australia: 6.22%
   
7. Netherlands: 4.10%
   
8. Spain: 4.10%
   
9. Italy: 3.81%
   
10. Sweden: 4.10%
    

Top Sectors include:

1. Financials: 28.48%
   
2. Industrials: 12.02%
   
3. Consumer Discretionary: 11.93%
   
4. Materials: 9.43%
   
5. Energy: 7.58%
   
6. Consumer Staples: 7.57%
   

VWO, Vanguard Emerging Markets ETF

VWO has an expense ratio of 0.30%.

Top Countries:

1. Korea: 16.2%
   
2. China: 12.6%
   
3. Taiwan: 11.9%
   
4. Brazil: 11.1%
   
5. Russia: 9%
   
6. South Africa: 7.3%
   
7. India: 6.5%
   
8. Mexico: 5.6%
   
9. Israel: 2.5%
   
10. Malaysia: 2.5%
    
11. Hong Kong: 2.3%
    
12. Poland: 1.7%
    
13. Turkey: 1.6%
    

Alternative to VWO: EEM: International Emerging Market ETF

EEM has an expense ratio (as of September 28, 2007) of 0.75%. This is higher than Vanguard's VWO ETF.

Some top countries that the fund invests in:

1. South Korea: 15.03%
   
2. China: 12.05%
   
3. Brazil: 11.29%
   
4. Taiwan: 10.50%
   
5. Russia: 9.16%
   
6. South Africa: 8.91%
   
7. Mexico: 7.04%
   
8. India: 5.98%
   
9. Israel: 3.31%
   
10. Indonesia: 2.28%
    
11. Chile: 2.07%
    
12. Thailand: 2.03%
    
13. Czech Republic: 1.95%
    
14. Hungary: 1.92%
    

Top Sectors include:

1. Financials: 20.50%
   
2. Information Technology: 15.46%
   
3. Energy: 15.39%
   
4. Materials: 14.58%
   
5. Telecom Services: 12.17%
   
6. Industrials: 5.88%
   

So in summary, for a long term investor who wants international market exposure without having to pick individual stocks, EFA, and VWO are two ETFs worth investing in as a core part of a long term portfolio.

Invest in Russian Stocks from the US

Russia is part of BRIC (Brazil, Russia, India, and China), a very fast growing block in International Emerging Markets. Russia became the fastest growing economy in the G8 and is expected to grow about 6.4% in 2007, and grow close to 6% in 2007 and 2008. Russia possesses rich natural resources, a well educated labor force with substantial technical expertise. In addition, there are signs of poor infrastrcture and inefficient supply systems.

One way to play Russia is through the Market Vectors Russia ETF Trust (RSX). Another way is to buy individual companies as Depository Receipts through the major American stock exchanges (Nasdaq, AMEX, New York Stock Exchange-Euronext). The majority of the Russian stocks available directly through the United States appear to be Over the Counter Stocks, and stocks in the "pink sheets." There is not as much information available on them, so it becomes difficult to research them.

Many of the Russian stocks listed here are minerals, oil and gas, and telecom companies.

Russian Stocks Listed on Major American Exchanges

1. Michel Steel (MTL) -- MTL is a 6 Billion Dollar Mining and Steel Company. The produce and sell coking and steam coal concentrate, steam coal, iron ore concentrate and ferronickel that are used in the production of steel. They also produce semi-finished steel products and other metal products.

2. Mobile TeleSystems (MBT) -- Mobile TeleSystems is a 25.8 Billion Dollar company providing mobile telecom services to Russia and parts of Eastern Europe. It's forward PE is 12.29, and is expected to grow at a 5 yr rate of 10.25%

3. Rostelcom (ROS) -- Rostelcom is a 7 Billion Dollar company providing long distance and international telecom services.

4. Golden Telecom (GLDN) -- Golden Telecom is a 2.44 Billion Dollar company that provides internet and telecom services to Russia and parts of Eastern Europe. It has a forward PE of 18.63, and is expected to grow by 15.5% (5 year estimate), for a PEG of 1.20.

5. Vimpel Communications (VIP) -- Vimpel is a 22.9 Billion Dollar telecom company that focuses on wireless telecommunication services in Russia and parts of Eastern Europe. It has a forward PE of 14.45, and an estimate 5 year growth rate of 24.11%, for a PEG of 0.60, a very good value.

