

Ask HN: Have $15k to invest. suggestions please. - investiser

 Have saved about $15k and do not have a need for this money for the next 5 years. Please suggest where i can invest this amount with decent returns, say somewhere in 12-15% range. I have not  tried investing in stocks due to volatility, hence any pointers on stock/bond investments would also be helpful. 
  Appreciate your time/suggestions very much.
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sabj
12-15% a year is very high indeed, and not a realistic expectation. Because
you have a limited amount to invest, your best option may likely be to invest
it in any number of index funds. These are very, very low in their expense
ratios and try to track indices or sections thereof without lots of management
(buying and selling, etc) of the sort that causes mutual funds to
overwhelmingly underperform the broader markets.

You can open an account at ScotTrade for free, and then buy a few index funds
that you like. You could either put these into mutual funds, like Vanguard's
VFINX US S&P fund, or buy exchange-traded funds which track indices as well.

Investing early is wise, the key thing is not to try to beat the markets (at
least not with YOUR money on the line!) and also note that volatility will
make you unhappy if you check often. You'll be up and down but, over the long
term, hopefully up. But if you check frequently, the "down" times will make
you unhappier than the happy-times will make you happy. So, set it and forget
it, if you take a diversified and relatively low-risk approach.

For 15k, you could invest across bonds, US stocks, international stocks,
emerging markets, and more, all without significant cost or overhead -- if you
play the broader markets, instead of trying to pick winners.

Most importantly, keep educating yourself, and not just what other people say
on random internet forums ;)

~~~
investiser
I consider HN to be a very informative forum hence posted it here :) My goal
is not to beat the markets, at the same time not to leave the money in Savings
account which does not get any significant interest either. Volatility is a
concern, hence I had stayed away from stocks till now. One other suggestion
was to track some specific companies for a period, and invest based on the
results. Investing in index funds seems like a good choice, and will explore
that :)

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dasht
This is not an appropriate forum in which to seek or give investment advice of
that sort. Those who respond risk accidentally running afoul of securities law
and you risk getting (and, worse - taking) very bad advice.

~~~
Mz
And then there is always the risk that someone will make a smartaleck
suggestion to the effect of "write me a personal check".

(Of course, tonight I'm the one tempted to make such a suggestion. :-/)

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wmwong
If you're talking about 12-15% after 5 years and not 12-15% per year, you can
stick it in a GIC and not worry about risk. I'm in Canada and ING's 5 year GIC
is 3% per year, which will end up giving you almost 16% after compounding
(1.03^5 = 1.159).

If you're looking for 12-15% a year, you'll have to be doing some very risky
stuff. Returns like that are hard to come by. Let me know if you find anything
though ;)

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lzw
Berkeshire hathaway and AFLAC both have returned above your target rate over
the course of decades. There are also many canadian resource companies that
will return a good percentage in dividends and then stock appreciation, plus
you'd benefit from the depreciation of the dollar against the CAD. IF you go
that route, look for one that is adding resources faster than they are
depleating them-- some have really high dividends but they are burning thru
their reserves.

%12-%15 is not that hard to get, and doesn't involve substantial risk, but
does involve doing your homework.

I would recommend one of Timothy Vick's books on Buffett for some advice.

Back when I was in the equities markets, I was able to predict the return I
would get from a stock, buy it, and then, on average, exceed that return.
Stocks are not gambling when you buy low, pre-calculate expected return over
5-10 years, and only buy when you are getting a good deal based on the
expected return.

I'm out of the equities market because the US dollar is in serious danger, and
I would not recommend bonds for this very same reason. I've been doing better
in precious metals than I did in equities. But if I were in equities I'd also
research some of the good precious metals companies-- some are very well run,
and have both equity and growth appreciation by moving assets from discovery
to production, as well as leverage to the decline in paper currencies which
will cause their resources to have a larger market value. It is one thing to
buy gold in the ground for $20 an ounce, it is quite another when gold is
going up in price while you're doing it. But this sector takes more research.

IF you're willing to put in some time, it isn't that hard, but first I would
recommend learning. The vick book, or Mary Buffetts "buffetology" are good
resources. Find people who cover the sectors that interest you, learn all you
can, and only invest in your circle of competance.

~~~
lzw
Also, one thing, if it is a new sector, consider if you can do some paper
trading based on actual returns in the past. For instance, get annual reports
from several companies from 2004. Try to get a survey of companies in the
sector, and not be influenced based on what you know now about the companys.

If you're married it would be best to have your spouse anonymize the companies
by copying down the key figures from the annual reports, and then the price on
Jan 30th, for each of the next 5 years. Have her keep the company key
seperate.

Analyze them on that basis, then look into the prices on the stock market in
January 2005. Use those prices and discounted cash flow analysis to predict
what their prices will be in 2010. Invest a fake $150,000 in the companies
based on those calculations.

Then wait a week. Each week, look up the prices for the companeis a year later
and decide if your thesis still stands. For this example, lets just pretend
like you have no access to news, no annual reports for 2005, just the price on
Jan 30th, 2006. Decide to re-allocate if you want, but pay $100 for each
transaction (sales and buys). IF you're down and you sell then you're locking
in that loss.

Do this for the next 5 weeks until you've covered the time period to Jan 30th
2010.... and then look to see how your companies did.

Try to draw your conclusions before you connect the fake companies names with
the real companies.

Don't forget to account for dividends in the interim as well.

This can be very instructive-- but be sure to learn about how DCF and current
trading price affect risk. IF one of the companies did poorly, was it because
of bad management? An externality that was unpredictable? etc.

~~~
investiser
Thanks for the suggestions. I will check out the book, and the method you
suggest seems very fair enough. Appreciate it very much.

