If you had say $10k to invest in a medium risk short term investment where would you put your money?

simlock free iphones to sell on ebay

Isn't that a bit of an oxymoron?

You might want to define "short term".

To me:

Long term - Retirement or several years

Short Term - Day trading up to two years

It's impossible to answer a question like this, in general. If short-term means "between now and next week", then that's completely different than "between now and the end of the year", etc.

For a short-term bet over the next few months (and, don't confuse yourself, this is nothing more than gambling), you need to pick some set of what-if scenarios and bet on some side of that coming true. Example: betting that Chrysler might declare bankruptcy in the next few months. A very risky bet. To make that bet, you'd normally short their shares except you can't, because they're privately held. Instead, you need to bet on collateral damage to their employees, suppliers (*), and surrounding communities. Alternately, you would bet on their competition benefiting from such a scenario.

(*) It's unclear whether, for many Chrysler suppliers, they would see the termination of contracts with Chrysler as a bad thing, given how Chrysler's been pushing them on contract terms.

Let me just overemphasize, again, that this is big risk-taking territory, and unless you feel you really understand the particular world where you're making your bet (i.e., you think you know more than the rest of the stock market -- good luck on that), then you might as well take your money to Vegas.

A more typical short-term strategy, assuming that you're going to need this money in, say, two years, for a big purchase, but you're not going to need it any time sooner than that, would be to buy something with very low risk, like a money market account. If you knew more about what the big purchase will be in two years, you could take a hedging strategy against price increases. Example: say you know you're buying your wife an expensive piece of gold jewelry for an upcoming anniversary, two years hence. You could buy IAU (an exchange traded fund that tracks the price of gold). If gold goes up in price, you're covered. If gold goes down in price, you lose money, but that's okay because the jewelry you were planning to buy (hopefully) got cheaper as well.

Because of this, the best advice anybody can give you is to invest in what you know and are familiar with. I am constantly amazed by how wrong the so called expert-analysts are in my field. There is a guy that is quoted in almost every story dealing with my industry. If you went exactly opposite of what he said every time, you'd be right about 90% of the time. I can't say it is like that in every field, only people in those fields can. Just be careful using any inside information in making your choices, that is when it gets ugly. But if something is published and common knowledge that the experts don't pick up on, go for it.

I'm with Bas on this one. A mate of mine ploughs money into buying whatever the current must have item is, then sells them on ebay. So far he's done this on 360's, PSP's, Wii's and to a lesser extent, PS3's. It's not his primary source of income but he bought most of his Fiat 500 with the proceeds.

He's not very successful then?

Given that it was a hobby he did in his spare time around his day job and he did it in 18 months I'd say it was successful.

A buddy of mine does essentially the same eBay trick with digital cameras. He typically looks for people selling a whole bag of equipment, then resells the individual parts for more than he paid for the whole. He makes enough on this "hobby" to support a growing collection of professional camera gear that his wife might not otherwise allow him to buy.

Let me get this straight, You want to put your money under a rock and then walk away. Then, in a few years you will come back and flip over the rock. And there will be more money under the rock.`

In the meantine, though, you hope that nobody comes along and flips over your rock and takes the money.

Is that correct?

Oooh, can I get a rock like that?

He said Jehovah - stone him!

Thanks, I think you guys hit on a good point. Knowing the industry I invest in is the key. I don’t know “The Market” and have only made money in it by accident. I do know the “concrete” world a bit better.

Maybe I’ll get back into buying and selling 60’s cars like I did years ago. However I think the market on old cars is very inflated and the bottom is going to fall out soon.

Go take a look at the Motley Fool, then. They have a number of books and resources that are excellent for folks just getting into investing. None of their basic investment philosophy is ground-breaking stuff, nor are they the first to espouse it. They are, however, the first I've found that put it into American English, rather than investo-babble-speak, and they've even made it mildly entertaining.

If I knew I wasn't going to need the money for a couple of years, I'd probably buy a CD. If I felt I might, I'd open a money-market account. Given that interest rates are so low right now and the difference between CD and MM rates is so small, I might go for the MM either way, in hopes that interest rates would go back up. (Locking in a low interest rate on a deposit account probably doesn't make much sense.)

As you can tell, I don't like gambling.

WaMu is offering 12-month CDs at 5.x%. Pretty hard to beat unless you want to go high-risk with stocks. Of course WaMu will probably go bankrupt soon but that's another story. They are FDIC insured so you will get your money back if they do.

Try the middle ground between risky stocks and boring CDs: mutual funds. Each fund is a collection of stocks, bonds, etc. Fund managers constantly monitor these portfolios to get the best return. These are less risky because the fund owns enough different stock to survive if a few suddenly drop.

Put the majority of your money in something stable. Put the minority in something risky that you know about, so you can recognize opportunity and risk. Funds are good for 2 years or more, so you'll get a good start at 2 years.

