Your Questions About How To Invest

Joseph asks…

How much is needed to invest for a $2k a month income in dividends?

How much is needed to invest for a $2k a month income in dividends? And what stocks are best to achieve this?
Blue Chips, Large Caps, High Equity?

John answers:

Right now youd need about $22000.. Look at some closed end funds like BFD, ETY, AGC, AOD…

Lisa asks…

How do invest in the stock market?

How do i invest in the stock market? I have very limited knowledge of this area, but would like to try investing. Also, do you need vasts amount of money to start off or can you start small? Thanks.

John answers:

Please don’t throw away money that you cannot afford to lose. Do papertrade and gain confidence first before using real money.

To open an account, you have to:

1. Find a brokerage e.g. ETrade, Scottrade.

Online Brokerage Survey:
http://www.bankrate.com/brm/news/investing/20010601b.asp

2. Fund the account
– Amount will vary depending on brokerage.

3. Load their software

4. Trade

You should consider learning and trading options instead of stocks:

http://www.investopedia.com/articles/optioninvestor/03/073003.asp

Again, please papertrade either way before using real money.

Best of luck.

Mandy asks…

Is it wise to invest in different mutual fund companies or just one?

Is it wise to invest in different mutual fund companies or just one company for maximum returns? My reason is that in case Company A fails, I still have a backup with other companies.

What is your opinion on this, will it matter if I invest in different companies? What are the chances that a mutual fund company will actually fail/close?
About diversification: isn’t mutual funds already in itself diversification?

John answers:

Mutual Fund companies tend to not fold, but I can understand your concern. But generally when people invest in funds they look at different types of funds – like large cap domestic, international, small cap domestic, emerging markets, etc. It certainly can’t hurt you to go with different fund companies.

I suggest you take a look at index funds – Vanguard and Fidelity have some good ones. They invest in a variety of markets and beat mutual funds over time. They also have low expense ratios. So if you want to look at seperate fund companies take a look at some of Vanguard’s index funds.

Lizzie asks…

What is the better path to wealth? Invest for the future or Invest for the present?

Invest in small companies that have potential or invest in big companies who are actually doing it big right now at the highest level?
Damn these are both great answers. Best answers I’ve had investing period. However, I can only pick one. I hate that part of it. LOL Anyway, whomever doesn’t get best answer don’t take it personal because your answer was exceptional as well. Both very great answers.

John answers:

There is no right or wrong, it depends on your situation and your philosophy of investing.

If you are interested in smaller companies, try reading Investors Business Daily. Each Saturday, they feature the top 100 best performing smaller companies. In good times, the stocks they suggest increase much faster than the market. In bad times, they lose money much faster.

Sandra asks…

What’s the best way to invest my money if I never want to touch the principle, and just live off the interest?

I know you get more interest if you invest in something where you can’t touch the money for very long periods of time, but the interest is paid into a checking account or something. If I never wanted to touch the money I invested, and just wanted to spend the interest earned, what should I invest in? Mutual funds? Index funds?

John answers:

Well, there are several ways to do this. One thing to think about is volatility. If you want to be 100% guaranteed of never losing any of your principal, then certificates of deposit (CD’s) are the way to go. In exchange for security, you will be foregoing the potentially greater growth of different types of mutual funds. Depending on the CD term (6 months to 5 years), they are currently paying around 1-2% per year. If you have a very large amount to invest (over $100K), you may be able to negotiate a slightly higher rate – shop around at credit unions, large banks, and small banks for the best deal.

If you’re willing to handle a little volatility, you could invest in a bond mutual fund. Your principal value will fluctuate slightly (not a lot), and you could expect an average return in the neighborhood of 4-7% annually, depending on the types of bonds the fund invests in.

If you want to be even more aggressive, you could invest in what’s called a balanced fund, which invests in both stocks and bonds. Your principal value will fluctuate more than a bond fund (stocks are more volatile than bonds), but it will be more likely to grow over the long term (5-10 years or more), and it will still kick off some income. You could expect your average total return (income plus growth in principal) to be around 7-9% per year (some years will be more, some less).

If you decide to go the mutual fund route, be sure you choose a good fund company – one with many good fund choices, low fees, and excellent customer service. Based on those criteria, my favorite fund companies are Vanguard, T. Rowe Price, and Fidelity. Their customer service reps will be more than happy to answer any additional questions you may have.

I hope that helps. Good luck!

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