6. Wimm Bill Dann (WBD) -- Wimm Bill Dann is a 4.45 Billion Dollar Russian dairy, juice, and food company. It has a forward PE of 21.88, but its 5 year estimate growth rate is 35%, for a PEG of 0.62, another very good value.

7. CTC Media (CTCM) operates television networks that offer entertainment programming in Russia.


The Other Over-The-Counter Stocks

There isn't as much information on the other Russian stocks that trade as "pink sheets." Among these, Lukoil (LUKOY.PK), Gazprom (OGZPY.PK), and Surgutneftegaz (SGTZY.PK) are often mentioned as some of the largest oil and gas companies in Russia. 51% of the Russian Market is in Oil and Gas.

Aside from Oil and Gas, Russian telecom companies seem to be popular Russian stocks that trade OTC.

Norilsk Nickel (NILSY.PK) is also the world's top producer of Nickel.

7. Bashinformsvyaz (BHFZY.PK)

8. Buryatzoloto (BYZJY.PK)

9. Central Telecommunications (CRMUY.PK)

10. Concern (CCKLY.PK)

11. Far East Telecom (FEEOY.PK)

12. Gazprom (OGZPY.PK)

13. Gazprom Neft (GZPFY.PK)

14. GUM (Torgovy Dom) (GUMRY.PK)

15. IRKUT (IRKTY.PK)

16. Irkutskenergo (IKSGY.PK)

17. Kuzbassenergo (KZBGY.PK)

18. Lukoil (LUKOY.PK)

19. Moscow City Telephone Networks (MWCTY.PK)

20. Mosenergo (AOMOY.PK)

21. Norilsk Nickel (NILSY.PK)

22. North-West Telecom (NWTEY.PK)

23. Polyus Gold (OPYGY.PK)

24. RBS Information Systems (RINFY.PK)

25. Rosneftegazstroy (RNGZY.PK)

26. Rostevenergo (RTVPY.PK)

27. Samaraenergo (STBWY.PK)

28. Sibirtelecom (SBTLY.PK)

29. Southern Telecom (STJSY.PK)

30. Surgutnetftegaz (SGTZY.PK)

31. Tatneft (TNTTY.PK)

32. UHM (UHMVY.PK)

33. Unified Energy Systems (USERY.PK)

34. Uralsvyazinform (UVYPY.PK)

35. Utair (UTARY.PK)

36. Volga Telecom (VLGAY.PK)

37. Yukos (YUKOY.PK)

Among these

Among all these companies, telecom company Vimpel Communications (VIP) and Wimm Bill Dann (WBD) look the most interesting from a growth at a reasonable price metric. Norilsk Nickel (NILSY.PK), Lukoil (LUKOY.PK), and Gazprom (OGZPY.PK) may be good options too if you can find enough information on them. The other Nasdaq/NYSE/AMEX stocks, such as MTL, may be worth investing too. Please do your due diligence in researching stocks.

"How can a teenager (11-17) start investing in the stock market?"

Question:

I'm a (11-17) year old student and I have some money I want to invest. How do I start investing?

Answer:

Congratulations on saving your money and trying to invest it!

In the United States, many US discount online brokerages, such as E*trade (www.etrade.com) require you to be 18 years or older.

So what you can do is ask your parents to open an account for you. One example is an Educational Custodial account. Your parents will control the account until you turn 18 or 21. Read the other requirements and benefits on the website:

There is also a Coverdell Account (formerly known as Education IRA), or an IRA for Minors (for your retirement!)

In the meantime, I recommend that you get your parents involved. Have them learn more about Investing. Both you and your parents should start by reading Investing for Dummies by Eric Tyson.

Once they open the account, you and your parents can decide how to invest.

For amounts $500 or less, you are better off choosing one good mutual fund (you purchase shares in a fund, and at the end of each day, the mutual fund price goes up or down, and you lose or gain money each day. After a period of time (for example, 10 years), you may decide to sell your mutual fund. At that time, you may have a profit (or a loss). The money is all yours now).

You can look at all the choices available in your brokerage account. If you use E*Trade, you can choose from among the more than 7000 mutual funds. Choose only mutual funds that are four or five start Morningstar.com rated and have no-load (you don't have to pay a special percentage to the brokerage when you either buy or sell), and no transaction fee.

Whenever you get more money, you can purchase more shares in the mutual fund. Look for either a good mutual fund that focuses on large US companies, or a diversified mutual fund that invests in international stocks.