Growth and income funds are rather safe and may provide a steady return. Stocks chosen for these are major corporations and other unglamorous faithfuls.

Index funds follow the major indices (Dow, S&P, etc) and are supposedly better preforming than other funds. Maybe now is the time to buy while the markets are lower.

Value funds are more of a "buy low, sell high" gamble, but could give better returns.

Sector funds let you invest broadly in a single sector - tech, health care, etc. Pick a fund in a sector that you know.

International funds ships your hard earned $$ overseas in hopes that other countries will do more with it than America will. Risky, because who knows when another nation's political tides may change, but could be a great return considering all the production coming from developing markets.

There are so many different sorts of mutual funds that it's quite tricky to give investment advice with a two year time horizon. The standard advice (splitting between stocks and bonds, with a bias that scales toward bonds as you grow older) only works for long time horizons. Over twenty years, you can be confident that the market will generally go up. Over the next two years, that's anything but a clear statement.

Instead, if you know that, say, you'd be willing to tolerate the loss of at most 25% of your money, but absolutely no more, then you could consider something like putting half of the money into a money market (very safe, 3-5% return depending on which one you get) and the other half into an S&P500 index fund (where I can say, with absolutely no confidence whatsoever, that a worst-case two year loss of 25% seems like it's in the right ballpark).

Thanks guys I have been thinking about mutual funds since I don't know stocks from socks.

Do you have a good resource for selecting mutual funds?

I can put all $10k at risk.

I've got some with Templeton and some with American Funds.

I used to work for Vanguard. Maybe it's them brainwashing me, but the one notion that stuck with me is to not overlook the fund's expense ratio. Yes, you need to choose how risky you want to be, the balance of stocks/bonds, whether you want index or actively-managed funds, etc. but after all of that, if you have several candidates, pick the one with the lowest expense ratio. Often times, the benefits of a super-duper awesome fund manager who makes all the right decisions can be erased by higher overhead, and you never know when the fund manager will throw a seven. You at least have some idea going in what the expense ratio is, at least historically.

What you want is a "no-load" market index fund like these.

Diversify the money across the major American, European and Asian markets to protect against regional recessions. You can do this by putting, say 50% into an S&P or Nasdaq index fund, 25% in a European index fund, and 25% into an Asian index fund.

That is, of course, if you don't want to start your own business with the money, which is a far better choice.

Jim

Right, no risk there...

Right here. Like tonyc suggests, Vanguard has some good funds. So does Fidelity.

FYI, my math above was broken. If you're willing to tolerate a 25% loss of your cash, and you put half your money into the market, then you can tolerate up to a 50% drop in the market.

Anyway, I'm with the crowd on Vanguard. They're all about charging you low fees. They have investment advisors who can help you out. I use Fidelity, because they do my 401(k) and other retirement stuff. Fidelity has low fees on their "Spartan" index funds, but their other stuff charges more. Big surprise. Their advisors, if you go speak to them in person, will try to sell you additional products that make them even more money rather than necessarily making *you* more money. (The one time I thought "what the heck" and scheduled a meeting, they were trying to sell me a weird variable annuity product. You lock your money into their box, they charge you a fee, and they give you a limited menu of funds, which charge more fees. In return, you save some taxes.)

Vanguard is a different beast. They offer a bunch of cheap funds that don't try to be too smart. You want to invest money internationally, right over here. You want small cap value? Over here. You pick the asset allocation you want, and they've got cheap, broad funds that do the rest.

If you were investing a lot more money for a longer time horizon, you might look into DFA (Dimensional Fund Advisors), who take this particular philosophy about as far as it can be taken. The only problem with DFA is that they don't want to deal with retail investors. You either get them through your company's 401(k) or you pony up for an investment advisor, who then charges you a management fee, just to get your money into the damn funds, canceling out much of the low-fee benefits. (Arguably, DFA does this so they can avoid lots of customers shoving money in and out, and thus they can avoid churning the underlying stocks and can keep their fees low. Still annoying.)

He didn't specify no risk. It's only $10k and he's young, so conventional wisdom says that growth potential should supersede risk minimization.

I can understand your point if it was high risk with high payout, but starting your own business often ends up being high risk, break your ass to eke out moderate payout. If you look at the dollars in vs. dollars out in isolation, it might look good, but when you attach a dollar amount in the effort needed to run the business, you're going to tread water for a long time before you see your first real profit.

Besides, $10k is about enough to start a lemonade stand these days, and that's if mom and dad are buying the lemons.

Maybe if I get lucky and get laid off I can start my own business . Right now I just don’t seem to have the time (yea everyone always says that). I’m hoping to find something where my money works for me for a change.

I have had successful results with all my past part time ventures. Maybe once I get my race car done, my three old care restored and my storage barn done I’ll have some time.

I did recently buy a saw mill (lumber for the barn) and was thinking about going into custom sawing. However that’s a lot of hard work.

