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Posted: 12/30/2003 1:17:49 PM EDT
I need a little help. I have about $7000.00 that I would like to invest for about 2 years. What would be my best bet? I would like someone who knows how/best route to take on an investment this size because I am completely  clueless when it comes to this kind of stuff, any help would be greatly appreciated!

Thanks
ROCKO
Link Posted: 12/30/2003 1:31:15 PM EDT
What is your goal with this money, and why only for two years?
Link Posted: 12/30/2003 1:38:25 PM EDT
My goal is just to make as much as possible. I will be finshing college, and plan on getting married arround that time frame so it just seemed right... thanks
Link Posted: 12/30/2003 1:39:38 PM EDT
Like the professor said, "why two years"?  What is your age?  What's your risk tolerance?  What are you going to need it for in two years?
Link Posted: 12/30/2003 1:43:19 PM EDT
Return and risk are traded off.  The more risk you are willing to incur, the more you can POTENTIALLY make (but you can also lose).

You want a safe bet, like a CD, you'll get very little money.  You want a much higher rate of return, you'll be taking much more risk.  
Link Posted: 12/30/2003 1:44:42 PM EDT
I don't want an extreamly high risk, however I would like to make more than just having it sit in my savings account though...
Link Posted: 12/30/2003 1:46:09 PM EDT
There is no sure thing and the more money you want to make the greater the risk. Understand that going in.
You might try an indexed fund tied to one of the major indexes such as the S&P, etc. If you want to be more aggressive you could try a tech fund or a small-med cap growth fund. I would look for a newer fund if you could or the tax disadvantages could be significant for a short term investor. If you don't know what I mean ask.

I am a doc, not a financial advsior. I think it is a good time to invest but there is significant risk in investing like you are trying to do so research this a little.
Link Posted: 12/30/2003 3:48:12 PM EDT
Do you have any debt?  Paying down that money on a credit card balance at 18% is just like making an 18% risk free, tax free return.  That's hard to beat.

Like the others said, your potential return will vary with the level of risk you're willing to take. For example, take the whole thing down to the casino (Wendover, Vegas) and put it all on red or black on the roulette wheel.

You have a 49% chance of breaking even, a 49% chance of doubling your money and 2% chance of losing it all.  Double your money on one roll and go home.  High reward = high risk.

Will you absolutely need that money in two years? Can you afford to lose any of it? If not, money markets and CDs, T-bills are the safest.  You won't make anything in interest, but you're not likely to lose it all.

What risks are you willing to take? Are you fully aware of the risks out there? Examples:
1. Interest rate risk - Lock your money into a 2 year CD at 1.25%, and you run the risk of rates increasing 7 days after you get the CD. You lose potential interest.

2. Market risk - Buy a bunch of stocks or mutual funds. They can go up or down.  Had your money in cattle futures two weeks ago, happy that prices were going up? Well, now you've got a problem because they went lock limit down because of Mad Cow.

3. Exchange rate risk - What good is making 5% on your money each year if the stuff you want to buy is priced in a currency that becomes 10% more expensive each year?  You risk losing buying power.

4. Political risk - What if your investment falls out of favor with the gov't and is confiscated (like gold in 1932, or "blood diamonds" from Zaire)

5. Default risk - what if you don't get paid back?  That 18% yield on Argentine bonds a few years ago looked pretty sweet for a few years, but now you'd be lucky to get 10 cents on the dollar for those bonds, if anything. Buy a corporate bond - the company could fold. Buy a Bank CD - it could become insolvent and you might get your money back from FDIC insurance in a couple years, or you might not.

6. Inflation risk - Is an investment paying 9% a year a good bet if inflation is 11% a year? No, because you're losing 2% a year in purchasing power.

Unfortunately, $7k really isn't that much money. You certainly couldn't justify hiring a financial planner as the fees would be prohibitive.  It's not enough to diversify into meaningful positions to reduce your risk.  I don't want to come across that I'm talking down to you with the above.  I just don't want to see you put it all in the "stock of the month" on a hot tip you got from your girfriend's brother's roommate.

You mentioned in your post that you are "completely clueless when it comes to this kind of stuff".  That said, my sincere, honest recommendation is that you put the money into an easily accessible, no fee money market account while you learn about all the various investing choices out there.

