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3 days later...

ILLZ said: "I've been researching and learning about stocks and funds for 3 days now. I've read some of Cramer's book, I've read some text book material I got from a friend, and I've gone through a good portion of the online classroom at Morningstar.com. Three days ago I didn't know what a mutual fund or compound interest was, that's how little I knew about investing. At this point I feel like I'm gaining a better grasp of the whole picture, but I'm pretty sure I'll never feel comfortable putting $2,500 of my own money into stocks or funds that I picked out myself. This money is pretty unimportant to me right now, and I'm willing to be a bit risky, but I don't feel I'll ever adequately be able to make some good decisions. Do I keep trudging through this with the hopes that I gain that ability or should I just bite the bullet and hire someone to invest for me? Thank you all in advance, this forum has been immensely helpful thus far."

REITlover said: "Illz, don't quit trying to learn, the market can be very intimidating but pick something that you are really interested in and study that. I, myself, really like high paying div. so I study REITS and energy companies. You might like technology or maybe you find mutual funds interesting if so study up and learn as much as you can. your money would be safer with a mutual fund. You might check out American Funds, they have several different types and usually have pretty good returns year in and year out. So in short figure out what you like and learn as much as you can and then when you feel comfortable move onto something else. Good luck."

ILLZ said: "I'm pretty much interested in all of it. At first glance it seems like my best bet might be to get into a semi-aggessive mutual fund with $2,500 upfront and then put an extra $200 a month into it. Does that make sense considering my situation?"

LongArm said: "Relax, take your time...it's only been 3 days! I agree that you shouldn't get advice, as it will cost you. If nothing else, you could buy an index fund that tracks, say, the S&P500 and then you'll be making whatever gains the overall market does (if any) while you're learning more about this stuff. Or, if you don't want to risk losing money while you're learning, stick it in an internet savings account--they're paying about 5% right now. My feeling on American Funds is that they do have some pretty good funds, but they are a [I]load[/I] fund company, meaning you'll pay a big, fat commission for nothing. I'd recommend a no-load fund, if you go the managed mutual fund route. There are lots of good ones."

ILLZ said: "I just started reading about index funds today actually. Can I take the money out at any given time without penalty? I'd like to start investing as soon as possible, but I don't want to do anything stupid while I'm still a novice. If I can do that, I'd probably like to get into some sort of index fund while I continue learning. Any suggestions?"

marbles said: "I got this from an article in todays Houston Chronicle (online)- In the last five years the S&P 500 index did better than 71.4 % of large cap funds, the S&P Midcap 400 index did better than 79.7 % of midcap funds, and the S&P SmallCap 600 did better than 77.5 % of the small cap funds."

marbles said: "[QUOTE=ILLZ]I just started reading about index funds today actually. Can I take the money out at any given time without penalty? [/QUOTE] A lot of funds charge you a penalty if you sell it, say for instance 6 months after you bought it. You will have to research that for each fund you are considering buying."

ILLZ said: "Thanks for the reply. I've also learned about fund families and "fund supermarkets". It seems that's the way to go because those funds are load-free, correct? And if I go thorugh a fund supermarket I can divrsify easily because there are many options within one fund?"

marbles said: "I really don't know how fund supermarkets work, sorry. I've always purchased funds through discount brokers, or directly with Vanguard."

cwms said: "ILLZ You might want to consider setting up a ROTH IRA and doing your investing there, buying and selling stocks, funds, etc. All gains, interest, dividends are tax free. Of course, it is a retirement plan and while there are ways to withdraw money before you retire, do consider it a retirement fund meant for that event."

