Investing for beginners

[Fuddy1952]

Someone once asked Eisenstein what he considered a true miracle. "Compound interest" he replied.
Notice this graph showing $1,000 invested in the S&P 500 at inception in 1957 until 2021, adding $25/ month. It shows how (green line) your contributions are negligible compared with returns (red line). At some point the returns take off like a rocket.
The reverse is true. Just look at the National Debt clock.

 

[Jrasband]

Invest in something REAL - land, gold, silver, livestock, equipment, etc. If you want to invest in communist China then go ahead and invest your money in stocks or something like that.

 

[Fuddy1952]

?????

 

[Fuddy1952]

I wasn't going to respond, but we'll play this game: "As of June 2019, US stocks had an average 10-year return rate of 12.21 percent, whereas gold had a return rate of only 3.71 percent."

 

[California]

Yeah. That first chart: $5k then annual $2k for 30 years compounds up $530k, is a model for my experience too.

Two points for the beginner to understand:
1) Live below your income and invest the difference.
2) S&P 500 mutual fund, any with low fees, will have results over time exceeding 85% of retail investors. Why not join the top 15%? As I'm getting older (WWII baby) I don't want to micro-manage a portfolio. This S&P strategy doesn't need active management.

Considering all that, in December I started a '529' college savings account for our new grandson. $10k (the annual limit) into a Fidelity S&P fund to start, likely another $10k in 2022, then leave it alone. This won't fund the kid's entire college career but with a similar contribution from his other grandparents, and the majority from his parents, he should be able to go anywhere. A 529 is the best way to do this because you don't need to prepare an annual income tax return for the kid every year - like we had to, with our own kids college savings accounts.

But all that is with regard to passive investing. Active hands on investing - remodeling and flipping houses for example, can have greater returns. That's where we accumulated the funds to buy rentals that when we sold, funded our investments.

One more point - avoid cryptocurrency. Nearly all is a vast Ponzi scheme that will eventually crash. I was just reading about one where the founder soon took out 80% of the cash that his investors had put up. He made $600k for his two weeks work getting it started. Then he said well they should have known better.

 

[Doughknob]

Invest in something REAL - land, gold, silver, livestock, equipment, etc. If you want to invest in communist China then go ahead and invest your money in stocks or something like that.

Huh? U r joking right?

 

[Doughknob]

Yeah. That first chart: $5k then annual $2k for 30 years compounds up $530k, is a model for my experience too.

Two points for the beginner to understand:
1) Live below your income and invest the difference.
2) S&P 500 mutual fund, any with low fees, will have results over time exceeding 85% of retail investors. Why not join the top 15%? As I'm getting older (WWII baby) I don't want to micro-manage a portfolio. This S&P strategy doesn't need active management.

Considering all that, in December I started a '529' college savings account for our new grandson. $10k (the annual limit) into a Fidelity S&P fund to start, likely another $10k in 2022, then leave it alone. This won't fund the kid's entire college career but with a similar contribution from his other grandparents, and the majority from his parents, he should be able to go anywhere. A 529 is the best way to do this because you don't need to prepare an annual income tax return for the kid every year - like we had to, with our own kids college savings accounts.

But all that is with regard to passive investing. Active hands on investing - remodeling and flipping houses for example, can have greater returns. That's where we accumulated the funds to buy rentals that when we sold, funded our investments.

One more point - avoid cryptocurrency. Nearly all is a vast Ponzi scheme that will eventually crash. I was just reading about one where the founder soon took out 80% of the cash that his investors had put up. He made $600k for his two weeks work getting it started. Then he said well they should have known better.

Or you could just buy Tesla stock! LOL

 

[California]

Or you could just buy Tesla stock! LOL

The problem with that is how do you recognize the NEXT Tesla stock?

At the minimum, it takes an ability for research so that you know more than professional stock pickers. Who would have bid up the price if they had recognized the value.

 

[Fuddy1952]

^^^X10^^^
Vanguard & Fidelity mutual funds have performed well for us (a few others also, mainly those two). Now in the diversified mix some in a cash annuity, and an SMA account...the experts buy & sell daily.
Never put all your eggs in one basket. Only debt I ever had was a 30 year mortgage, paid off in 3 years.

 

[BravoXray]

Or you could just buy Tesla stock! LOL

I did. 135 shares at $85.90 a couple of years ago.

 

[kenmac]

Invest in something REAL - land, gold, silver, livestock, equipment, etc. If you want to invest in communist China then go ahead and invest your money in stocks or something like that.

I'm not only invested in the market, I'm also invested in land, livestock, equipment, and private equities. and a little gold.... I think I've got it all covered !
I'm going to invest in china because they own several companies here.
I most likely own stock in the Chinese company that built the device you're posting with ..

 

[Oaktree]

Or you could just buy Tesla stock! LOL

Tesla is still ridiculously over-valued right now. It's not if it's going to continue to decline, it's by how much.
Maybe a buying opportunity when it reaches a realistic valuation.

 

[Oaktree]

Invest in something REAL - land, gold, silver, livestock, equipment, etc.

None of which are liquid, and all subject to price swings. As someone else mentioned, precious metals aren't a very good investment, land is going for ridiculously high prices right now, livestock markets are volatile. Not sure how equipment is an "investment", most of it depreciates over time.

 

[Fuddy1952]

None of which are liquid, and all subject to price swings. As someone else mentioned, precious metals aren't a very good investment, land is going for ridiculously high prices right now, livestock markets are volatile. Not sure how equipment is an "investment", most of it depreciates over time.

Very true. I have to laugh...my Dad (rip) years ago was filling out a financial assessment form. He said "I can see me now taking my sofa to the grocery store".

 

[Doughknob]

Tesla is still ridiculously over-valued right now. It's not if it's going to continue to decline, it's by how much.
Maybe a buying opportunity when it reaches a realistic valuation.

None of which are liquid, and all subject to price swings. As someone else mentioned, precious metals aren't a very good investment, land is going for ridiculously high prices right now, livestock markets are volatile. Not sure how equipment is an "investment", most of it depreciates over time.

do u like any investment?

 

[kenmac]

Not sure how equipment is an "investment", most of it depreciates over time.

Normally that would be true. But Not right now. My local dealer says If I want to sell my tractors, he'll give me more for my two than I paid for them

 

[Fuddy1952]

Very true: but just for fun a 1953 (first year) Corvette new cost $3,500. Today it's worth more...a lot more...about $120,000 if you can find one.
Assuming you bought one new, keeping it in pristine condition all these years. You'd still have maintenance to do, insurance, etc. You'd have to store it. So from $3,500 to $120K...quite an impressive appreciation assuming nothing major happened to it (fire, theft, accident).
But then again:
S&P 500: $3500 in 1953 → $5,075,514.42 in 2022

Now I await my evisceration, although Oaktree is correct with what he said. MOST
equipment depreciates over time.
Fine art, certain antiques, selling at the right place/time can appreciate.
Original post topic was "Investment for beginners".

 

[kenmac]

Diversification would be a part of a beginners plan.
How you decide to diversify is up to you. Equipment, rabbits, dogs, horses, etc,.

 

[JasperFrank]

Plastics

 

[BnRidge]

Put some money in an growth or index fund and leave it alone. I have some, started in 1969, still there, all interest reinvested - put that into a future worth calculator.