If you have $1000 or more, you can choose to have fun. Are you interested in learning more about the stock market? You are young, and that means that you can take more risks with the money. Even if you lose it all, you'll have enough time to make it up in the future.

One good way is to continue reading about stocks and the stock market (Remember the Investing for Dummies by Eric Tyson book above?).

Then, as I mentioned before, get your parents involved. You can research stocks together. A good stock to research would be stocks you already know. Do you like McDonalds? maybe you can invest in "MCD". Do you like Games? Then consider Gamestop (GME). Of course, don't just buy it because you use the product. This is just a starting point. Research the stock!

Since you don't have that much money, just invest in one stock (or ETF, an Exchange Traded Fund. An ETF is a mutual fund that you buy and sell just like stocks) and just see how it goes up and down, and how what you do (for example, buy more Big Macs) affects the companies bottom line.

Also, watch "Mad Money" on CNBC hosted by former hedge fund manager Jim Cramer. Lots of those in Generation Y like him. He may sound a bit crazy on the show, but in reality, he as a very good hedge fund manager before he did the Mad Money show. (Video of Jim Cramer here.)

To be realistic, expect a market return of 10% per year over a long time. Of course, you can lose 40% in a year, or gain 40% of a year, for example. If you hold an individual stock, the stock will be more volatile. Don't be surprised if you go on a rollercoaster ride.

Good luck!

Credits

My own experience plus inspiration from Jim Cramer's article on teaching your children about investing.

Simplest Buy and Hold Portfolio

So you have some discretionary money that you can risk, don't need the money within five years, and want some growth. But you may not know too much about individual stocks and you don't have the time nor the inclination to follow individual stocks.

Here's a very simple and easy Buy and Hold Portfolio that you don't have to monitor often, and offers good performance and diversification. (Do know that while the stock market averages 10% per year over a long time, that during any individual year, you could lose or gain 40%?)

The strategy is based on buying and holding certain ETFs, or Exchange Traded Funds. An Exchange Traded Fund is essentially a mutual fund (mostly indexed to a particular index. The ETF company just mirrors the index, and doesn't make active stock decisions) that trades on the major exchanges just like a regular stock. You normally buy and sell them and pay commissions. For example, the stock symbol "DIA", isn't really an individual company. The "DIA" ETF represents the Dow Jones Industrial Average ETF. It holds the 30 stocks in the Dow Jones Industrial Average. However, from your point of view, you are buying and selling "DIA" directly, a single trading instrument. You lose money and profit just as if you were holding a single stock.

The Portfolio

Here's the recommended simple buy and hold portfolio that you do not have to monitor that often:

• SPY -- The S&P 500 ETF representing 500 of the US biggest and most influential companies.
  
• MDY -- The Midcap US ETF representing the middle size US companies.
  
• IWM -- The Small Cap US ETF representing some of the smaller companies in the US
  
• EFA -- The iShares Developed International Market ETF representing investments in Europe, Japan and Australia
  
• EEM -- The iShares International Emerging Market ETF which covers international emerging markets such as Taiwan, Korea, China, Mexico, Brazil, Russia and India.
  

That's it! You are diversified throughout the US and the world. You can monitor your portfolio once a year, or twice a year.

If you don't have that much money, you can start with one or two ETFs first. I suggest SPY and EFA as your first two ETFs. The third ETF should be IWM. The fourth should be EEM, and the last MDY.

If you wish to learn more, or even start learning about individual stock investments, you might have to do some studying. You can read the books recommended here, or start browsing some good investment sites on the internet.

How Many Stocks Should I Have in My Portfolio?

If you have an all stock portfolio, you should balance several factors to determine how many individual stocks you should have in that portfolio. These stocks should ideally be in several different sectors, or else you'll have concentration and not diversification.

1. If you have too few stocks (4 or less), you will not get enough diversification. If a single stock gets hit hard, your entire portfolio will get hit very hard. By having at least 5 stocks in your portfolio, you get better diversification. Over the long term, studies have shown that a diversified stock portfolio gets a good return with less risk.

2. If you have too much diversification, you may have difficulty keeping track of all your stocks. Owning individual stocks means you have to keep track of the situations on all your stocks. Can you manage a stock portfolio of 20?

3. If the total amount in your portfolio is not that big, you should have less positions. Otherwise, commissions will be too big a percentage to position size. Let's say it costs $10 to buy and sell a stock, and each position of a stock in the portfolio is $500. That means you are spending $20 per trade, or $20/$500 = 4%. For every investment or trade you make, you are spotting the market 4%! That's too much.