LongArm said: "[QUOTE=ILLZ]At first glance it seems like my best bet might be to get into a semi-aggessive mutual fund with $2,500 upfront and then put an extra $200 a month into it. Does that make sense considering my situation?[/QUOTE] Just realize that "semi-aggressive" means you could lose money more than semi-quickly if the market takes a dump. That doesn't mean you won't make a nice return over the long haul, but some investors don't like roller coaster rides. Your idea of adding a little each month--called dollar cost averaging--is a good idea and one way to offset some of the risk. If the market [I]does[/I] take a dump, you'll be buying shares at a lower price, and once the market recovers, you will have benefited from that. [QUOTE]I just started reading about index funds today actually. Can I take the money out at any given time without penalty? I'd like to start investing as soon as possible, but I don't want to do anything stupid while I'm still a novice. If I can do that, I'd probably like to get into some sort of index fund while I continue learning. Any suggestions?[/QUOTE] Most if not all funds now have short term redemption fees to discourage "trading." If you want to be able to buy and sell at your every whim, you could buy an S&P 500 ETF rather than index fund. Basically, it's the same thing--an index fund--but it trades like a stock. So you could have your index fund (in the form of an ETF) but get a bit of a feel for what it's like to trade stocks at the same time. The problem with ETFs is you'll pay a commission--say, around $7--each time you buy or sell. So if you'll be buying more shares each month, that would get to be too expensive. An index fund in which there is no transaction fee is your better move, in that case. One of the better S&P 500 index funds (because of low expenses) is Vanguard's VFINX. If you want an ETF, go with SPY. [QUOTE]I've also learned about fund families and "fund supermarkets". It seems that's the way to go because those funds are load-free, correct? And if I go thorugh a fund supermarket I can divrsify easily because there are many options within one fund?[/QUOTE] If I were you, I would just open up an account at a discount broker and buy a fund on their NTF (no transaction fee) list. That way, once you're ready to move to individual stocks ([I]if[/I] you do), you'll be all set and ready to go. Of course, if you decide to go with ETFs rather than index funds, you'll [I]have[/I] to buy them through a broker."

ILLZ said: "Thank you so much for the detailed response. [QUOTE=LongArm]Just realize that "semi-aggressive" means you could lose money more than semi-quickly if the market takes a dump. That doesn't mean you won't make a nice return over the long haul, but some investors don't like roller coaster rides.[/QUOTE] I'm completely fine with that. Like I said, this money is relatively unimportant to me right now. I'm starting a new job next November that will have a significant bump in salary, so in the meantime I can play with this money to some extent. [QUOTE] An index fund in which there is no transaction fee is your better move, in that case. One of the better S&P 500 index funds (because of low expenses) is Vanguard's VFINX. If I were you, I would just open up an account at a discount broker and buy a fund on their NTF (no transaction fee) list. That way, once you're ready to move to individual stocks ([I]if[/I] you do), you'll be all set and ready to go. [/QUOTE] I've heard of Vangurad's VFINX, it was mentioned in something I read last night. I'll go back and research. Can I get the Vanguard index fund through a discount broker's NTF list? I'm going to spend the weekend buired in this stuff, so I'll come back with more questions if you guys are willing to help me further. Thanks again."

LongArm said: "[QUOTE=ILLZ]I've heard of Vangurad's VFINX, it was mentioned in something I read last night. I'll go back and research. Can I get the Vanguard index fund through a discount broker's NTF list?[/QUOTE] You should be able to, however I just checked Scottrade and E*trade and neither one has it on their NTF list. But you should be able to find another S&P 500 index fund, if not Vanguard's. There's really going to be no practical difference between them other than a few pennies in expense ratio. In fact, E*trade, I just learned, has their very own S&P 500 index fund (ETSPX) and it supposedly has the lowest expense ratio out there right now."

ILLZ said: "Here is the Etrades S&P fund... [URL="https://www.etrade.wallst.com/v1/stocks/snapshot/snapshot.asp?YYY220_/UfRI8EalsCYH8nTrXR9a7sTB/7t0SthVaYW0PaMyFPP6uIc2u57kipR/iB8MUHlyNVsmiaNHr/IgxBtBbLQ+tDm/BRVro4iAdJP3Py8nc17dMNFQu8+8e6ZWVXswMwoMj5U9BbJCiHyNSY31nBlIZE/UMMZYn6LNTnv7c+t31+0pwATY9zjOEZp+qBErJPM"]https://www.etrade.wallst.com/v1/stocks/snapshot/snapshot.asp?YYY220_/UfRI8EalsCYH8nTrXR9a7sTB/7t0SthVaYW0PaMyFPP6uIc2u57kipR/iB8MUHlyNVsmiaNHr/IgxBtBbLQ+tDm/BRVro4iAdJP3Py8nc17dMNFQu8+8e6ZWVXswMwoMj5U9BbJCiHyNSY31nBlIZE/UMMZYn6LNTnv7c+t31+0pwATY9zjOEZp+qBErJPM[/URL] Now it says on the there "inital investment... $5,000". Does that mean that's the minumum investment one can make?"

