# Investing small amounts per month, advice required



## KJPF (16 Apr 2007)

Hi,

I have a lot of spare time in work and some disposable income(around €300) at the end of every month after bills, savings, etc. so I was thinking of investing it in some mid-term stocks.
This is partly to give me something to do in work (as I said I have a lot of free time) but mostly as a way to generate a bit more cash.

What I am wondering about is if it enough cash to play around with per month. Looking at some of the brokers, they require you to make an initial deposit of $5000 to start trading.

Is there a better way to go about this whole process?

Thanks in advance.


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## ClubMan (16 Apr 2007)

KJPF said:


> so I was thinking of investing it in some mid-term stocks.


What precisely do you mean by this?


> Is there a better way to go about this whole process?


Invest indirectly via a low charges unit linked fund rather than directly by buying individual shares? Have you read the key topics and the _AAM _and _IFSRA _guides to savings & investments for some more food for thought?


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## KJPF (16 Apr 2007)

Sorry, by mid-term stocks I meant shares I was planning on holding between 4 months to a year and then selling them on.


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## ClubMan (16 Apr 2007)

4-12 months investing is short term in my opinion. If this is your investment timeframe then you need to double check that equities are the most appropriate option for you. Investing over such a short term involves potential risk/volatility that reduces with longer term investing.


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## KJPF (16 Apr 2007)

ClubMan said:


> 4-12 months investing is short term in my opinion. If this is your investment timeframe then you need to double check that equities are the most appropriate option for you. Investing over such a short term involves potential risk/volatility that reduces with longer term investing.




I understand that there is a risk involved but I can afford a hit, as I said, this money is available after bills, savings etc so I see it more as a way of getting some experience in the stock market without worrying about destroying my finances etc.
What would you remommend instead of equities?


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## ClubMan (16 Apr 2007)

KJPF said:


> What would you remommend instead of equities?


I've already suggested investing indirectly in a low charges unit linked fund rather than buying equities directly. It's impossible to give specific advice/tips without much more detailed information about your overall financial situation, short/medium/long term goals etc.


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## RedJoker (16 Apr 2007)

By not investing in an index fund you will more than likely trail the market.  You will also add unneccessary volatility to your portfolio.  By giving yourself something to do at work you are likely costing yourself money.  

If you are considering this a tuition while you learn how to invest, then I advise you to read the recommended reading list in the key posts at the top of this forum.  Perhaps your first 300 would be better invested in some of those books.

What age are you?  Will you need this money in the future?


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## z108 (16 Apr 2007)

RedJoker said:


> You will also add unneccessary volatility to your portfolio.





I thought index funds were more volatile than managed funds ? Was I wrong ?


KJPF , it seems to me that smalll regular purchases of stock are more suited to a fund like quinn life

 but http://www.scottrade.com seems to  only require $500 down  instea dof the 5 grand you wrote about earlier.


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## ClubMan (16 Apr 2007)

sign said:


> I thought index funds were more volatile than managed funds ?


What did you base this belief on?


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## z108 (16 Apr 2007)

Clubman , I based the particular belief upon the notion that most managed funds invest in a mix of cash, bonds and property as well as equities but an index fund only has one asset class/type. Was I wrong ?


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## ClubMan (16 Apr 2007)

Different managed funds invest in different mixes. There are lots that are up to 100% in equities. To say that index tracking funds are necessarily more volatile than managed funds is a meaningless generalisation.


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## z108 (16 Apr 2007)

ClubMan said:


> Different managed funds invest in different mixes. There are lots that are up to 100% in equities. To say that index tracking funds are necessarily more volatile than managed funds is a meaningless generalisation.



So is this another way of agreeing with my original post by implying that to say  managed funds are necessarily more volatile than index tracking   is a meaningless generalisation ?


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## ClubMan (16 Apr 2007)

sign said:


> So is this another way of agreeing with my original post by implying that to say  managed funds are necessarily more volatile than index tracking   is a meaningless generalisation ?


Huh? How can I agree with your original post when you posted two questions on this issue?


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## z108 (16 Apr 2007)

ClubMan said:


> Different managed funds invest in different mixes. There are lots that are up to 100% in equities. To say that index tracking funds are necessarily more volatile than managed funds is a meaningless generalisation.




Well I dont think its a meaningless generalisation that an index fund 100% invested in equities has to more volatile than a properly managed fund which is properly diversified riskwise across sectors and asset classes. Isnt diversity what everyone is preaching?
The real performance would depend upon which index and upon which fund  its compared to and then also upon the future performance of either but the concept is valid.  During previous bear markets wasnt it index funds which were hurt the most while those managed funds which had stop losses would have been less affected?


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## ClubMan (16 Apr 2007)

sign said:


> Well I dont think its a meaningless generalisation that an index fund 100% invested in equities has to more volatile than a properly managed fund which is properly diversified riskwise across sectors and asset classes.


So index tracking funds that are invested 100% in equities are more volatile than *some *actively managed funds? Probably - but that was not the original point/question.


> During previous bear markets wasnt it index funds which were hurt the most while those managed funds which had stop losses would have been less affected?


Surely it depends on when people got out? If people sat tight with the index tracker while the active managers were liquidating assets then they could well have done better in the long run. As somebody else here is fond of saying (possibly quoting somebody else) "it's time in the market and not timing the market that matters".


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## z108 (17 Apr 2007)

hindsight is always 20-20

what about people who sat tight with dogs such as waterford wedgewood for a decade or more ? Surely there are cases when selling is the right decision ?

sure long term holding  is a good idea  if you made the right choice in the first place but in the long term we're all dead.


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## ClubMan (17 Apr 2007)

All you are doing is repeatedly saying that some investment decisions are worse than others. So what? That proves nothing in general and doesn't really get anywhere with regard to the original point about (some?) index trackers being more volatile than (some?) managed funds? Pointless discussion in my view...


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## RedJoker (19 Apr 2007)

sign, 

I assumed that OP was going to be investing in individual shares, not managed funds.

Re managed funds vs. index funds. I'm not sure how volatilities compare. However, the majority of managed funds trail the market or the equivalent index funds. A lot of this is because managed funds have higher fees but also has to do with paying more commissions.

It is possible to buy a few index funds in different asset classes or sectors so that you can be even better diversified. Alternatively you could invest in a target retirement fund which would automatically adjust your asset allocation away from equities and towards bonds as the target date approaches.

Re managed funds being able to get out in bear markets. I believe that managed funds are required to have a certain percentage invested at all times by law. You could invest in a long-short hedge fund which would be unaffected by overall market direction and in general are a lot less volatile than either index or managed funds. However, these usually have very large minimum investments.


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## diarmuidc (19 Apr 2007)

sign said:


> what about people who sat tight with dogs such as waterford wedgewood for a decade or more ? Surely there are cases when selling is the right decision ?
> .


And what about the people who sold Apple while they were stuck in the doldrums during the 90s? 
It's easy to spot the "dogs" when you are looking back. Not so easy when you are looking forward.


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## z108 (19 Apr 2007)

Thanks for that info guys But have we answered KJPF's original question ?


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## RedJoker (20 Apr 2007)

I hope so, if he has any follow up questions he can always ask.


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## z108 (22 Apr 2007)

http://www.interactivebrokers.com


http://www.keytrade.com/


I think the two above deserve some inspection


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