<p>My father has given me $10,000 to work with and I just don’t know all that much about investing. Could you guys give me some advice on what I should do with this money?</p>
<p>Buy four or five stocks that display a pattern of increasing their dividend over the past five or ten years. The greater the percentage of increase in dividends the better. Google finance or other websites have this information. Or you can go to the library and ask for Valueline which will provide this information as well. You should have a good number of stocks to chose from. Of those, chose ones in different industries and ones which you believe will continue to grow their earnings from which dividends can be paid.</p>
<p>Start by putting the cash in a bank or money market account, where it is safe and insured.</p>
<p>And start reading. Learn the basics of investing BEFORE you put one dime at risk. Learn the characteristics of various mutual funds and their investment objectives. Learn about properly spreading your investment risk over different types of investments so when some of it is on the way down, some of it is most likely on the way up…to balance your risk.</p>
<p>While I think the parents in Parents Cafe on CC are very intelligent, for investment-specific advice, I suggest you visit bogleheads.org. </p>
<p>I have learned a lot there.</p>
<p>bogleheads.org is a great site! Most likely they will advise you to buy a mutual fund with a good mix of stocks. It’s important to examine the management fee of the funds (that’s a big part of the bogleheads philosophy). I believe counting on a few individual stocks is really more gambling than it is investing.</p>
<p>Have fun!</p>
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<p>First, consider opening a retirement account and putting much of it away into retirement, especially if/when/should you be a recent graduate. The government gives low income earners a very large tax credit to encourage saving, and you might be able to take advantage of it. Plus, you have 30-40 years to let the money to grow. </p>
<p>Regardless of the type of account that you invest in, my philosophy has been to invest in index funds using a dollar cost average technique. In your case, you would invest $1000 or so (depending on the index fund) to get started, and then perhaps $100 or $250 a month for the next 3-5 years. </p>
<p>The advantage of this is two fold: One is you buy more shares when the market is down and fewer shares when it is up, thereby buying low. Second, you protect yourself in case of a market downturn in the future.</p>
<p>As others said, read this advice plus a lot of others and you’ll find a strategy that makes sense. </p>
<p>One of the best magazines that I’ve read is MONEY Magazine. Highly recommend it.</p>
<p>Happydad likes the advice from Motley Fool.</p>
<p>My son is learning by doing some sort of thing on line where you buy and sell but not with real money.</p>
<p>Google around on the following topics:</p>
<p>Stocks vs. Bonds
Large, Medium, Small Cap (Capitalization) stocks
Income vs. Growth stocks
Proportion of cash to keep vs. investing in a stock/bond portfolio
Risk tolerance in investing
How an investment portfolio should change with age of investor
Distribution of risk in an investment portfolio
How to invest in stocks: buy and hold vs. day trading (extremes of investment style)
Value investing
Fundamentals
Technical investing
Market timing (don’t bother trying but you should know what it is)</p>
<p>You have to, as an investor, consider how long you will be holding your investments (so this factors your age in) because long term investing strategies are different from short term investing strategies.</p>
<p>You have to determine how risk tolerant you are so that if the market crashes can you stand waiting years for it to come back because over the very long term (decades) typically the stock market out performs other investments but ONLY if you can hold on to your stock and ride out a decade or half decade long storm. So for example if you need the money next year for college tuition you don’t invest in long term (typically stock) type investments. </p>
<p>This oughta get ya started. Good luck!</p>
<p>Oh yeah and remember to buy low and sell high. This sounds so simple but actually making this happen is really really really hard. Example: you have a stock that has been running up like crazy. You love it. Can you stand to sell it? You should at least sell some of it. You keep your eye on the company’s fundamentals to help decide how much to sell and how much to hold. It’s hard to sell something you love. Conversely, you bought stock in a company you thought was gonna be great. It has done poorly and you have lost money. Can you stand to sell that dog? You should. It’s hard.</p>
<p>Similarly, when the market crash happend in 2008 and you were (if you were invested) watching your portfolio that you had worked 30 years to save into dive in half in a matter of weeks, could you stand to not sell then? Did you have a dollop of cash sitting around waiting for this type of thing to happen and when it looked like the country was going to he!! in a handbasket could you make yourself buy some of the halved in value stocks? That is buying low and selling high.</p>
<p>Ok more. Most wealth is built by salting away savings little bit at a time with regularity over a long period. Investments typically grow (overall portfolio) in small fits and starts, not in giant bumps up. Some stocks might rise mightily and fast but others will poop out on you and overall you look for “moderate growth”. Get rich quick is not what happens for most who have built wealth. So spend less than you bring in and invest your savings. Keep. costs. down. Save. Slow and steady investing in good and bad “weather.”</p>
<p>Taking investment advice from random posters on a message board is NOT the way to go. Before you “Google around” for hours, get lost on a site like Motley Fool, or try to understand dollar cost averaging or market timing (the latter being something pretty much no one knows how to do), go to the library and get a book on basic investing and personal finance. Jane Bryant Quinn’s is one. There’s a lot to learn before you ever start focusing on particular investments or strategies. In the interim, put the money somewhere safe.</p>
<p>I recommend looking at “Personal Finance in your 20s for Dummies” by Eric Tyson. It’s a good short overview of financial planning in general without being too overwhelming. It’s not an investment book per se but it explains stocks vs. bonds, mutual funds, retirement accounts, etc. and shows how investment fits into an overall financial plan for one’s life.</p>
<p>Don’t overlook the tax impact of investment decisions, including the taxable gains that some mutual funds generate, but don’t distribute.</p>
<p>Where’s DStark? need him to weigh in.</p>
<p>When I was fresh out of college working my first “real job”, my project manager impressed me because he had all these rental properties. He encouraged me to to do the same. At first, I just saved to buy a home, which I did two weeks after I married. I had used auto-savings deposits into the credit union, as well as auto deposits into a 401k for retirement. </p>
<p>Then after marrying and having 2 incomes, we lived on one income, saved the other and started buying rental properties.</p>
<p>There’s no ‘one size fits all’ investment strategy. A lot depends on where you’re at in your life and what investments/assets you already have. What a college student should do with a lump sum would generally be quite different than what a 35 y/o should do or a 60 y/o should do.</p>
<p>If you’re young, for example in college, my own opinion is that the investment should be in securing your future first which would mean investing in your education including grad school if you have that planned and not just tuition but also living expenses (housing, meals, transportation, insurance). Your education will likely set the foundation for your future income hence its importance, IMO, out-weighing investing in a retirement plan or stocks/mutual funds at this point.</p>
<p>Most of us will need to live somewhere and for most of us that means that at some point we want to own a home which is itself a basic living cost and in the long run an investment in most areas of the country (emphasis on the long term). For most it involves saving for a down payment in a relatively safe manner (money market savings, CDs, etc.). Consider whether you have this covered.</p>
<p>Keep in mind that stocks/mutual funds can go down as well as up although over the long term the trend is up. Don’t do individual stocks unless you really know what you’re doing and are willing to take the risk. Another option would be to go to Vegas and put it all on Red but of course that involves some risk as well.</p>
<p>I agree with the posters who said to educate yourself in the area first and not use anecdotes from posters, many of whom might be more reluctant to indicate their losses than their gains and hence you end up with some unbalanced anecdotes.</p>