I have a Scottrade account and was hoping to buy through that account. Is that a good idea or should I go with someone else?

I agree with most of this, but expectations are a big consideration. When you start a business, you don't do it intending to make $1500, which would be a huge return on $10k in a year of stock market investing. $10k is plenty to get going with a business, though. This is the information age, after all. Selling unlocked iPhones on ebay is just one example. What most people consider a "moderate payout" on the business they started is many, many times more than what they could ever hope to achieve in the financial markets.

There's a good article by Paul Graham about the idea of effort and wealth. In his words, "There is a conservation law at work here: if you want to make a million dollars, you have to endure a million dollars' worth of pain ... You do tend to get a certain bulk discount if you buy the economy-size pain, but you can't evade the fundamental conservation law. If starting a startup were easy, everyone would do it."

But you don't need to have the intention of becoming a millionaire on $10k, even though it IS possible with an insane amount of time and effort (and a good dose of luck). My point was just that direct participation in capitalism can often pay better than lending your capital to others, particularly if you don't know where to lend (which stocks to buy). If you don't know stocks from socks, but you know a lot about collectible cars and the parts and work they need, then with some hard thinking there's probably a way to make some decent money with that $10k...

A terrific return on the $10k in a year in the stock market would be about $1500. Someone with good connections in collectible parts (or someone willing to get them) or who knows how to unlock iPhones could easily do much more than that without destroying their quality of life. One good parts deal could double that, it seems to me. One batch of iPhones sold on ebay should net at least 30% ROI -- way more than one should expect in the stock market, and you could do it multiple times in a single year.

Jim

Look at the transaction costs and fees. If you're going to buy & hold an index fund, then your decision method is to minimize fees. Take them all into consideration -- is there a fee to withdraw & cut a check? There's lots of hidden fees. Make an excel spreadsheet and list out all the fees. If you pay 1% in fees in a year, that's a big chunk of one's expected return (probably over 10% of the average annual return of an index fund).

I don't use Scottrade, so I'm not entirely sure what their fees are. I know that Fidelity lets you buy just about any mutual fund you could possibly want, but they charge you a $75 handling fee to do it for you, and another $75 fee when you sell. At that point, it's easier to just transfer the money directly to the fund family where you want to buy the funds and pay no fees.

The thing that you might want to investigate are "exchange traded funds" (ETFs). Vanguard has a bunch of them ("VIPERS") as do a few other firms (iShares being one notable example). You buy and sell shares of an ETF in precisely the same way you buy and sell shares of a stock, paying the same fees, and so forth. For example, if you wanted to get some exposure to emerging markets, you might buy shares of VWO.

This recent Wall Street Journal article talks about how Vanguard's fees are much cheaper, which is a big plus for them.

Sorry to bump this oldish thread, but I thought this was funny and shows just how fluid stocks really are.

Today's AIAA Launchpad has a summary of how a six year old article popped up and devestated United Airline's stock in one day. There are several articles out there like this one in the New York Times.

On the same day, it was the first trading day after Boeing's commercial machinists went on strike. That means no commercial planes in Washington State are being completed or sold. Their stock went up $1.02. Go figure.

It really helps to understand the stock market price as expectation of future earnings. Everyone knew there was a very good chance of the strike happening, so it was already factored into the price of the stock. It actually happening was a non event for the stock market. No one thought UAL was declaring bankruptcy, so you see it becoming factored into the stock price in a matter of minutes.

Now, if the strike drags on longer than anyone expects, you'll see boeing stock slide. For the vast majority of shares, those expectations are set by people who do nothing but think about boeing and airbus all day and most of the night.

If it drops below $50 I'm buying some.
My company just installed a system to help them form aluminum wing panels. Our process will extend the viability of aluminum wingskins for a couple of decades.
I don't think Boeing will falter- even if the stock does.

Just to be contrarian- remember that planes are a very cyclical industry and the cost of failure on the 787 is very high. Also the tanker contract is most likely lost even with the re-bid offer (just done by the Pentagon to appease politicans) and the Iraq war may be coming to a close sooner rather than later depending on who gets elected.

I don't know a whole lot about investing myself, but my financial advisor locked a good chunk of change away for me in a dividend fund and it's making quite a bit more money then other funds.
It's paying out approximately 14% annually. Which can be reinvested into the fund or cashed out automatically. I am cashing out and putting it towards my mortgage every month. After eight months our mortgage has gone from 20 years and ten months to 19 years and three months. Feels good!

Well, I've put off buying any stocks and now Boeing is floating around $40...

Luckily I didn't get around to investing my money right away (though my 401 K dropped round $50k). My company’s stock dropped to ¼ its value compared to last year and half my the people in my department just got laid off .

I did buy a few shares last week but I think I’ll hold off on investing in anything too risky right now since I may be on the street soon as well.