Learn how they work, what the risks are and how to play the game before risking your money. Read a bunch. Talk to those who understand, and have invested in, various areas of finance.  That will be the best investment you can make for yourself.
Link Posted: 12/30/2003 4:12:06 PM EDT
If you're not planning on using the money for a downstroke on a house or blowing it on a honeymoon, I would suggest a Roth IRA.  You can start a Roth (I would recommend Vanguard funds) before April 15th and after that date contribute again.  Any funds left over you'll need to wait until April 16th 2005.  Diversify your IRA.  If you go with Vanguard, put a third in the S&P 500 Index fund, a third in Vanguard Primecap and the rest in something like Vanguard Explorer.  Is it risky, yes but if your just getting out of college you'll be fine when you want to retire.  If the money is meant for a home, than that is the only other way I would not invest for the long term.  Please understand, any IRA you need to be 59 1/2 years old before you can take any dough out and not be hit with big taxes.  If I was kid today, all my extra money would go into a Roth...
Link Posted: 12/30/2003 4:16:01 PM EDT
Tax liens.  16% - 25%.  Risk?  Return is guaranteed by the gov't and backed by the property itself.
Link Posted: 12/30/2003 4:32:54 PM EDT
Originally Posted By Railman44:
If you're not planning on using the money for a downstroke on a house or blowing it on a honeymoon, I would suggest a Roth IRA.  You can start a Roth (I would recommend Vanguard funds) before April 15th and after that date contribute again.  Any funds left over you'll need to wait until April 16th 2005.  Diversify your IRA.  If you go with Vanguard, put a third in the S&P 500 Index fund, a third in Vanguard Primecap and the rest in something like Vanguard Explorer.  Is it risky, yes but if your just getting out of college you'll be fine when you want to retire.  If the money is meant for a home, than that is the only other way I would not invest for the long term.  Please understand, any IRA you need to be 59 1/2 years old before you can take any dough out and not be hit with big taxes.  If I was kid today, all my extra money would go into a Roth...
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I second the Roth IRA.
I'm 29 and have been putting the maximum amount in an IRA since I was 18. I started investing my yearly contributions in a "Roth IRA" around 4 years ago. The Roth is the only way to go in my book. You pay the tax on your money in the beginning, then when you start taking money out at 59 and a half IT'S TAX FREE!!!!!
On a regular IRA you pay no tax when you put your money in , but pay tax when you pull it out for retirement. Who would want to pay tax on all that money you've made from now till then when you take it out.
I invest for retirement through Fidelity Investments. My whole family does Mother, Father, Brother and Grand Parents. It's a great company. You can put $3000 a year in a n IRA. $3500 if you are of 50 years or older(as a catch up clause).
Link Posted: 12/30/2003 5:52:14 PM EDT
[Last Edit: 12/30/2003 8:11:58 PM EDT by Ragnaroc]
I have been following Bob Czeschin and his Oil & Energy investment report for about 7 years.  Even when oil was at 12 dollars a bbl, his investments where showing a solid return. He recommended Nabors Industries at 11.00 and it has been over 40.00 recently. A year and a half ago he recommended buying Euro call options when the Euro was .86 to a $. The Euro is now almost 1.26 to a $. Just following this one recommendation and rolling it over for the last year and a half would have made a retirement. I think the guy is amazing, his profit/loss for as long as I have been subscribed is phenominal.
Link Posted: 12/30/2003 6:04:24 PM EDT
The Roth IRA is a good idea IF you qualify - but not everyone can pay into a Roth (so make sure you check into that).
Link Posted: 12/30/2003 6:19:36 PM EDT
Cattle futures should be close to their low about now.
Link Posted: 12/30/2003 7:02:25 PM EDT
Originally Posted By DK-Prof:
The Roth IRA is a good idea IF you qualify - but not everyone can pay into a Roth (so make sure you check into that).
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Anybody that can invest in a regular IRA can invest in a Roth IRA.
Link Posted: 12/30/2003 7:16:32 PM EDT
[url]www.superiorinvestor.net[/url]
Link Posted: 12/30/2003 7:46:14 PM EDT
I suggest the indexed mutual funds. If you do it through Charles Schwab, they won't even charge you commissions on the buy.

I think the stock market is on the way up.
Link Posted: 12/30/2003 9:42:37 PM EDT
Originally Posted By SS109:
I suggest the indexed mutual funds. If you do it through Charles Schwab, they won't even charge you commissions on the buy.

I think the stock market is on the way up.
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Not on the way up, it IS up. Will still go up some more, I believe, but who knows for sure.
Time to buy was 2 weeks after 9/11 and I told plenty of people that at the time.

Indexed funds are fair performers and are very low cost.

Once again, with mutual funds that are invested in outside of retirement vehicles, you will pay tax on the gains for that fund even if you are a new investor. ie:
If your fund bought microsoft 10 y ago and sold today at a profit you would have to pay your share of the capital gains even though you just bought into the fund. Something to think about.

As others have pointed out the Roth IRA is a great deal if you are willing to wait for your money until 59 1/2. I try to talk all of you young guys into doing that.
Link Posted: 12/30/2003 9:49:04 PM EDT
Originally Posted By drjarhead:
As others have pointed out the Roth IRA is a great deal if you are willing to wait for your money until 59 1/2.
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If you have a roth, you can also withdrawl your initial monies at a later date if needed.  This is generally a bad idea, though.

