Ask HN: What are your instruments for investment?
I am going to get my first salary so I was looking around for investment options. Do you have any advice for someone just starting out? How do you manage your investments? Any apps/services that stand out? Also, any resources for understanding index funds would be great. I know they are a basket of securities but I don't understand why they're traded on the stock market just like a stock. Because if they're traded on the stock market then they're prone to be affected by the forces that affect the stocks.
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[ 0.24 ms ] story [ 177 ms ] threadDon't invest in anything until you have 6 months of expenses saved in cash.
Do you have student loans? Besides contributing enough for your company's match, don't invest anything until you have paid off your loans.
but they aren't exactly like stocks - ETFs act like stocks for people buying/selling, but there is an extra participant in the market called Authorized Participant (AP). This is an entity with a special position in the stock market which has the privilege of redeeming ETF units to obtain their underlying stocks, and well as parcelling up stocks and trade them for a unit of ETF.
See https://docs.google.com/viewer?url=https://www.blackrock.com... for details
But essentially, ETF act like stocks, but there's always a flexible amount of outstanding units (unlike stocks in companies, which usually have a fixed number of units outstanding). Investors buy/sell ETFs between each other most times, and the AP doesn't get involved (and thus units outstanding doesn't change). But at some point, demand for ETF units grow to be bigger than the numbers available for sale (everyone is holding it and not selling, for example), and the price of each unit grows. At some point, it makes sense for the AP to buy up the set of underlying stocks, parcel it up and trade them for an ETF unit (from the ETF issuer - like vanguard), and sell it for an arbitraged profit. This then increases the number of units outstanding for the ETF, and thus, reduces demand, and stablizing the prices.
The opposite also happens - when there are too many sellers of an ETF, the AP will purchase the ETF and redeem the underlying stocks from the issuer, and sell those stocks for an arbitraged profit. So the end result is that the value of each individual ETF unit almost exactly match the value of the parcel of shares it represents (as the AP is financially incentivized to buy/sell and arbitrage any profit out of this difference).
[0] https://www.investopedia.com/terms/a/authorizedparticipant.a... [1] https://www.janestreet.com/what-we-do/etfs/
2. As others pointed out, having an emergency fund set up and ensuring that you're taking advantage of all employer-matching and tax-saving benefits (both company and government). Different countries have different settings, so you could probably try and research those online, or ask someone you trust
3. Along with the Intelligent Investor, another book I found helpful was "A Random Walk Down Wall Street". This will help you understand ETFs and index funds
edit: If you're not in the US (or in a significantly well-developed economy), a lot of the advice in either of these books might not be as ideal as it would be otherwise. For example, in developing economies, beating of the index by reasonably knowledgable active investors is fairly common
4.
> Also, any resources for understanding index funds would be great. I know they are a basket of securities but I don't understand why they're traded on the stock market just like a stock
Index funds and Index ETFs are slightly different. Index Funds are not traded like a stock, Index ETFs are. Funds usually have a "Net Asset Value" which changes once per day. ETFs trade like a stock, and tend to fluctuate intraday.
5. Make sure you know what your investment temperament is, what your long-term goals are, and know all the mind games which you will play on yourself (not to mention the buttons the investment industry will try to push). Dan Ariely's courses and books can help a lot with understanding and minimizing irrational investment behavior.
It doesn't have to be perfectly applicable for it to be useful, it just needs to teach you something new and valuable.
There is no equivalent of Reliance in Nasdaq or NYSE.
But if Value investing suits you, you can take up the books others have suggested and get profits
I used to be a value investor, but these days I'm not. I still look for good companies available for discount, but if it goes 10% up I immediately sell it.
Intelligent investor is good for this: you can decide what type of investor you are. That gives you an intellectual framework to work with stocks.
For eh, I bought ITC for 179 yesterday, it went down to 176 today, but I did not immediately freakout, I am holding to the stock coz it has value and company is financially strong and product wise very diverse.
I've already got some minor profit and dividend from ITC in the past.
Get the basics, follow a framework but also be aware that this is just luck in the end. You can't predict a stock market so if you think you can invest all money directly in stocks then its not a good idea
Some in stocks some in RD/FD (not option in US as interest rates are like 1% or so compared to our 5.5%. but let Modiji stay for another 5yrs and FD rates will probably go 0)
I'll say don't fall in the mutual fund trap. They're adverting it so heavily that I stopped even thinking about it.
As a quote goes: a man visited a Index fund manager's lavish boat. Excellent boat. But after the party he asked "where are the customer's yatchs?"
Indian MF/Index funds don't provide you a report asto where they r investing like Warren Buffet provides to his shareholders.
They're opaque and u hope to get returns. Nobody I know has actually got 30% or so returns.