ILLZ said: "Yes, turns out that's the minimum. I'll have to find one that has a $2,500 min..."

LongArm said: "The Dreyfus S&P 500 fund, PEOPX, is on Scottrade's NTF list. It has a $2500 minimum initial purchase, $100 minimum on subsequent purchases. The only problem with that one is the expense ratio is on the high side for an index fund at .50%. That means you can expect it to do about .25% worse per year than the average S&P 500 index fund. Here's a list of more index funds: [url]http://www.fool.com/mutualfunds/indexfunds/table01.htm[/url] I'd suggest finding the ones that have minimums of $2500 or less, then sorting them in order of lowest expense ratio. Then check them against broker's NTF lists. Or, if you don't want to hassle with that and you can live with Dreyfus' higher expense ratio (which is still very low compared to a [I]managed[/I] fund), you could just go with it. Scottrade's a good, inexpensive broker with good customer service and local branches all over."

ILLZ said: "I just became pretty familiar with Spiders and other small and mid cap index funds auch as the Russell 2000, Nasdaq 1000, and other international type funds. Would it be worth looking into diversifying with two seperate index funds of varying risk? Say 60% in a S&P 500 and 40% in something else riskier? And through all this research I can't seem to come across any sort of time table for a withdrawal. The stats pages for most of these funds on scottrade.com list all sorts of return rates fr 1, 3, 5 years, etc., but I can't seem to find any sort of early withdrawal fee. When I buy the fund do I have to pick what term I'd like to hold it for? Thanks in advance..."

LongArm said: "Diversification is good, although you might have a problem finding two funds with initial minimums of $1000. With ETFs, it wouldn't be a problem, of course. But sure, adding smallcaps, for example, to the mix would spice up your portfolio. Scottrade imposes their own early redemption fee on no-load no-transaction-fee funds and that's 6 months. But the funds may have their own redemption fees too, and for that you can go to the fund family's website and find the info there or in the prospectus (which you can download). And no, you don't choose a term or anything like that--you simply hold it until you want to sell it, and if you sell too soon, you pay a redemption fee. Again, if you don't want to bother with these redemption fees, you could just go with ETFs (but pay a commission on buys/sells)."

Rickster said: "Longarm is giving you some solid advice ILLZ."

marbles said: "[QUOTE=ILLZ] The stats pages for most of these funds on scottrade.com list all sorts of return rates fr 1, 3, 5 years, etc., but I can't seem to find any sort of early withdrawal fee. When I buy the fund do I have to pick what term I'd like to hold it for? [/QUOTE] There is no term to hold funds, you can sell them at any time. The only reason they list the 1, 3, and 5 year performance is so you can compare the funds performance to other funds and benchmarks."

ILLZ said: "[QUOTE=Rickster]Longarm is giving you some solid advice ILLZ.[/QUOTE] Thanks for the reinforcement. And Dave Barry is/was a genius."

ILLZ said: "It turns out both Scottrade's and Dreyfus' own early redemtion fees apply to selling within 6 months, so no problem there. I'm very close to getting this fund. It also has a $1,000 min. investment so I'm thinking about putting a portion of my funds into a riskier fund to diversify a bit. What's the best way to do that? An international fund to prevent against the U.S. market taking a plunge? Or should I get a mid or small cap fund? And which ones are good options? On Scottrade there are 27 funds that will take a $1,000 min investment with no worse than .05% expense fees, including numerous international and niche-specific funds. [url]http://www.scottrade.com/mutual_funds/nofee_noload.asp[/url]"

LongArm said: "[QUOTE=ILLZ] An international fund to prevent against the U.S. market taking a plunge? Or should I get a mid or small cap fund? And which ones are good options? On Scottrade there are 27 funds that will take a $1,000 min investment with no worse than .05% expense fees, including numerous international and niche-specific funds. [/QUOTE] .05% expense ratios? Do you mean .50%? At any rate, I like the idea of adding both foreign [I]and[/I] smallcaps, if you can. Look for funds that track the Russell 2000 (smallcaps) and EAFE (foreign). Or, if you want even [I]more[/I] bite (but more risk too), instead of EAFE, go with emerging markets. If finding funds is too much of a chore, here are some appropriate ETFs, if you want to go that route: Russell 2000: IWM MSCI EAFE: EFA Emerging Markets: EEM"

