Spyders? (Spy)

[Smaegol]

Hello,
I dont know much about investing, but Id like to give the stock market a shot. Ive been hearing alot of hardcore investers talking about how the economy is prepared for liftoff. I saw an add on TV about this Amex stock called Spyders (SPY) which from what I gathered is a reflection of the S&P's totals for the day. Is this a sound investment? What are the advantages and disadvantages? Is this a long or short term type of stock?

Thank you for all replies, and I apologize for my lack of knowledge on the subject.

[Ray Zee]

first have enough cash for six months or more living expenses. then own a house, and your car paid for. be out of debt from credit cards. then only think about the stock market. learn alot first or your money goes to someone else.
buy individual stocks that you have researched and like their future. hold them till you retire.
but put all you can into a ira or similar account first.
anything else is just playing roulette. if you want excitement take a roller coater ride. but never do it with your money. unless you think social security will take care of you. good luck.

[Paluka]

SPY is the exact same thing as the S&P 500, but in stock form. QQQ is the same thing for the Nasdaq 100, MDY for Midcap 400 etc...

[adios]

"Is this a sound investment?"

If I could give you a 100% certain answer to this question I wouldn't be answering this question on this forum /images/graemlins/smile.gif. Like others stated SPY is the S&P 500 more or less.

"What are the advantages and disadvantages?"

There are four major advantages from my viewpoint:

1) Individual company risk is diversified away. You are assuming market risk only. You have the ultimate in diversification by buying only one security. You can be assured that on a risk adjusted basis your "portfolio" is the most effecient one possible.

2) The shares are highly liquid. It's easy to buy and easy to sell.

3) You don't have to evaluate individual companies i.e. you don't have to make a lot of decisions. Just one really either to buy or sell.

4) Transaction costs are low compared to mutual funds. Management fees in no load index funds are more.

Disadvantages:

1) You probably don't have as much upside as in selecting a portfolio of individual stocks. Of course there's a huge downside in selecting individual stocks as well.

2) IMO it's debatable that stocks will out perform bonds in the long run. Yeah I know that stocks have traditionally done better than bonds given past history but there are two mitigating factors. One is that the data isn't that extensive and two we're talking about the future not the past and I'm not sure that what's happened in the past can be a good predictor of what's going to happen in the future for stocks. I'm sure several will disagree with this statement.



"Is this a long or short term type of stock?"

Again if I could answer this definitively I wouldn't need to be on any forum but probably more long term than short term. I promise to post something about using SPY and the appropriate riskless asset to generate an expected return.

[Czech_Razor]

Read Malkiel's "A Random Walk Down Wall Street," and Bogle's "Common Sense on Mutual Funds." You should also go to Index Funds (http://indexfunds.com), where index mutual funds and etfs are compared.

As an aside, ignore the notion of ever knowing when is a good time to get into the market. Investing's about asset allocation, time, patience, and reducing the rake. Hopefully this is not a complete waste of your time.

Anthony