Edit: sorry if I avoided pedantic I thought you are the one who asked the qn. I realise that you already know what I was trying to say.
If you want to read more about Index funds(Mutual fund & ETFs), you might find this helpful: https://www.bogleheads.org/wiki/Index_fund
- https://www.whitecoatinvestor.com/ - targeted mostly at doctors and other high earners but can be useful
- https://old.reddit.com/r/financialindependence/ - subreddit about achieving financial independence and retiring early. It's a bit boring but the financial advice is pretty sound and never really changes. You can probably just read the sidebar or skim when you're bored.
Once you read the "Getting Started" and "Index Funds" on bogleheads, I'd suggest https://www.bogleheads.org/wiki/Three-fund_portfolio . It shouldn't take long, and by that point you should at least be able to understand enough to set up your investment accounts with some confidence.
If you will need the money in the short-term there are other options/indices (e.g. bonds) that are safer given market volatility but will yield lower returns most likely.
If you want to speculate and try timing the market, I'd suggest mentally separating the money into a different category and accept the possibility that you may lose it or end up with terrible returns. I would try not to consider category that as "investment"
> of course as the old saying goes time in the market beats timing the market
but you also directly contradict it by saying to wait until after the election.
Timing the market > Time in the market is my motto so your previous comment has me intrigued.
Getting into TSLA tomorrow Oct 02 $450.00 Calls with $8.00 buy stops.
It's different in every country thus why you need local advice. For example students loans, in the UK it's more often than not a terrible idea to pay them off early. But that might be very different in other countries.
First, Start contributing Maximum allowable and feasible to tax deferred retirement plans, pensions, and other retirement plans.
Second, Start paying off any debt you have.
Third, build an emergency fund.
For the UK the Daily Telegraph has a good business section, I also read the investors chronicle and the money observer.
Your first priority should be building up an emergency fund though
I gather you are young since you just found your first job which typically means you can take on more risk than older investors. Owning a diversified stock portfolio and holding is generally considered a safe long term strategy because stocks tend to trend upward and you can regain losses caused by bear markets by holding until times are good again.
If you want to be a passive investor then invest in ETFs like SPY or QQQ that have a lot of liquidity and represent a basket of stocks than will tend to trend upwards.
If you want to have more fun and take on more risk than some of the older guys on here then learn about options trading and hedging strategies which can really increase (or decrease) your YoY returns. I just turned 30 and have set aside a small sum of my retirement money for that sort of trading and am up around 150% this year on that account. It’s fun but it’s not for the faint of heart and you’ll have to learn a lot but flip-side is you have much greater earning potential if you do. If you go this route you should learn about options sigmas, find out what the VIX represents, learn technical analysis so that you have a strategy on when to enter and exit trades and a bunch more. Wish you luck out there, have fun and don’t get discouraged if you lose some money at first, just keep learning until you have a strategy that works for you!
Don't touch it with anything but money intended for entertainment. Yeah, it's possible to do well. It's also an easy way to set a pile of money on fire.
80% in a total market index
20% in a global bond index
You might also be interested in a Target Date Fund.
The 6 months expenses allows me to leave my long term investments alone, without worrying about what’s happening to the market in the short term.
As far as advice goes, /u/actuators comment elsewhere in this thread is great. I also enjoyed reading Bogle’s Little Book of Common Sense Investing
Do yourself a favor-- run over to Bogleheads.org, read a bit. Investing for the long term is frighteningly easy. Do it the Boglehead way, there is no better way.
One of the best ROI's available is not spending money in the first place :)
Steps for budgeting:
1) Find out where your money is going now (what's it cost for mortgage/rent, insurance, food, cell, etc...). Know your bare-bones cost. Then where you'd like to be.
2) Start actively managing your spending. https://www.youneedabudget.com/ is really the best tool out there. I banged my head against it for 3 weeks before I grokked it (esp. as a not-living-paycheck-to-paycheck person), but when I did it's been amazingly helpful. It makes big purchase decisions crystal clear.
3) Should you get life insurance? Disability? If you have kids, you definitely need >= x10 your income (permanent, term life insurance).
4) Figure out the extras. How much do you actually have available for investing. Saving for a house, car, etc...
5) Investment goals. Ideally hitting >=10% of income going to retirement/investments. Max out Roth, Max out 401k. Then look into other options. Bogleheads is best. https://www.bogleheads.org/wiki/Getting_started
It's literally a site with people gambling on the market but you can learn a lot from that too, it's a fun place.
On HackerNews you're going to get a lot of Boomers' advice telling you how to be safe with your money with low risk low reward investing. You should try following some of the advice on here but also try learning about other things because honestly you're young and you can make some mistakes just set aside a small fund for learning with.
