New To Investing
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New To Investing
I'm a complete beginner to investing, so I was wondering how do you choose which companies are good to invest in, and which ones to stay away from? I always see people talk about doing your due diligence, but I'm not sure what that entails.
Re: New To Investing
I just invest in every public company in the world through total market index funds. No need to form an opinion on any specific company.
- retired@50
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Re: New To Investing
Welcome to the Bogleheads forum.benstevens wrote: ↑Mon Apr 19, 2021 10:55 am I'm a complete beginner to investing, so I was wondering how do you choose which companies are good to invest in, and which ones to stay away from? I always see people talk about doing your due diligence, but I'm not sure what that entails.
If you're interested in investing the Boglehead way, consider reading from the wiki pages.
Start here: https://www.bogleheads.org/wiki/Getting_started
Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
- ruralavalon
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Re: New To Investing
Welcome to the forum .
To start your investing education consider this: https://www.bogleheads.org/wiki/Boglehe ... philosophy
Bogleheads generally suggest broadly diversified index funds with low expense ratios.
Is there a plan offered at work like a 401k, 403b, 457b, SEP IRA, SIMPLE IRA or TSP? If a plan is offered at work then that's usually the best place to start.
If a plan is offered at work is there an employer match, and if so what is it? What funds are offered in your employer's plan? Please give fund names tickers and expense ratios. Please simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place.
For other accounts like IRAs or a taxable brokerage account I suggest using a low cost fund provider like Vanguard, Fidelity or Schwab. Among those three it's largely a matter of personal preference, my personal favorite is Vanguard.
To start your investing education consider this: https://www.bogleheads.org/wiki/Boglehe ... philosophy
Bogleheads generally suggest broadly diversified index funds with low expense ratios.
Is there a plan offered at work like a 401k, 403b, 457b, SEP IRA, SIMPLE IRA or TSP? If a plan is offered at work then that's usually the best place to start.
If a plan is offered at work is there an employer match, and if so what is it? What funds are offered in your employer's plan? Please give fund names tickers and expense ratios. Please simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place.
For other accounts like IRAs or a taxable brokerage account I suggest using a low cost fund provider like Vanguard, Fidelity or Schwab. Among those three it's largely a matter of personal preference, my personal favorite is Vanguard.
"Everything should be as simple as it is, but not simpler." - Albert Einstein |
Wiki article link: Bogleheads® investment philosophy
- climber2020
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Re: New To Investing
Invest in all of them. A fund like VTSAX (Vanguard Total Stock) is adequate. Save a high percentage of your income, invest regularly, don't touch it, and in 30 years you'll be fine. For someone first starting out, a high savings rate is far more important in building wealth than your actual investments.benstevens wrote: ↑Mon Apr 19, 2021 10:55 am I'm a complete beginner to investing, so I was wondering how do you choose which companies are good to invest in, and which ones to stay away from? I always see people talk about doing your due diligence, but I'm not sure what that entails.
There is no "due diligence". Anyone who has truly useful information that gives them an edge in trading a particular stock (which is likely an illegal situation) is not going to tell random strangers about it.
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Re: New To Investing
I agree with the other comments. As an example, let me tell you about a very knowledgeable group of professionals who are all about "due diligence". They're the managers of actively managed (as opposed to passive) mutual funds. Unlike you, they have college or even graduate degrees in subjects related to economics, business, and finance, and then complete many hours of additional specific training to help them pick winning companies and avoid losers. Then they work all day doing "due diligence" and choosing "good" companies. They may have researchers, economists, mathematicians, and industry insiders on the payroll to help them do this. Your idea of due diligence may be to read an article about a company in The Wall Street Journal. Their idea of diligence is to talk directly to the company's officers and listen in on the earnings call.
So how successful are these active fund managers? We can compare their funds' performance against the "total market" which is the weighted average of all stocks - all the winners and all the losers. More than half of their highly-considered funds fail to beat their market benchmark in a given year, and over the long term, 75-90% of them will underperform. So someone who knows absolute nothing about any company can likely outperform a professional by investing in passive index funds that will give you the market's returns.
Source:
https://www.ifa.com/articles/despite_br ... d_-_works/
So how successful are these active fund managers? We can compare their funds' performance against the "total market" which is the weighted average of all stocks - all the winners and all the losers. More than half of their highly-considered funds fail to beat their market benchmark in a given year, and over the long term, 75-90% of them will underperform. So someone who knows absolute nothing about any company can likely outperform a professional by investing in passive index funds that will give you the market's returns.
Source:
https://www.ifa.com/articles/despite_br ... d_-_works/
Re: New To Investing
Read this by Laura [urlhttps://www.bogleheads.org/forum/viewtopic.php?f=1&t=6211][/url]
I read and recommend 2 of the books listed, The Boglehead Guide to Investing and the Boglehead Guide to Retirement. Taylor's book the Boglehead Guide to the 3 fund portfolio is sure to very worthwhile also and had not been published when I started.
These books are short, to the point and very easy to understand. Read those books and you will know everything you need to do better than most investors.
I read and recommend 2 of the books listed, The Boglehead Guide to Investing and the Boglehead Guide to Retirement. Taylor's book the Boglehead Guide to the 3 fund portfolio is sure to very worthwhile also and had not been published when I started.
These books are short, to the point and very easy to understand. Read those books and you will know everything you need to do better than most investors.
Re: New To Investing
1. Do not buy individual stocks.benstevens wrote: ↑Mon Apr 19, 2021 10:55 amI'm a complete beginner to investing, so I was wondering how do you choose which companies are good to invest in, and which ones to stay away from? I always see people talk about doing your due diligence, but I'm not sure what that entails.
