9 Things You Should Do Instead of Buying Stocks
fool.com
Advice by a cartoonist (Scott Adams) on 9 steps to take to generate and protect wealth. Very timely.
fool.com
How is this not buying stocks? Is he suggesting putting all this money in a savings account paying 3% interest?
> Take whatever money is left over and invest 70% in a stock index fund and 30% in a bond fund through any discount broker, and never touch it until retirement
I tend to disagree for individuals willing to keep up with their stocks, and can read 10-Qs and other investment material. if you're doing the "buy and ignore" thing, however, it doesn't make much sense.
I've been guilty of not being as active as I should be, relying on meta information far too often. However, the vast majority of my investment is outside individual stocks and in indexes.
This is about as dumb as putting money into your savings account before paying off your cc debt.
Math. I suppose it's not everyone's strong point.
401(k)s can (and should) be invested across a portfolio of different asset classes (and geos) according to your retirement needs. Asset allocations should be changed over time as retirement nears. this is my personal opinion, not financial advice :)
...unless you want to end up like Warren Buffett - who loves downturns because that's when he can stock up on his favourites, at discount prices. He hates booms, because everything is overpriced, and there's nothing to buy. He folded his first partnership because of that.
Of course, the advice for the stocks is the same now as always: don't buy unless you understand what you're buying (although, you might buy a little, as an educational experience). If you can't place a rough value on it (so you know if it's overpriced or underpriced) and are confident it has an enduring competitive edge (so it will compound, buy an index instead. (Scott recommends index funds in:
8. Take whatever money is left over and invest 70% in a stock index fund and 30% in a bond fund through any discount broker, and never touch it until retirement.
Feel free to buy individual stocks, but only with money you can afford to throw away. Picking stocks is gambling, pure and simple. Fun as it is, you should not expect to retire and live comfortably from your winnings. Study after study has shown, quite rigorously, that there exists no method at all for picking winning stocks. Feel free to read A Random Walk Down Wall Street for a more detailed analysis.
Of course, a stock that is valued below book could still drop further. And that is why you stage your buys, and must be ready to hold for the longer term.
Right now, we have a bunch of stocks with historic lows. I stand by my assertion that now is a great time to pick stocks if you meet the above provisions.
As with all things, there is no reward without risk - but you can manage your risk in various ways (staging buys is just one).
This is a path to comfort, not a path to wealth. So it's not for everyone.