Make sure you read this article https://leveragethoughts.substack.com/p/dont-hinge-your-care...
But the more important thing is, do you want to have fun now? Do you want to go out, party, vacation, hit up the clubs? Or do you want to stay home, save money. Maybe buy computer gear and AR or whatever the new fads are as they come? Maybe you want to save and go on vacation 3-4 times a year. Or maybe you want to save completely, get to a $1/$2/$10/$30M and then retire and do what you want to do. So when you answer that more clearly it helps to kinda figure out what you want to do.
Now if you want to have fun and enjoy your school career, I wouldn't put any money in the market, I would just go spend it. The reason being is your career should pay well. Now are you good at it?
Are you going to go for a FAANG job or a regular job? Do you want to work for someone or start your own business? Maybe instead of investing in the market, invest in a tool, like something that is going to change how everything works, for example, you think AR is the future and VR is crap, so the first AR device can be purchased, or you want to get the first Neurolink and solve dementia or whatever.
Suppose you have decided you are going to work for someone, then you want to put the money in the market somewhere and don't want to learn any new tech because you are focusing on school. YOu have to decide, do I want to swing for the fences or use a lazy portfolio. So if it's the former you can buy stocks that are the next AAPL like TLSA, or the stock you think is the next TSLA. You can split it up in a few stocks if you think you can pick better than the average market. Alternatively, you can go with the lazy portfolio and just throw it into Index funds knowing in 20 years you will be golden, and since you are going to get a decent job you will be able to contribute each month and grow it and life a safe life. To do this, look up bogleheads lazy portfolio or canadian couch portfolio in Canada.
Now if you really want to live life, and say you wanted to spend $1000 on a party, you go and risk that and put it on options. Turn that into $10K and go and buy a $10,000 on a bigger party instead. But you could end up finishing school with no money. Seriously, don't try this, I am sure most of #wallstreetbets does that.
However, it all depends on the life you want to live.
Note: Posted this comment a few months ago on Reddit and it applies to you as well.
My advice would be to do exactly what you're doing in regards to index funds, since this is your first money going into the market. If this very richly valued market drops at some point, it's going to sting, don't let that dissuade you from the long-term course, which is: investing as a matter of routine over time, you're in it for a lifetime, not a short-term flip; and during that lifetime, there will be many ups and downs. Always do your best to hold a long-term mentality about what you're trying to accomplish.
Depending on your personality, your preferences for learning about investing and managing your own money (it's incredibly boring to many people in my experience), you might consider setting aside a small slice of your investment money to invest into specific companies that you're interested in (ideally sticking to higher-quality, well-known, longer track record companies, so as to improve your odds of avoiding the Nikolas out there). Use that stake as a self-interest booster to practice reading about a company, following their progress, read their financials, read their quarterly and annual reports, read some of their archived annual reports. Practice basic due diligence on an investment that you're interested in (eg AMD, whatever it happens to be). Get used to the terminology, teach yourself to be able to digest financial information about companies rapidly, so that it's second nature. Then with a better grasp, begin practicing comparing companies, which will help you build some baseline comparison capabilities (so you'll be able to more rapidly grasp good or bad numbers from a company). Occasionally read business news, although don't bother with the bulls & bears type junk, the clickbait of the business & financial news world; read about concepts and events (like mergers & acquisitions, or stock issuances, IPOs, conflicts), to further educate yourself about how the markets work and get a feel for that world. This basic learning aspect doesn't take a lot of time, an hour per week, kept up over time. The end result is extremely valuable: considerably improved financial literacy; it gives you a leg up, as the vast majority of populations even in affluent nations tend to have a weak understanding of financial markets and stocks.
I'm biased in my recommendations, I'm a modified value investor in terms of strategy. I look for what I perceive to be mistakes in price vs value in the market. If you have an interest in managing your own money over time, you'll likely gradually learn to lean into what you're good at.
I'd recommend a few introduction level books, from the perspective of my bias:
Buffett: The Making of an American Capitalist, by Roger Lowenstein. Not primarily to learn about Buffett, rather, to learn about the concept of value as it pertains to investing.
Business Adventures: Twelve Classic Tales from the World of Wall Street, by John Brooks.
The Little Book That Still Beats the Market, by Joel Greenblatt.
Margin of Safety, by Seth Klarman. This book is excellent, however it has been out of print for some time. You may be able to find a copy of it somewhere though (there have often been PDFs of it floating around).
Common Stocks and Uncommon Profits, by Philip Fisher.
Peter Lynch has a few worthwhile books as well. Some of this will seem out of date, it's not. The lessons are eternal.
A lot of people will jump to recommending The Intelligent Investor by Benjamin Graham, I absolutely do not recommend his books for anyone new to inve...