4. If the total amount in your portfolio is much bigger, you can diversify more to reduce risk.

5. If you are very young (college, early 20s), you can take a lot more risk in your portfolio. Even if you lose the money, you have time to make it up. So you can be more aggressive, and you could even buy two stocks at $1500 a position. Of course, this money should be discretionary money, and not retirement money, or money that you need.


So, to summarize, in general, Jim Cramer in his book "Real Money: Sane Investing in an Insane World", suggests having a portfolio between 5-10 individual stocks. This is enough for diversification, but not too much that it becomes too much to handle.

If you have the time and inclination, you can hold up to 20 individual stocks, but only if you can handle it.

Alternatively, you can use ETF (Exchange Traded Funds) to supplement your portfolio. You can invest in 5 individual stock for 50% of the portfolio, and in the other 50%, invest in broadbased ETFs such as EEM (Emerging International Market ETF) or EFA (Developed International ETF). This way, you can explore with 50% of your portfolio by investing in individual stocks, and the other 50% for a core ETF position or ETFs that have exposure that your individual stocks lack. For example, if 5 of your individual stocks are all US Domestic stocks, you can use the other 50% to invest in International ETFs as mentioned above.

If you don't have the time or inclination

If you don't have the time and inclination to study and research individual stocks, maybe you should consider a diversified portfolio of ETFs or Mutual Funds instead.

"I have a Sum of Money to Invest. How do I invest it?"

Question:

I have a sum of money to invest. How do I invest it?

Answer:

Before you can think of investing this sum, let us go through these questions:

1. Do you have high interest rate credit card or card loan debt? For example, credit card debt greater than 10%? If so, you can use this money to payoff the debt. If you hold a balance on a credit card that charges you 15%, then if you pay off this debt, you are getting a 15% RISK-FREE return! If you invest in the stock market, expect to gain 8-10% average per year over a very long time (yes, you can gain 20% in a year, then next year, lose 10%), with risk. The better deal is paying off your high credit card debt.

2. Do you have a three to six month emergency cash fund in case you lose your income? If not, you may want to start that fund, by putting the money in a high yielding savings account (getting at least 5% at this time). If you have a safety net (such as having supportive parents), then maybe you can have a smaller emergeny fund.

3. Do you need the money within five years or less? For example, you need the money for a downpayment on a house. Then maybe you shouldn't invest the money in a stock market. You may want to put this money in a high yielding savings account as mentioned above. If you can take a bit more risk, and you don't need the money for 3 years (but need it by 5 years), you can look for a good no load, no transaction fee, Balanced Mutual Fund. A Balanced Mutual fund is a mutual fund that often has a 60% weighting in equities and 40% in bonds.

4. If you don't need to use the money within 5 years, then you can be more aggressive and go with a higher percentage of equities (stocks or stock mutual funds). The next question is whether you have saved at least $1000. If you have not saved at least $1000, start saving using a high yielding money market or savings account until you reach $1000.

5. If you have $1000 or more, start learning more about the stock market and investing.

6. Once you are comfortable with at least a primer on investing, Exchange Traded Funds (ETFs) and the stock market, you can now open a Brokerage account from brokerages such as E*Trade or Ameritrade.

7. Do you have between $1000 and $5000 to invest? Then I would recommend investing in diversified mutual funds or ETFs. ETFs are Exchange Traded Funds, or mutual funds that are often indexed, that trade just like stocks. For example, you can buy and sell DIA ETF from any broker. DIA represents the 30 stocks in the Dow Jones Industrial Average. One company which provides ETFs that are sold by almost any broker is Barclays Ishares.

A Sample ETF portfolio:

1. SPY: S&P 500 ETF representing approximately the largest 500 US Stocks.
   
2. IWM: IShares US Small Capitalization ETF representing the smaller capitalization US Stocks.
   
3. EFA: IShares International Developed Markets including Europe, Japan and Australia.
   
4. EEM: IShares International Emerging Markets including Korea, Taiwan, China, Mexico, Brazil, India, Russia.
   

8. Do you have at least $5000 to invest, and do you have the time an inclination to study stocks and learn more about the market? If you do not, then you can continue using the mutual fund and ETF strategy mentioned above.

9. If you have at least $5000 to invest, and you do have the time and inclination to study stocks and learn more about the market, then you can now invest in individual stocks. You have to continue reading and learning and go deeper in the recommended book list.

