any stock that pays a dividend near 5% will carry risk to principal...If you want little or no risk, stick with the cds..

I'd like to get the most interest with the least amount of risk.

Wouldn't we all! :-)

Seriously, qdognj is right -- with reward comes risk. Any stock or bond will come with some risk, though you can address that some. You could choose, for example, U.S. Savings Bonds, which currently offer an interest rate of around 4.5%, though there are some interest penalties if you don't hold the bonds at least five years. Treasury Bills return about the same as the CD, and are backed by the federal government, but bear the same interest risk as CDs (mentioned below). Or you could go for money-market funds, but they're not really returning any more than that CD.

The question about the CD is how long the term is. On a long-term CD, you're betting that your return will be better now than CDs will offer during that term. Or else you've left money on the table. You won't lose your capital, but you may lose out on some interest you could have earned.

Or, if you have enough money, you can choose a bunch of CDs, some short-term, some long-term, to try to spread the risk of ending up with a low rate as other CDs offer higher rates.

If this is the first time that you are considering investing in stocks I would suggest going slowly. A couple of rules of thumb I use are that I don't buy blocks of stock for any less than $5,000. The broker's fees are too large otherwise. Another rule I follow is that I hold no less than 5 stocks in very different parts of the economy. On that basis I would not recommend starting to invest in stocks with anything less than $25,000 and better yet considerably more.

If you don't have enough money to build up a diversified portfolio then you might be ready for mutual funds.

I get no real sense of what the goals in investing are here other than to make money safely. That is why people pay the fees for a full service stock broker. He should be asking the relevant questions.

You really need to do your own homework and be prepared to take responsibility if your investments do poorly before investing in equities. If you require somebody other than yourself to blame if your investments do poorly IMHO you are not ready for equities.

i would like to point out,contrary to Ian, that you can buy smaller lots of stocks(100 share for example) WITHOUT incurring large commisions/fees..Fidelity,for one,has low rates for trading stocks..I think i pay 10.95..That said, i'd stick to mutual funds for a more diversified investment if i were you

Please don't be offended, but I'm not sure you're ready to invest in stocks right now. I've been heavily invested in stocks and mutual funds for years, and I've had some spectacular gains...and some spectacular losses. Here are some examples:

My first stock investment was Boeing at $16...it went up to $51 in a year and I more than tripled my money. Then I took all of that money and invested in some really good picks from my broker...in 6 months I had lost 1/2 of it! Or how about my Microsoft stock? I got in on it 7-8 years ago and kept making lots of money. I kept telling my wife to get in...and she finally did. She bought at $60 and it went down to under $30 shortly thereafter and she's been sitting with a 50% loss for the last 4 years. Or let me tell you about my Cisco stock that I got at $60 that went up to nearly $100...before it went down to $26. If you can handle the roller coaster ride, jump on board.

I suspect that you're a conservative investor and don't have money to waste. Over the long term you will do better in the stock market than in CDs, but some years you may end up with less than you started with. If you can't accept that, you'll have many sleepless nights. I recommend you stick with CDs for a while, and get used to the idea of investing by putting together a "phantom" portfolio of things that are interesting to you. Choose mutual funds, rather than individual stocks, as that spreads risk over many stocks, and would be what I would recommend to you if you finally end up investing. Then go to the web site of a reliable mutual fund company, like Fidelity.com, do some reading, and pick out some mutual funds that appeal to you, and write down the prices. Next, go to, say, Yahoo's finance area and create a portfolio. Set it up as if you've bought $2500 of several different mutual funds. Then check your "portfolio" every day. If some of your picks aren't doing well, take the money and switch it into another fund and see what happens. It will give you a sense of how the market moves, what the ups and downs are like, and whether you've got the stomach for daily gains and losses. If you do this for 6 months or a year, it will tell you whether you can handle investing. Some people can't, and that's ok. But it's best to find out with a phantom portfolio rather than your own funds.

vannie,

How long do you want to leave this money to do its working? 6 mos. - or 6 yrs. - or 30 years, till retirement?