2. Buy a mutual fund that owns the stocks of all companies, such as VTSAX. That way you in fact own a piece of all publicly traded companies.
Now this answers your specific question but just scratches the surface of "investing" and how-to. Others have given you suggestions for some reading. Read, then ask more questions here.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect
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Re: New To Investing
I try to invest by this quote.
You can do due diligence in either one, two or three mutual fundsBuy and hold, long term, cap weighted, all-market-index strategies, implemented at rock-bottom cost, are the surest of all routes to the accumulation of wealth – John C. Bogle
FI is the best revenge. LBYM. Invest the rest. Stay the course. Die anyway. - PS: The cavalry isn't coming, kids. You are on your own.
- arcticpineapplecorp.
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Re: New To Investing
welcome to the group.benstevens wrote: ↑Mon Apr 19, 2021 10:55 am I'm a complete beginner to investing, so I was wondering how do you choose which companies are good to invest in, and which ones to stay away from? I always see people talk about doing your due diligence, but I'm not sure what that entails.
really only two ways to go about it:
1. actively pick stocks (or purchase an actively managed fund for someone else to do that. don't do this)
2. own the total stock and bond markets according to their market cap weights.
with a total US stock market index fund and a total international stock market index fund and a total bond market index fund that's pretty "total":
https://www.bogleheads.org/wiki/Three-fund_portfolio
once you realize you're not likely to beat the market, nor is an active fund manager (not over long periods of time anyway see image below) and you decide to follow #2 above (not #1) then you've freed up a lot of time you'd have used researching stocks (that due diligence) to instead consider your asset allocation which is your mix of risky assets and safe assets. You'd be surprised how many people wouldn't be able to answer a simple question like "What's your mix of stocks and bonds?" If someone doesn't know they're 80/20 as opposed to 20/80 they probably don't know how much (or how little in the latter case) risk they're taking. This is one reason so many people are surprised when their portfolio falls (because they didn't understand the amount of risk nor how their specific asset allocation would perform in all markets).
Read more on Swedroe's series on "Ability, willingness (risk tolerance), and need to take risk,":
https://www.cbsnews.com/news/asset-allo ... -you-take/
https://www.cbsnews.com/news/asset-allo ... tolerance/
https://www.cbsnews.com/news/asset-allo ... -you-need/
https://www.cbsnews.com/news/asset-allo ... ing-goals/
source: http://www.oncoursefp.com/files/Vectors ... 0final.pdf
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions |
Re: New To Investing
Read the investing books from your library.benstevens wrote: ↑Mon Apr 19, 2021 10:55 am I'm a complete beginner to investing, so I was wondering how do you choose which companies are good to invest in, and which ones to stay away from? I always see people talk about doing your due diligence, but I'm not sure what that entails.
- ruralavalon
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Re: New To Investing
To learn some basics read Dr. Bernstein's free, short pdf book "If You Can".
Then read one or two more comprehensive books on investing. Wiki article "Books: recommendations and reviews", link.
Then read one or two more comprehensive books on investing. Wiki article "Books: recommendations and reviews", link.
"Everything should be as simple as it is, but not simpler." - Albert Einstein |
Wiki article link: Bogleheads® investment philosophy
- bertilak
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Re: New To Investing
One must take investment risks to get investment returns. The goal is to limit the risk while getting adequate returns. Risk is managed with diversification and asset allocation. Not all risk is adequately rewarded. Poor risk is risk that could have been "diversified away."
The above is true UNLESS you are REALLY good at stock picking. Having to ask means you are not. It is not the kind of thing that can be taught in an internet post, nor even n a book -- unless you are a Warren Buffett type in which case you are acting, not asking!
Now, assuming you are not Warren Buffett ...
You need to diversify over MANY different stocks because a single (or a few) stocks is much riskier than your investment portfolio should be.
Trying to pick individual stocks or sectors is the opposite of diversifying and is a failing strategy. You are pitting yourself against the experts. Let them fight it out amongst themselves then go with the results as represented by capitalization weighted (cap-weighted) index funds.
You adjust the level of properly rewarded risk by setting you stock-bond allocation.
Note that none of the above indicates that choosing "which companies are good to invest in, and which ones to stay away from?" is a good idea. Note that the Bernstein book recommended above does NOT teach stock picking. Nor do other books recommended on Bogleheads.org.
The above is true UNLESS you are REALLY good at stock picking. Having to ask means you are not. It is not the kind of thing that can be taught in an internet post, nor even n a book -- unless you are a Warren Buffett type in which case you are acting, not asking!
Now, assuming you are not Warren Buffett ...
You need to diversify over MANY different stocks because a single (or a few) stocks is much riskier than your investment portfolio should be.
Trying to pick individual stocks or sectors is the opposite of diversifying and is a failing strategy. You are pitting yourself against the experts. Let them fight it out amongst themselves then go with the results as represented by capitalization weighted (cap-weighted) index funds.
You adjust the level of properly rewarded risk by setting you stock-bond allocation.
Note that none of the above indicates that choosing "which companies are good to invest in, and which ones to stay away from?" is a good idea. Note that the Bernstein book recommended above does NOT teach stock picking. Nor do other books recommended on Bogleheads.org.
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker (aka S.O.B.), the Cowboy Poet
- patrick013
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Re: New To Investing
Order a Boglehead book. While waiting for delivery here's some info also.
Vanguard’s Principles for Investing Success
Smart Bond Investing
Portfolio Allocation Models
Vanguard’s Principles for Investing Success
Smart Bond Investing
Portfolio Allocation Models
age in bonds, buy-and-hold, 10 year business cycle
Re: New To Investing
1) Save as much as you can and buy something like VTSAX as others have mentioned.
2) read, read, read.
2) read, read, read.