Best Investments For Beginners

For the neophytes starting out, investing can be very intimidating. In the past, people were limited to stocks and bonds. Nowadays, there are so many options available, it can overwhelm anyone starting out. Now just about anyone can buy stocks, bonds, ETFs, CEFs, options, futures, commodities at a fraction of the price.

My advice for people too lazy to do research is to buy a target retirement fund for their retirement accounts. It is diversified worldwide and the managers will shift to safer assets such as bonds as you progress towards your retirement date. A Vanguard or Fidelity Target retirement fund will do the job. Just buy them, do an automatic contribution at regular intervals and watch your money grow slowly.

For people who want to try to beat the market, but who don’t want to research individual stocks, concentrated mutual funds are their best bet. Although concentrated funds such as Oakmark Select have higher expense ratios than index funds, their R-Squared is a lot lower than other funds because they only hold around 20 positions. I just recently invested some money into Oakmark Global Select Fund (OAKWX).

For others who would like to actually own individual stocks, I suggest you start off slow and learn how to properly value stocks using discounted cash flow and relative analysis. Learn how to read a financial statement. You also must enjoy reading because that’s the best way to learn a lot about a company. There’s a ton of resources out there such as www.investopedia.com, www.morningstar.com, and finance.yahoo.com. Classic books should be read too such as the Intelligent Investor, Common Stocks Uncommon Profits, and How to Beat the Street. The library is a good resource.

It is not that difficult to learn how to invest. All one needs to do is to learn the basics, stay disciplined, and get started. You can be involved as much or as less as you like. It’s up to you.

From our Friend Loi Tran