Do you have an emergency fund? It sure is nice to have a cushion, in case of unexpected needs for a larger fund than can be met comfortably from current income. Can you survive if you don't have a paycheque for 3 mos.? 6 mos?

For a number of years, I kept some funds in readily available form, in case of such need.

But now I don't need to do that.

I have a number of stocks (and some equity-based mutual funds that I bought earlier and have been too undisciplined to dump, as I don't enjoy paying about $1.00 in $5.00 that my investments earn to the managers who are loking after it - but some of the managers have produced good growth). I'd rather learn how money works and pay that $1.00 to myself. Maybe not in the early years, but increasingly, as I got smarter.

In the early years, sometimes my investments did less well that that managed by the mutual fund managers. And, to be honest, some still don't.

But few of those managers have a better growth record than the market as a whole, or the various components of it, over the long term.

And did you know that you can buy a chunk of the various components of the stock market, at a much lower annual fee than you pay to the fund managers?

Actually, a number of them hold a substantial portion of their holdings in that kind of investment.

Don't let learning how money works intimidate you - take on the job of learning how it works, and get working on it.

If somone had told you in kindergarten of all of the stuff that you'd have to learn by the end of high school, you'd probbly have gone running to look for the nearest cave, ran inside, and tried to pull it in after you. Wouldn't you have?

Don't forget - when you give $10,000. to the bank to care for, feeling comfortable with the guarantee that they'll return every dollar to you that you lent them in the first place, in addition to the rent on the money, there's another guarantee that they never mention ... they won't pay you one dollar more, either.

And the value of every one of those dollars that you gave them shrank, every year that they held it.

They pay you back in shrunk dollars!

And make more on your money than you did.

Not my idea of good time.

Learn how to run your own money, effectively.

Good wishes for increasing skills in managing your money.

ole joyful

P.S. Now, some of my stock and mutual fund certificates sit with the credit union, and I have a fully-secured line of credit, at low interest rate, that I can call on in case of an emergency.

Granted, the interest isn't deductible ... but the increasing rate of dividends that those stocks pay, and their growth in value over the years, more than compensates.

Especially since, in Canada, interest income is taxed at top rates, and dividends on Canadian stocks at a very much lower rate ... and the dividend rates on quality stocks increase over the years.

Also, since I'm on pensions, those pensions continue, whether I'm in too poor health to be able to go to work, and I don't have to worry about layoffs. All that I need do to keep them coming ... is stay above the grass!

A stock that I bought 40 years ago for $4.20 or so, originally paying about a dime annually, has grown to over $100. a couple of months ago, about $97.00 now - and now pays a dividend of $3.08 annually.

o j

Tax free Municipal bonds. AA or AAA and Insured.
Stocks that appreciate bite you on the behind. The divs that come with them also are not tax free.

To me, it's better to have my money sitting safely and earning lower interest, than to gamble on high gains but take the chance of losing principal

Stocks are a rich man's Las Vegas. They're bigtime gambling. The only money anyone should ever put into stocks is 'play money'--extra money that you can afford to lose completely, and it won't crimp your lifestyle or keep you from sleeping at night. Are you in that position? Is this money you won't miss if it disappears? If so, buy stocks to your heart's content. If losing that money would be devasting now, or mean you would be deprived in your retirement? Then you need to stick with something super safe.

My husband and I have kept the bulk of our money in the bank, our entire adult life. And as a result? we're the only people we know who aren't crying over the huge losses they've suffered in the past few years. Well, DH does have some stock--that used to be worth over $90/share--it's now worth around $30--considering he's got about 500 shares, that's a huge loss. But wait--it's not--he didn't buy the stock, his company gave it to him, so whatever we get from it will be profit to us when we cash it in.

If this is money for your future, please be safe with it.

"My husband and I have kept the bulk of our money in the bank, our entire adult life. And as a result? we're the only people we know who aren't crying over the huge losses they've suffered in the past few years. Well, DH does have some stock--that used to be worth over $90/share--it's now worth around $30--"

This thread was started in 2007. Amazing what has transpired in that time.