10. Once you've studied enough about individual stocks, you can aim to have a 5 to 10 stock diversified portfolio (as recommended by Jim Cramer in his Book, "Real Money: Sane Investing in an Insane World"). Each stock has to be in a different sector for true diversification. Expect to spend one hour each week studying each position. That's why it is difficult to have a portfolio of more than ten stocks because you won't have time to keep track. Of course, you can choose to have a mixed portfolio of ETFs and individual stocks. Also, if you can keep track of more stocks, you can have a portfolio of up to 20 individual stocks.

11. EXCEPTION: If you are very young (college aged or early 20s), and you have at least $3000, and you have the time and inclination to invest in individual stocks, then go ahead an invest in individual stocks. You are young and you can take more risks than someone who is close to retirement. If you only have $3000, you can start with three positions at $1k each, and as you save more money, you can continue adding money until you have a 5 stock portfolio.

12. NOTE ON COMMISSIONS: Be careful about commissions. If it costs you $10 to buy a stock, and sell a stock, then if your position is $500, then that means it costs $20 per $500 position, or $20/$500 = 4%. That means, for every transaction, you are spotting the market 4%! This is not acceptable. You should have larger position sizes but make sure that you have enough diversification (at least 5 stocks in 5 different sectors). The exception in point #11 above still holds.



Don't forget to continue reading and learning! I hope you enjoy the journey and make lots of money in the process.

"How do I start investing?"

Question:

Hi. I'm new to the market and I'm interested in investing.
How do I start?

Answer:

Congratulations on wanting to get involved in the stock market and investing!

All investors need to start somewhere, and books are a good way. I would recommend starting with "Investing for Dummies" by Eric Tyson and "Personal Finance for Dummies" by Eric Tyson.

Once you learn the basics of investing and the stock market, you can continue reading more books including the recommended books in this link.

In addition, you can start watching former Hedge Fund Manager Jim Cramer, on his CNBC show "Mad Money." While his antics may seem crazy to some, he has a lot of substance and has a good message. He had a very impressive record as a hedge fund manager. He even has a loyal following among Generation Y.

Continue to read magazines and newspapers such as "The Wall Street Journal", "Money", "Smart Money", and even "Barron's" or "Investors Business Daily".

Once you are ready, you can start choosing a brokerage account. Two popular ones are:

1. E*Trade
2. TD Ameritrade

They offer many kinds of accounts, and you buy and sell stocks, and mutual funds. The minimum to open each account is $1000.

Mutual Fund Route

If you choose to go the mutual fund route, look through your brokerage mutual fund list, and only choose mutual funds that have no-load or no transaction fee. You can then visit Morningstar.com and look for 4 or 5 star mutual funds.

In order to have a diversified portfolio, you can have three mutual funds:
1. Diversified International Mutual Fund
2. Large Capitalization USA Mutual Fund
3. Small Capitalization USA Mutual Fund

If you don't have that much money to start with, you can start with one mutual fund. And as you have more money to invest, you can start investing in another mutual fund, and so forth until you have three mutual funds.

You can also choose index mutual funds. The advantage is that the fees that you pay (called the expense ratio. You don't really notice it, but it is taken out automatically from the price of the mutual fund. Morningstar.com shows you the expense ratio) is much lower than an actively managed mutual fund. Also, advocates of Indexing such as Vanguard founder John Bogle say that Index funds outperform a great percentage of actively managed mutual funds so why not invest in Index funds with a lower expense ratio?

Exchange Traded Fund (ETF)

Exchange Traded Funds, or ETFs are essentially mutual funds, most of which are indexed rather than actively managed, that trade in the stock market just like stocks. For example, the DIA ETF represents the 30 stocks in the Dow Jones Industrial Average. You pay commissions to buy and sell, just like a regular stock. You can buy them from many brokerages out there.

One of the largest ETF companies out there is Barclays iShares.

Investing in Stocks and ETFs

If you wish to invest in stocks and ETFs, congratulations. You are saying that you have the time, and the inclination to study stocks. I would recommend reading lots of recommended books I mentioned, and continue learning about the market.

Also, continue to live life. Sometimes, the best investment ideas you have are in areas you already know. Maybe you see that Chipotle Mexican Grill (CMG) is always full, or that everyone seems to be shopping at Gamestop (GME).


Good luck to you, and I hope you enjoy the journey, and make lots of money in the process.


Info on Getting Started investing a sum of money.