ILLZ said: "Although ETF's would satisfy my desire to diversify with 2 or 3 different indexes because of the no minimum investment factor, I think the transaction fees would end up killing me because I want to contribute more money each month. Is that a fair assessment? I'm going to dig around later today for other index funds that track the Russell 2000 or international markets. Emerging markets? What would that type of fund be labeled as? I don't think I've come across any fund that tracks emerging markets just yet. Here is one I found that tracks international funds, "Sextant International Fund (SSIFX)". It looks to be doing well and is available from Scottrade. Min investment is $1,000, expense ratio is .49%, and it's posted excellent returns in recent years. How does that one look? I'm interested to find out if I'm beginning to get the hang of properly assessing a fund. Thanks in advance."

Corey said: "ILLZ, my recommendation for a 'stable portfolio' would be to know where those overseas funds are going. Are they going to more stable markets, like England or Switzerland? Or are they going to emerging markets like China and Brazil? It is a risk and reward trade off, but I prefer to hit singles and doubles rather than go for the home run. Swing too hard, you are going to strike out. Overseas have become rather 'hot', so most recent ETFs and Indices are posting phenomenal numbers. 15%+ a year for three years is no laughing matter. But can they keep it up? What sort of risk are you willing to take? Personally, I have never even heard of Sextant, so I myself wouldn't go with them. After a quick browse, I couldn't even see where my funds were going. What overseas market were they placing my hard-earned money into? If they aren't saying it up front, its probably because I don't want to know -- the risk would give me an ulcer. There are a bunch of nice iShares ETFs that I was looking into a while ago. I personally like: MSCI United Kingdom Index Fund (EWU) MSCI Sweden Index Fund (EWD) MSCI Spain Index Fund (EWP) or, for a broad range pick, S&P Europe 350 Index Fund (IEV) All have posted solid returns, and iShares is a pretty well known name. They show you all their picks and give several brochures on their style. Check 'em out: [url]http://www.ishares.com/[/url]"

LongArm said: "[QUOTE=ILLZ]Although ETF's would satisfy my desire to diversify with 2 or 3 different indexes because of the no minimum investment factor, I think the transaction fees would end up killing me because I want to contribute more money each month. Is that a fair assessment?[/quote] Yes, I agree with you. I was just giving you another option if finding funds is too much of a chore. I'm a big ETF fan, but they're not practical if you're going to make small purchases every month. [quote]I'm going to dig around later today for other index funds that track the Russell 2000 or international markets. Emerging markets? What would that type of fund be labeled as? I don't think I've come across any fund that tracks emerging markets just yet.[/quote] There are plenty of them. In Scottrade's "Quick Search" fund screener, look under Foreign-Emerging Markets. Or in Morningstar's fund screener, they're under International Stock, Diversified Emerging Markets. [quote]Here is one I found that tracks international funds, "Sextant International Fund (SSIFX)". It looks to be doing well and is available from Scottrade. Min investment is $1,000, expense ratio is .49%, and it's posted excellent returns in recent years. How does that one look? I'm interested to find out if I'm beginning to get the hang of properly assessing a fund. Thanks in advance.[/QUOTE] It's a decent fund--top 11% in its category for the past 10-year period, top 46% over the last 5 years. More recently than that, it's been mediocre. Remember, although at first glance a fund may look like it's done great over a period of time, if most other funds in the same category have done significantly better, then that fund isn't really doing so well. I'm not saying this fund has done badly--it hasn't--I'm just saying compared to other funds in it's category, it hasn't really "posted excellent returns in recent years" as you say. The thing with this one is that it's a largecap fund and has about half of it's holdings in giant companies, which is good for stability, but not so great for diversification necessarily. I like my foreign funds to have more smallcap/midcap representation because the chances are better that it won't move as much hand in hand with the U.S. market. And to me, that's the whole purpose of having a foreign fund. But if you're like Corey and are more concerned with stability, this fund is a decent choice. The manager has a value philosophy, which is also good for stability. BTW, info on which countries the fund invests in is available at Morningstar.com and also at the fund's website in the Semi-Annual Report, available for download: [url]http://www.saturna.com/ssifx.htm#[/url]"

thezster said: "FWIW - the Z-man, who usually has little use for funds... has about $30K invested in JSVAX and has for about 12 months.... Today, I dropped another $10K into the same one... Can't mess with a no load winner, in my opinion.... Longarm... You're doing a great job explaining the ins - n - outs... I'm impressed!"

