YABI (Yet Another Beginning Investor)

[maddog2030]

First off, I know that there's plenty of these type of posts but I didn't see what I was looking for. Most people were just asking for books for beginners or something along those lines. While those would be good advice, I think there's enough of those posts already that I can get that information readily. I'm sure what I'm about to say has been discussed many times but I couldn't find much doing a search. So if it has, search terms or links would be appreciated.

To give you a better idea of what I'm actually going to ask, I'm going to explain my situation in a nutshell:

I'm a college student and have been playing poker for a few months now. I've made a few grand and haven't really cashed out any of it (with the exception of purchases of poker related software). Over this summer I have a well paying job, and I think I'm going to sit tight with the limits I'm currently comfortable with (and now fairly overbankrolled for), so I have no need or desire to withdraw the extra money for any real purpose. Also, I don't expect this poker fad to last forever so I want to get started in other oppurtunities while it lasts. I've wanted to get into the investment arena for a while now but I've never really had any money to do it with being a broke college student. So I figured what better way than to get started than with a portion of my poker profits.

The problem arises that I have absolutely no idea where to start from. You can pretty much assume I have no idea how the market really works, or anything in the investment arena really... I have a passing understanding but that is all. Nor do I know what type of investing I even want to do or what would be best for me. What are my goals you ask? Makes as much money as fast as possible with as little risk as possible, but I'm sure that doesn't help. I'd basically need to lay out my options on a table and then decide from there but, again, I have no idea where to start.

I want to learn how the market works, the various theories/models predicting its behavior, etc., and in the end, to turn a good profit. Yeah, wouldn't everyone.

So what I'm asking is what would be the best place to get started? A lot of the threads asking for books are geared to specific types of investing. I couldn't tell you what type of investing I'm interested in doing because I have no idea. But I want to learn.

Any resources, books, other possibly more active message boards, general advice, etc. would be greatly appreciated. Thanks in advance. Also, do you think $1,000 would get my started pretty well? More? Less? (It probably depends on what type of investing I'm doing but I figured to throw a figure out there at least)

[James Boston]

I think I understand your question, so here's a couple of things:

1) I don't know what book would help, try all the books in other threads. The Market is a pretty vague thing, so I don't know what you're asking. There's THE STOCK MARKET, THE REAL ESTATE MARKET, THE BOND MARKET, etc... You should really try to understand them all, or at least understand one enough to make intelligent decisions.

2) $1000 isn't that much. It's not bad, but you're not going to see a lot of reward with that kind of investment. Assuming a decent 8% return for 50+ years, you're only looking at $60Kish. So in your words, you can't "make as much money as possible, as fast as possible, with as little risk as possible."

It sounds like you're looking for an easy answer, and there isn't one. The good news is there IS a complicated answer that is readily available through lots of studying. Good luck!

[maddog2030]

Sorry, I have a problem with asking too many questions and drowing out my main points.

[ QUOTE ]
1) I don't know what book would help, try all the books in other threads. The Market is a pretty vague thing, so I don't know what you're asking. There's THE STOCK MARKET, THE REAL ESTATE MARKET, THE BOND MARKET, etc... You should really try to understand them all, or at least understand one enough to make intelligent decisions.

[/ QUOTE ]

Yeah, basically my goal is to understand the fundamentals of all these different markets and the theories/models behind them. From there I can decide what would be best for me to "specialize" in and maybe what I'd be most interested in. My hope was that there was a good comprehensive resource in to gaining this type of knowledge, or a well known collection of resources.

[ QUOTE ]
2) $1000 isn't that much. It's not bad, but you're not going to see a lot of reward with that kind of investment. Assuming a decent 8% return for 50+ years, you're only looking at $60Kish. So in your words, you can't "make as much money as possible, as fast as possible, with as little risk as possible."

[/ QUOTE ]

$1000 would just be a "getting my feet wet" type of investment. I wouldn't die if a lost it, but thought it might be enough to manuever around with to see how things work; I don't expect to become a millionaire with it. Once I got comfortable and saved up some more money, I'd invest more.

[ QUOTE ]
It sounds like you're looking for an easy answer, and there isn't one. The good news is there IS a complicated answer that is readily available through lots of studying. Good luck!

[/ QUOTE ]

Well I was looking for an easy answer... just what to start researching to start understanding all my options. Generally when I get into something, I like to gobble up as much information about the topic as humanly possible. Just with investing, it seems like its hard for me to find a starting place to start gobbling. I've glanced through some resources and they seem to assume you know how certain markets work already, etc... knowledge I don't have yet and makes it impossible to understand the more complex stuff. Perhaps I've just been looking in the wrong places.

Thanks for the info.

[James Boston]

[ QUOTE ]
My hope was that there was a good comprehensive resource in to gaining this type of knowledge, or a well known collection of resources.

[/ QUOTE ]

Investopedia

[ QUOTE ]
$1000 would just be a "getting my feet wet" type of investment. I wouldn't die if a lost it,

[/ QUOTE ]

Bad Idea. Investing isn't like playing poker, in that you can deposit $100 on Party, play $.50-$1 to "get your feet wet," and then start studying once you get the rules and mechanics down. You need to learn how to invest before you put a nickle into any kind of investment. If you don't want to learn about the finer points of investing, that's fine. CD's, index funds, and several other methods allow you to invest conservatively with virtually no knowledge of what you're doing. You should never have a "if I lost it" mentality. A loss of an investment should only be the result of an unforeseen occurence, not a gamble that didn't pay off.