We sold a lot our stocks in the middle of 2008 because our sources were warning us about what was coming. Three of these stocks were worth $40/share and went down to $2--. This happened within a year AFTER we sold.

We would have taken a real bath had we stayed in. Our broker (at that time) tried very hard to talk us out of selling. We told him to sell ANYWAY, NOW. He took his time doing this so we fired him and moved the rest elsewhere. The company he worked for went under. (how fitting)

We still have a few stocks but thankfully, these have gone up during the past 5 years.

Here is a link that explains why I'm not interested in putting anymore money in the stock market/Casino. At least until something is done to regulate the 'regulators'.

A link that might be useful:

www.rollingstone.com/politics/blogs/taibblog/sec-taking-on-big-firms-is-tempting-but-we-prefer-whaling-on-little-guys-20120530

The link above is still valid, deff a good read.

This post was edited by HopsNCrops on Sat, Jan 26, 13 at 21:53

"The link above is still valid, deff a good read."

Agreed!

We recently learned that our previous broker left the company he stole for when they went out of business in 2010.

He has had 3 job changes since then. Now he's a supervisor at a Liberty Tax office.

I don't know what they pay there, but I doubt it is very much. He had to sell his pricy house near the water last year.

Nice to see a little justice for a jerk that tried to steer us down a rathole on the way out.

I believe one can do well investing in the stock market, it is always best to manage your own money not give it to a broker to invest.

Exactly. No one cares more about your money than yourself. DIY investing is the way to truly go, IMHO. But if you can't or don't want to, study up enough to find a trusted (preferable fee only) advisor. With the caveat that most "advisors" and their ilk are really just salespeople.

To comment on some of the other posts:

Posted by azzalea (My Page) on
Sat, Oct 13, 12 at 22:03
"To me, it's better to have my money sitting safely and earning lower interest, than to gamble on high gains but take the chance of losing principal "

Sure, if you're a VERY conservative investor and have a very short time horizon or are already retired, then this kind of asset allocation is perfectly acceptable. Of course, on the flip side of the coin, you're losing buying power every year you do this. Ever hear of inflation? In reality, your principal may be slowly being chipped away at after all, you just can't see it.

Posted by dreamgarden (My Page) on
Tue, Oct 16, 12 at 11:57
"This thread was started in 2007. Amazing what has transpired in that time.

We sold a lot our stocks in the middle of 2008 because our sources were warning us about what was coming. Three of these stocks were worth $40/share and went down to $2--. This happened within a year AFTER we sold.

We would have taken a real bath had we stayed in. Our broker (at that time) tried very hard to talk us out of selling. We told him to sell ANYWAY, NOW. He took his time doing this so we fired him and moved the rest elsewhere. The company he worked for went under. (how fitting)

We still have a few stocks but thankfully, these have gone up during the past 5 years."

Great job of timing a bear market. Too bad you didn't jump back in. Had you done so, you would be ahead of where you were in 2007. Despite all the doom and gloom, most markets have been in a bull run since 2009. If you would have had jumped back in AND kept contributing via dollar cost averaging, you'd be even FARTHER ahead.

Posted by azzalea (My Page) on
Sat, Oct 13, 12 at 22:03
"Stocks are a rich man's Las Vegas. They're bigtime gambling. The only money anyone should ever put into stocks is 'play money'--extra money that you can afford to lose completely, and it won't crimp your lifestyle or keep you from sleeping at night."

This spells it out really. You are VERY risk averse. You're the type of person that will sell all their stocks at the slightest sign of trouble and then sit on the sidelines until everything looks better. By then, it's too late. You've already missed most of the gains to made in that bull run. You probably should have a lower allocation of stocks to begin with.

Stocks and the markets are not gambling if done properly. One simply needs to realize that there is more volatility from stocks over the short term. Over the longer term, the risk is reduced and the gains are greater. One needs to evaluate their time horizon, how much volatility (risk) they can handle in the meantime, and then choose asset allocations that are appropriate so that they can sleep at night. It's probably a good idea to create a financial plan. After that, STICK TO IT. Don't dump all your stock at the first talk of recession. Don't buy 1000 shares of the next hot thing when things are going great. Also it would be a good idea to stick to index investing and ETFs via a mechanism like dollar cost averaging and regular contributions. Lower cost and easier diversification.

