Your Questions About Investing Tips

Daniel asks…

Tips on working with a financial planner?

My fiance and I are getting married in October of 2008, and at some point before the wedding we are going to meet with a financial planner to help us with things like setting our household budget, but more so for important things like investing in retirement plans and working toward a down payment for a house. There’s so much information out there, and it gets complicated if you’re not familiar with the field, so we figured this would be a good way to help us get started.

Do you have any tips about working with a financial planner? What to ask, what to look for, companies to use or avoid, etc.? Relevant/helpful answers appreciated. Thanks!

John answers:

The first thing you want to make sure of is that your financial planner is a Certified Financial Planner (CFP). Next, you will want to meet with the advisor to make sure you are comfortable with them. If you don’t like and trust your advisor, the relationship won’t work.

Good luck in your search.

Sandy asks…

Does anyone have any information on commodity investing and or trading they can pass on to me?

I would like to become an investor, and am looking for something simple to get into. I have been told that commodities are one of the easiest methods to begin, yet I know no one doing so. Any advice, help, tips, or detours to something a little more simple will do for me as I plan to follow some through the next year and begin investing around the end of next year or the beginning of 2009

John answers:

As a very experienced professional investor, STAY AWAY. I could produce a long list of reasons to stay away as an inexperienced investor but I will give you a few:

1)Insider trading is not only legal, it is expected. There are people who know the true supply of cotton, in fact, there are four groups of them and they trade against retail investors.

2) They are not simple. Stocks are simpler investments.

3) Do you really want to take delivery or be obligated to deliver 30,000 gallons of heating oil? Where will you put it? If not, why do you trade it?

4) In the event of a crisis, can you deliver the required corn of your investment.

5) In the event of a crisis, and the markets are closed by the government and contracts come due, do you have the cash to support them outside this account?

6) Do you understand the supply and demand dynamics of the commodities you are trading?

Commodities are for gamblers and professionals. Individual investors do not belong there.

William asks…

Where should I invest my money tips mutual funds stocks?

Okay, So I’ve got about $9000 that’s been sitting in my credit union earning 5%. Well I’ve just finished reading the Wealthy Barber , Richest Man in Babylon & Dave Ramsey books. They all seem to say I should open a Mutual Fund with a good portfolio manager. Can someone tell me where I can start researching this. Better yet. Can someone just list a few examples of Mutual funds I can throw some of the money in now while I research things as I go?

Any other suggestions welcome. But I’m getting tired of researching things on my own right now only getting more lost.
These are all Fantastic answers so far. keep ’em coming. Maybe I don’t know any better but I was hoping If someone can be a little more specific as to what they are investing in right now. And to which Mutual Fund group and with which company. I appreciate everything so far. You are all gentlemen and scholars.

John answers:

I hate to burst your bubble, BUT, Mutual funds are appropriate for some and the wrong investment for a increasingly growing number of people.

For me, I would NOT invest in mutual funds if it weren’t for having a 401K.

Overall, Mutual funds are not good (once you’re educated in investing) and many people should not invest in mutual funds unless you have to (like if it were a requirement in a 401K).

Here’s why.

First of all, mutual funds exist to take average person’s money.

Second, mutual funds seem to be “happy” just to do better than the S&P index, since that’s often the gauge. A monkey, yes monkey, can usually outpick most mutual funds. Over 60% of the mutual funds out there can’t even outperform the market (CNBC just reported the current # was 72%). That’s VERY SAD!

Third, mutual funds have embedded management fees in their costs. Most of these mgmt fees are 0.5% to 2% annually. This is one of the reasons they can’t outperform the market; they take a cut out regardless of how well or poorly they do!

Fourth, most mutual funds exist not to earn you a lot of money, but are more interested in NOT “losing” you lots of money. That way you stay with them and they continue to collect their fees. Did they not highlight to you that they take this fee each and every year regardless of how poorly they do?