[ QUOTE ]
I've glanced through some resources and they seem to assume you know how certain markets work already

[/ QUOTE ]

I still don't know exactly what you mean here. Do you want to know the detailed economic forces that drive all markets? Because that's a discussion I'm in no way qualified to participate in. If you have a few specific questions about the simple mechanics behind certain types of investments, post them and I (and a few others I'm sure) will try to answer them.

[maddog2030]

Nice resource.

[ QUOTE ]
You need to learn how to invest before you put a nickle into any kind of investment. If you don't want to learn about the finer points of investing, that's fine. CD's, index funds, and several other methods allow you to invest conservatively with virtually no knowledge of what you're doing. You should never have a "if I lost it" mentality. A loss of an investment should only be the result of an unforeseen occurence, not a gamble that didn't pay off.

[/ QUOTE ]

Fair enough. You're right. I was looking at it as sort of a gamble, but an informed gamble. I didn't in any way mean to just chuck out $1000 in the market, buy some random stocks, and see what happens.

I'm not very interested right now in just turning my funds over to someone and having them invest for me. I want to manage my own money and know what's going on, and most importantly know why. Perhaps in the future I might go a different route, but for now I want to do the research on my own.

I hope my lack of knowledge isn't radiating too much. [img]/images/graemlins/smirk.gif[/img]

[DesertCat]

No-one knows how the market works. Some people have success at figuring out what individual stocks are worth.

Online start with the Motley Fool web site, it's a good overiew. Books by Ben Graham, about Warren Buffett.

[soapbox]
Ignore "technical analysis" and "charting", worse than useless. Stay away from day trading, big time -EV. Ignore macro analysis in most cases. Tune out CNBC, they are a pump and dump network for stock salesmen.

Learn fundamental analysis (i.e. value investing). Learn how to estimate the true ("intrinsic") value of a stock. Buy stock when cheap. Sell stock when expensive. Rinse, lather, repeat, beat the market over long periods the same way all of the long term winners do. No other knowledge necessary.

[/soapbox]

[player24]

If you are still in college (and I am assuming that you are not majoring in Business), take a course in economics, finance and accounting (in that order). This, alone, will not transform you into a skilled investor, but it will put you ahead of 95% of the US population.

You have a mature/realistic attitude regarding poker - this suggests to me that you have the proper mindset to be a good investor...and that you will have a propserous career (doing whatever) which will make your $1,000 seem like pocket change in a few years. (Unfortunately, it is pocket-change...and this limits your options.)

From a financial planning point-of-view, the 'proper' place for you to start is with a diversified equity mutual fund (preferably a low cost index fund from Vanguard or Fidelity). When you build up additional assets, you can start to think about implementing a core-plus strategy whereby you own index funds with most (80+% of your assets) and you invest the remaining assets in a small semi-diversified portfolio of individual stocks or ETFs (sector funds). This is not realistic, however, until you have about $10,000 to invest.

The basic reality is that when you are 20 years old, your income and wealth creation will come almost entirely from your "day job" (because you don't have enough to invest to make much of an impact). When you are 50 years old you will, hopefully, be earning more from your investment portfolio than you will earn from your day job. So, making a mistake at your age is not very costly in the broader scheme of things.

Now, for the good news, unlike poker, where playing with play-money is detrimental to your game, you can play with play-money in the equity market and, if you are disciplined about the process, you will learn and improve. Keep a paper portfolio of individual stocks...and be honest about your entry and exit points...and track your returns. This works best when you are in competition with someone else - becuase it will keep you honest in the process and, if you have your pride on the line, it will help simulate the fear/greed of real world investing. I believe there are clubs you can join which organize this type of competition.

As far as books - try Investment Philosophies by Aswath Damodaran. During your first read, skip over the parts you don't understand.

[GeorgeF]

The first thing to learn in any gambling game is when not to play/fold your hand. I suggest you go with a diversified portfolio rather than try to 'make money'.

If you have less than $500,000 I suggest you spend your time on ways to increase your earned income. For example instead of reading investment books, read all material related to whatever field your are working in.
1) learn who the most important people in your field are.
2) learn who can give you a promotion (hint it is not likely to be your boss).

[player24]

[ QUOTE ]
The first thing to learn in any gambling game is when not to play/fold your hand. I suggest you go with a diversified portfolio rather than try to 'make money'.

If you have less than $500,000 I suggest you spend your time on ways to increase your earned income. For example instead of reading investment books, read all material related to whatever field your are working in.
1) learn who the most important people in your field are.
2) learn who can give you a promotion (hint it is not likely to be your boss).

[/ QUOTE ]

I agree, in general, he is going to create wealth by working, not by generating 'excess' investment returns.

But, at $500,000 I think the bar is a bit high. Once he has a diversified core, there is no reason why he can't tinker around at the margin. He can establish a diversified core portfolio with $10,000.

Although his priority should relate to his employment/career, there is no harm in having a secondary priority (aside from poker, which should not be in the top ten, IMO).

[player24]

On second thought, if he begins investing while he is undercapitalized, he might end up like this guy:
http://www.wohnzimmerprovider.de/studio.jpg