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Author: palsan Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 1193  
Subject: Re: RRSP - stocks or not? Date: 12/11/1999 10:27 AM
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Its tempting for everyone these days to jump into the stock market. With stocks jumping 600% in one day people think they are missing the boat.

My advice for new investors (especially young ones):
Since you have alot of time on your side, you do not need killer returns of +30% per year to retire comfortably. Returns in the 10-15% range are all one needs to accumulate a large "nest egg".

Having said that, do not jump into bying stocks until you know what you are doing. Do alot of reading on investing, business, accounting, economics etc. Once you are confortable with mechanics of investing and are able to do due diligence on a company, then, start buying stocks. In the meantime, while in the learning phase, equity index funds are probably the best place to park relatively small $ until one is ready for the "big time".

Buying a house is a huge investment. For young couples with no children, renting is an option to look at - it allows for saving for a sizable downpayment. When you are ready, buy what you can afford and put down as big a downpayment as you can.

IMO, one should not borrow huge $ for a mortgage in order to invest money in the stock market. I would try for a reasonably small mortgage - even if it means no money for investing. (Leveraging home equity to buy stock is risky and should not be done by novice investors.) This alows for a few years of learning about the stock market while saving a few dollars along the way. These small savings can be placed in index funds. When savings reach about $10K one can start looking at bying 2 or 3 stocks.

Conclusion:
25 year olds have plenty of time and do not need to rush into the stock market just because it seems that everyone is doubling their money everyday. Take it slow, learn as much as you can and decide what investing style suits you. Learning about yourself is also important - not everyone has the same risk tolerance. Once you are confortable with investing your own money, stocks are the best way to accumulate wealth over periods of more than 20 years. Consider yourself lucky to have discovered the wondreful world of the stock market at such a young age, but DO NOT feel you are missing out on anything.

Hope that helps.

palsan
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