Sunday, January 11, 2009

Buy Low ... SELL HIGH

Time is running out for catching the market at historic lows (across the board). Any investment you make now is certain to gain - as long as it is in a well known company with a good track record.

So you have decided you have some money you would like to invest (maybe earned from the various blogs you write). You should not dump it all on one stock (no matter what company it is) unless you like to gamble. It would last longer than betting it at the tables in Las Vegas, but it may lose a lot of value.

You have to last for the duration of this down cycle and make small "bets" based on how much money you have to invest. You have to figure this cycle to last at least most of 2009. So, you want to divide the money for a particular investment by maybe 10 or 12. If you have $10,000 you may choose to put $1,000 per month over ten months into the market. That way, in this volatile market, if stock prices go lower you can take advantage of them. You have to make your plan when you start and stick to it.

Because the amount above is not a great sum of money, it makes a lot of sense to invest it in a mutual fund - something like a Wilshire 5000 Fund [Vanguard Total Stock Market Index Fund (VTSMX) is one such fund] - where you are investing in 5000 companies. This way you get automatic diversification across different industries. You would be investing in health care, technology, consumer goods, energy, the industrial sector, telecommunications, biotech, and more. You would not have to worry about balancing the portfolio because the managers do that for you. It is also an index fund which means the expenses you pay per year are extremely low (about 1/10th of an actively managed fund).

You can sign up with a mutual fund company online with your computer in a matter of minutes. Then you must fund the account and set up automatic withdrawals to pay the money into the fund over time.

So what are you waiting for? Choose a mutual fund company with low fees and get going !

Or you can visit Las Vegas - Its fun, but does not have as much long term upside.