Fifth, mutual funds are not as liquid as one might think. If you’re in mutual funds and a Bush talks in the morning and you call your broker to sell because the market is now tanking, the broker will gladly take your order, but the order will not be executed until the day is over and the negative impact is already priced into the fund.

Sixth, many mutual funds charge extra “fees” if you buy/sell their fund within a certain amount of time, meaning you must keep your money in the fund 90 days to 2 yrs before you’re free from the fees (read the fine print on trying to get a withdrawal). These fees can be up to 3% or so of your money as well.

Seventh, mutual funds have to be in the market. So if the market is crashing or going down like it has between May and now, then the funds still have to be in the market and taking those losses too. With some practice, you can time your monies to avoid some of those losses (it’ll take practice).

Convinced yet? Need more?

Eighth, mutual funds have to be pretty diversified and so if there are hot and cold sectors, they are probably in both the hot sectors and cold sectors. However, as an investor, you can buy into just the sectors you want, like metals, or housing, or energy, etc. Or right now, Brokers/Dealers, Retail, and insurance!

Ninth, mutual funds are so big, they can only invest in certain companies. A small mutual fund with $10 billion in assets. 1% of that money is $100 million. How many companies are this big where $100 million investment isn’t the whole company? Do you want to limit yourself to just those larger companies like Times Warner, Microsoft, home depot, Cisco, Ebay which have been sideways for years? I think not.

A better way would be to buy ETFs (exchange traded funds) or holders. These trade like stocks, so are very liquid, and do not have the high fees like the mutual funds. Further, you can buy/sell them as you wish. They represent sectors or indexes, so buying them gives you the same diversification as the sector/industry/index, but with much less overhead! Here is a site with some basic stuff on ETFs.


See (american stock exchange) or, for more info as well.

You need to invest for yourself. If you can’t, then sure, use mutual funds. But be aware of the shortcomings (and as you can see, there are many).

Let me know if you have further questions.

Best of luck!

P.S. Where would I invest right now. Here are a few stocks I own.
Here are a few good ETFs, OIH, DIA, XHB
5/30/07 AM

Mary asks…

how can i get started with investing at an earlier age?

i am fifteen years old, and i am seeking advice in the world of investments. i want to learn how to know where to invest, and how. give me some hints and tips that may help for my future.

John answers:

Im actually only a year older that you and I’m trying to invest just as you are. Right now I have a Mutual Fund which averages 12.9% a year. If I were you I would get into something like the one I have. I’m part of the Schwab S&P 500 Fund. The best advise I have been given so far is to read books about investing. If I were you I would read Rich Dad Poor Dad. Trust me it will help you out and make you think. Another tip that has helped me is scheming up ways to make money. Avoid risky gambles. There are many things you can sell to your friends as well…but be careful, its hard to rely on kids our age. Beware of selling to anyone your age…or even selling at all. Another helpful tip is, save save save save save! Don’t be stingy, but if you have extra money, don’t go blow it. Put it in an envelope and once you have several hundred saved up, send it into your mutual fund that I told you to get. Thats what I do and its working well. If you can help it, try not to pull out any of your money from the mutual fund until way way way after college, and always add to it. Let me know if this works out for you! READ RICH DAD POOR DAD!

Steven asks…

Any tips for getting pre-approved for a mortgage or loan?

In in Canada, and would like to get a loan for 100 to 200K for either buying a house, or if not that than for investing in GIC’s or something (it provides tax benefits). I’ll be switching jobs soon, so I’d like to get the pre-approval before I move jobs in mid January. Any tips? I won’t be buying a house right away but I don’t want the job switch to scare off lenders.Thanks

John answers:

I am a Mortgage Associate in Edmonton, if you leave your current job and start a new job in the same line of work then usually lenders will just want you to pass probation. Here’s where you may get a problem most brokerages can get you a rate hold of up to 120 days maximum. So that would only give you 30 days to find and move into a new home. I can get a 6 month rate hold so if you are in Alberta I can help, if not find a brokerage which can give you as long a rate hold as possible.

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