From Billy Cravens: “I would like to get started in buying small stocks and I know very little and would like to make enough small gains on my investments and I would like your advice. The amount I was intending to start out with was around $500 to $1500 and I really need some help. P.S. I also have a 401k account and I realize the importance of long term investments so any help is appreciated.”
Good for you for wanting to start. I don’t want to discourage that. And the time to lose a portion of your money through inexperience is when you don’t have much – so that’s good, too.
Still, you’re about to sit down at a table with some very smart, very aggressive players. And it turns out even they have an all but impossible time racking up 20% a year after tax, on average (most will average more like 6% to 12% over long periods of time).
So we’re talking about growing your $500 to $600 – maybe – a year or two from now.
What’s my point? Two points:
- It’s far more important that you simply get into the habit of saving/investing money periodically from now on … that WILL make you rich, or at least comfortable … than that you try to find a way to make a lot of small (taxable) gains by playing the market against the pros with your $500. Find a stock you really believe in and hold it for the long term. And keep putting aside whatever you can each month or quarter or year to add to your investment portfolio. You’re already doing that with your 401(k), which is great.
- If you can find the time, and if I may be so presumptuous, go to the library or bookstore and read The Only Investment Guide You’ll Ever Need. It was written for you.
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To the BELOVED REPUBLIC under whose equal laws I am made the peer of any man, although denied political equality by my native land, I dedicate this book with an intensity of gratitude and admiration which the native-born citizen can neither feel nor understand.~Dedication to Andrew Carnegie's Triumphant Democracy (Scribner's, 1886)
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