ILLZ said: "There are 3 funds on Scottrade that fit the bill (<$1000 min) , although the expense ratio on them is relatively substantial. Is that the price I pay for getting a pretty speculative fund? American Century Emerging Market Adv (AEMMX) has a $250 min. investment but a 1.4% expense ratio. It has posted returns of 42%, 36%, 13%, and 65% over the last 4 years. If I'm reading this correctly it's performing in the top 18% over the last 5 year period. ValueLine ranks it as a 2 overall (1 being the best) and a 5 for risk (5 being the most risky). What would be the difference between that fund and this other fund, "American Century Emerging Market Inv (TWMIX)"? They appear to be similar in performance, except the "inv" fund has a 1.8% expense ratio. The 3rd fund that is an option looks like possibly the best, "SSgA Emerging Markets (SSEMX)". It's performed in the top 8% the last 5 years and the top 19% the last 10, and has the lowest expense ratio at 1.25%. For some reason Valueline ranks it as a 3 overall, lower than the previous 2. EDIT - Turns out I don't think I'm reading it's ranks in respect to other funds correctly. The numbers you gave me for the Sextant Fund I can't find anywhere on it's page, so those performance percentiles I spit out are wrong I presume. Sorry if this appears as though I'm rambling, I'm trying to be as coherent as possible."

marbles said: "What percentage of your capital are you thinking about putting into emerging markets ?"

LongArm said: "These are actually pretty average expense ratios for [I]managed funds[/I], which are what you're looking at now (well, 1.8% is rather high). [I]Index funds[/I], like the Dreyfus S&P 500 fund, have much lower expense ratios than managed funds. Index funds simply track an index, so the manager doesn't have a whole lot to do. Managed funds have a manager who's actively trying to [I]beat[/I] the index, therefore the expense ratio is higher because he's actually doing something (or trying to). The numbers I gave you comparing SSIFX to its category are from Morningstar.com. So if you were looking at something else, it's very possible the numbers don't jive. As for rankings, whether they're Value Line's or Morningstar's or anyone else's, I don't put a whole lot of weight in those, partly because much of the ranking is often based on what a fund has done [I]recently[/I]. And a fund having a hot 6 months or year doesn't really tell me if it will be a quality fund over the long haul. I'll look at the three funds you mentioned and give you my opinion on them. Just remember that an emerging markets fund [I]is[/I] much riskier than a typical foreign fund. You could potentially lose a pretty large chunk of change in a given year (or two or three), if things go bad. You could also make some nice change. Just so you understand the situation."

ILLZ said: "Marbles - About 20%. I'm putting 60% into an S&P index fund, 20% into (probably) emerging markets, and the last 20% either into a small cap fund, or if I can't find one that suits (which is happening right now), I'll just make it 80% into the S&P. My entire initial investment is going to be $2,500, so dropping $500 into emerging markets is virtually nothing. LongArm - I didn't realize those were managed funds. That would explain the expense ratio. Thanks for looking into those for me. I'll check on their comparables on Morningstar right now. Thanks again to all who have posted here."

LongArm said: "Ok, of the three emerging markets funds you mentioned (well, two are the same fund, just different classes), SSEMX would be my clear-cut and easy choice. Been in the upper echelon of its category for 3, 5, and 10 years. And the expenses are much lower. The other fund, AEMMX, is mediocre at best."

ILLZ said: "Oh damn, the min investment for SSEMX is $1,000, I don't know how I missed that. Back to square one."

ILLZ said: "Perhaps I'll just put 80% into the S&P fund and sit on the rest until I can safely add enough to it to invest further in emerging markets/small/mid cap/international, etc."

LongArm said: "You could let that 20% sit in an internet savings account such as EmigrantDirect and get paid 5.05% while you wait. No minimums, no fees, and you can move money back and forth from there to your checking account with a few clicks of the mouse."

ILLZ said: "I actually just thought of that. Etrade has the same savings account going. I'll probably do that. Thanks for the idea."