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written by reader Need Your Long Term Investing Help

By xiexgp, January 13, 2014

New to Gumshoe, but a big fan already and became irregular as of this month. I am 39 years old, and have put every dollar I’ve made the last 20 years into my business that is finally a stable flow of income for me and my family. I have never had any investments to speak of (mutual funds, 401k, etc). I am debt free but my mortgage @ 2.62%, and have 6 months living expenses saved up in money market @ .9%. I have $2500 a month to invest and was wondering what you would do if you were me. Save up til the market has a correction, buy some mutual funds, and then buy stocks as they appear to be a buy or value. I know there is a lot more to it than this, but just now ready to start investing in stocks and wanted to get some opinions. Thanks and Travis you do a wonderful job, thanks for this site.

This is a discussion topic or guest posting submitted by a Stock Gumshoe reader. The content has not been edited or reviewed by Stock Gumshoe, and any opinions expressed are those of the author alone.

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Travis Johnson, Stock Gumshoe
January 13, 2014 10:11 am

Hi friend, welcome aboard! I can’t give personal advice, I’m afraid, but I can tell you how I learned to invest when I got started on this adventure: I started with just saving and building up by dollar-cost-averaging into index funds and other low cost mutual funds that looked appealing to me. I didn’t want to take risks in buying individual stocks that need more attention and monitoring until I understood things much better, so I started reading everything I could get my hands on, including the letters from investors I really admired and the funds I bought into (like the Third Avenue shareholder letters, Warren Buffett’s annual letters, etc. — reading how professionals invest is a great education). Then I kept putting most of my money into diversified funds but gradually started taking small positions in stocks — I found that owning just a few shares of a stock led to me paying a lot more attention to it, and studying the business more carefully, and I learned from each one. These days my portfolio is about half funds, half stocks, and I still try to put a bit into an index fund every time I buy an individual stock, just because I know that I’m not going to be infallible and pick good investments all the time.

And no, I never try to time the market to decide when to invest — there are some people who have built expertise at doing that, on average, but most of us are terrible at it and would invest big bulk sums at just the worst time. The best time to invest is when you have the cash, I think — the prudent and careful way to do that is probably dollar-cost-averaging over time, but given the general tendency of the market to go up over time there’s also something to be said for just putting what you have into investments when you have it, particularly if you’ve got 20 years or more before retirement. It’s hard now because to me the market seems a bit overextended, but that’s an emotional response to a bull market — there’s no way to know what will happen over the six months.

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