August 10, 2008 at 1:00 am by Tom Lydon
If you are an investing newbie and considering buying some stocks for your first time, there is a better way to go: exchange traded funds (ETFs).
First consider who you are: Are you 30 and starting your career, retired and wanting to see your money surplus, or are you risk intolerant and feel the need for security? If any of these are so, then why not an ETF instead of a single stock, advises Matt Krantz for USA Today. What’s more, ETFs are good for anyone and easily customizable to your goals, time horizon and risk tolerance.
It is also important to figure out what your goal is with your first investment. Are you going to buy-and-hold and watch it grow over time, or are you thinking of doing some day trading of your own in an attempt to make some fast money?
Consider risk vs. reward. When you pick an ETF, make sure you’re up for the risk. If not, look for one that is a little more suited to your tastes.
If you just want to pick something and be done with it, one or two broad-based funds might work a little better for you, such as the SPDR S&P 500 (SPY) or Vanguard Total Stock Market (VTI). When you go in, invest when it is above its 200-day moving average, and sell when it goes below or 8% off its high.
Why buy stocks when ETFs are so much better? Getting this kind of diversification by buying individual stocks would get expensive, and create a mess as far as keeping track.
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