And no, I don't work for the stock market, bankers, advisors, or advocate any related fields or businesses in anyway. In fact, just the opposite, I hold equity in many of those businesses. They're working for me, rather than me paying them inflated fees. I'm simply a DIY investor who has done a lot of research. Been investing regularly going on 15 years and still have a time horizon of 30 more, need be.

I could go on much farther in depth but there's a ton of great books out there that will do it much better. Get educated (or at least find someone who actually is and that you can trust) rather than being afraid. You're missing out otherwise.

Hi again Vannie,

In my post of '07 I asked how long yiour time frame was? Three months is one thing - 30 years is a much different kettle of fish.

Further to the stock that I referred to then, that I'd bought 40 years ago for about $4.20, paying about 10 - 12 cents a year (taxed in Canada at a low rate), that had grown to $120.00 in June of '07, paying $3.08, at an even lower rate of tax, and had declined to $95.00 or so.

It was a Canadian bank, that was substantially involved with the U.S. financial system, and in the financial fiasco which your financial system underwent, their share price slunk down to about $40.00, and some said that they would cut the dividend, but others that they wouldn't, as theat would hurt the price of the stock even more.

They left the dividend alone, but didn't raise it for three or four years.

The stock price has since recovered to about $85.00, and the dividend is not about $3.76 or $3.78.

As a personal financial consultant, selling no financial products, so had no conflict of interest, I recommended that folks carry 3 - 6 mos. worth of income, in case of illness, layoff (whether temporary or permanent), etc.

But often I didn't have such, as I could use credit card in case of most emergencies, and had stock and mutual fund certificates lodged at the bank or credit union as collateral undergirding a line of credit, which carried a lower rate of interest than an unsecured loan and which I could draw on as desired (but haven't for a number of years) in order to pay off the credit card balance at the first billing, thus avoiding paying them any interest.

I like paying 4.25% on a line of credit rather than 18% on credit card (or 28% or so on store-issued ones). And even more so when, as is usually the situation, the interest isn't deductible.

Someone said that no one cares as much about your money as you, and I've used the saying many times, over the years with my financial advisory clients and others ... but some years ago added some to it ... "except - someone who'd like to move some of it from your pocket into his/hers".

Your job is to see that coming ... and avoid it as far as possible.

Good wishes for increasing knowledge of how the money system works.

ole joyful

Hi again vannie,

Further to my post of last Feb.

The Canadian bank stock that I bought for $4.17 about 46 years ago, paying 10 - 12 cents (at low tax rate) and had grown to $107. in '07, paying $3.08 annual dividend, taxed at an even lower rate, that had grown to $3.48 ( that 40 cent increase being almost 10% of the original cost) had maintained that rate through the drop to $95.00 per share ... and down to the $40.00 per share ... but hadn't grown for about three years, then grew to $3.60 and $3.78. (There was a typing error there - what was written "not" should have been "now": sorry).

This year it has grown again - now pays $3.84 per year.

If I can stay alive for a few more years ... maybe it'll be paying me each year the amount that it cost me in the first place.

Granted - $4.17 would buy a lot more 46 years ago than it'll buy now.

Many charities ... and now the churches ... want me to let them go into my bank account to pick up some money, monthly.

Problem: if there's not enough money there to cover - the fee is $42.50 ... each.

So if there are three - that's $127.50, which is about what some of them get for a whole year ...

... and if it's 10 - that's $425.00 ... and few of them get that much or more each year!

If I sell that stock and put the money into the account to let them do that ... if I sell it for $84.17, having paid $4.17, my capital gain is $80.00, and I have to pay tax at regular rate on half of that, $40.00.

If I transfer the stock to a charity ... I get a receipt for the full amount ... and I pay zero tax on the gin. (Another keyboard error - that was supposed to be "gain").

I like them apples!

ole joyful