Very nice investment vehicles.
Link Posted: 12/31/2003 12:55:50 AM EDT
I invest more or less as hobby. I move around $50 a pay check into my account with my broker (I will get to who I use in a Minute). When I have a $100 or 2 and I see I stock I like I buy it. I don't have it set as an IRA or anything like that. I figure $50 a paycheck is not that much I would end up blowing that on useless garbage anyway. I hope one day down the road to buy some vacation property up north for hunting and fishing. I stick to the big companies (Dow 30) that pay out dividends. That's just my Philosophy.

Anyways I use a broker called Sharebuilder. [url]www.sharebuilder.com[/url] They only charge $4 to buy stocks on Tuesdays and there is no minimum. They also offer index funds and bond funds as well as 3000 stocks. They also have IRA's. The company is for long term investors not daytraders. They are a good company and I have been with them for over 2 years and had no trouble. They are running a promotion right now and I recommend someone I get 5 free trades. So if anyone is interested send me an IM with your email address and I will forward the e-flyer so I can take part in the promotion.
Link Posted: 12/31/2003 1:40:05 AM EDT
I'll also second drjarhead and sixgun357.  Sharebuilder is one site I use to buy a few securities here and there, and you can even buy Berkshire Hathaway B shares through them.  Index funds are great performers, they will outperform something like 80% of all other mutual funs out there, and have low overhead as well, since there is very little "management" that is done on them.
Link Posted: 12/31/2003 9:36:15 AM EDT
What's so great about paying $4 to sharebuilder to buy stocks?  They accumulate orders from lots of people and then make a purchase every week, so who knows what price you might get.

My accounts are at Scottrade and the fee is only $7 (unless you are buying stocks that cost less than a buck), and I get to dictate when I want to buy.
Link Posted: 12/31/2003 10:14:17 AM EDT
Scott trade is $7 plus $1.50 contract. When you buy 4 shares of something this adds almost $2 to each share. And besides when you only buying a few shares of something does it really matter if save say thirty cents on a share. I am not Scottrade is a bad company Im just just saying for a smaller investor sharebuilder would be a little better way to go
Link Posted: 12/31/2003 10:48:35 AM EDT
Sharebuilder is good for people who want to do dollar-cost-averaging, plus they have a $12 all you can buy plan.  This allows you to buy, say 4 different securities each week, for a flat fee of $12 per month.
Link Posted: 12/31/2003 11:05:59 AM EDT
Originally Posted By Sixgun357:
Scott trade is $7 plus $1.50 contract. When you buy 4 shares of something this adds almost $2 to each share. And besides when you only buying a few shares of something does it really matter if save say thirty cents on a share. I am not Scottrade is a bad company Im just just saying for a smaller investor sharebuilder would be a little better way to go
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That might be their fee for options, but not stocks.  Plus, unless it's Berkshire, a person has no business buying stocks if he can only afford 4 shares of it.  People who want to invest $50 or $100 at a time should stick to mutual funds.
Link Posted: 12/31/2003 11:18:47 AM EDT
Cattle futures should be close to their low about now.
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Bill, I disagree.  Before the Canadian case of
Mad Cow was found, the cattle futures were much lower than they are going to close even today.  Besides, there is a lot of risk with all of that volatility.  Cattle markets are one of those inelastic markets whereby a minor shortage of beef can easily result in a huge price run up.  Of course the reverse is true also.

For a novice investor, any futures market has too much risk.  The possible exception might be the domestic sugar market, but the prices are perennially on the support price, with world sugar near $.06, so there is not enough volatility to justify the nonexistent return.

DK Prof is right that risk & return are a trade off.  The problem is essentially one of very high risk to achieve a mediocre return, IMHO.  So, don't buy junk bonds paying 10 - 15% unless you are a sophisticated investor & watch the markets closely.  You could easily lose your whole investment for a return only slightly better than a CD.  BTW, if you can add another $3000 to the $7000, you can put it in a CD & just let it sit for 2 years.  A total of $10K will give you more leverage than $7K.  IIRC, I was seeing returns of 4 - 5% for $10K in CDs for 2 years.
Link Posted: 12/31/2003 11:23:31 AM EDT
Originally Posted By SS109:
I suggest the indexed mutual funds. If you do it through Charles Schwab, they won't even charge you commissions on the buy.

[red]I think the stock market is on the way up.[/red]
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2004 will be a good year for the stock market.
Link Posted: 12/31/2003 12:18:24 PM EDT
[Last Edit: 12/31/2003 12:19:22 PM EDT by CAPITALIST]
Originally Posted By cyanide:
2004 will be a good year for the stock market.
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I Wholeheartedly Agree!!!!!
Link Posted: 12/31/2003 1:55:32 PM EDT
You can also buy things like QQQ and DIA through sharebuilder, and my Shrebuilder roth buys Berkshire, about $300 per month worth of it, which is only like 1/10 of a share.  Folio FN is another nice online service.
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