Re: What to do with a little money?
 

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yeah, that was my actual real suggestion.

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Ok, I'll bite... for the purpose of discussion...

Convince me why a person in the situation described would be better served by keeping their money in Cash, rather than investing in an index fund?

Re: What to do with a little money?
 

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why a person in the situation described would be better served by keeping their money in Cash, rather than investing in an index fund?

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Remember that we're talking about a one-year holding period.

[I don't have the inclination to research the sources for all these figures right now, but I will if someone honestly doubts the ballpark I put them in and really really needs sources.]

Cash=guaranteed 4% return with a 0% variance
S&P 500=???? return (avg. return ~11%, variance y% [I don't know exactly, but I'd guess y=~20])

Who knows what the return of the index will be? I sure don't, but here's some stats you may be interested in:

* The overall P/E of the S&P today seems fairly reasonable (17-18 is what I've been hearing), but the one that's usually bandied about includes the words "projected operating earnings," the first two of which significantly deflate the ratio. Also, corporate profits as a %age of GDP are at a multi-decade high (don't have the stats in front of me, but it's now in the 7-8% range, though usually in the 4-5% range).

* The P/S of the market (defined as aggregate-stock-market-valuation/GDP) is currently in the 140% range. The long-term average is less than half that.

* Around x% of the years since 1927 (I don't know what x is, but I'm guessing somewhere aroun 25-30), the S&P 500 has returned less than 4%.


Your turn.

Re: What to do with a little money?
 

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Cash=guaranteed 4% return with a 0% variance
S&P 500=???? return (avg. return ~11%, variance y% [I don't know exactly, but I'd guess y=~20])

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I don't know if s&p has a variance of 20%, prolly 10%

Re: What to do with a little money?
 

I guess I was thinking of standard deviation.

Re: What to do with a little money?
 

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Cash=guaranteed 4% return with a 0% variance

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you should consider inflation variance alternatively, consider 4% not the true return.

Re: What to do with a little money?
 

inflation hurts the cash holder and the index holder equally

Re: What to do with a little money?
 

If your going to invest it... margin it to give you mroe buying power. Don't let anyone tell you otherwise... you only live once and gettin rich quick is the only way to do it! I took out a home equity loan to drop and margin in da market. Im gonna be rich real quick.

Re: What to do with a little money?
 

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margin it to give you mroe buying power. Don't let anyone tell you otherwise... you only live once and gettin rich quick is the only way to do it!

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This is obviously correct. Also, if you're a winning poker player, then any free time spent not playing is wasted. So take as much caffeine, cocaine, and whatever else you need to keep you awake all night every night. Then you'll get rich much quicker than the rest of us so-called "sleepers" and "people who think that investing on margin is a very dangerous way to go, especially for a noob but sometimes even seasoned professionals get burned doing it."

Re: What to do with a little money?
 

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[ QUOTE ]
margin it to give you mroe buying power. Don't let anyone tell you otherwise... you only live once and gettin rich quick is the only way to do it!

[/ QUOTE ]
This is obviously correct. Also, if you're a winning poker player, then any free time spent not playing is wasted. So take as much caffeine, cocaine, and whatever else you need to keep you awake all night every night. Then you'll get rich much quicker than the rest of us so-called "sleepers" and "people who think that investing on margin is a very dangerous way to go, especially for a noob but sometimes even seasoned professionals get burned doing it."

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And to think that my parents almost talked me out of opening a margin account, thanks 2+2

Re: What to do with a little money?
 

how about putting it into a CD?

5k into 6-month CD at 4.6% apy
10k into 1-year CD at 4.9% apy

The added advantage of a CD is that I won't blow the money on some stupid crap and I'll at least have my tuition locked up in case something goes wrong.

Weak tight, or wise conservative?