No. of Recommendations: 3

If you have credit card debt you almost assuredly will be better off paying that off before investing. The reason for that is that the interest rate you're likely paying on your credit cards is almost assuredly higher than the after tax return you'll average from stocks, especially as a beginner, when you don't know how to value stocks, i.e. you have no system in place to know when a stock is a good value and when it might be a good time to sell. If your credit card is charging you 18% interest, paying that off is like a risk free pre-tax return of something like 22%, or whatever 18% * (1 - your tax rate is). You aren't going to be able to beat that as a beginner. Even very talented investors have trouble generating those kinds of returns, and not even the very best investors can generate that kind of return risk free, guaranteed.

The price of an individual share of a stock is not that important. Some companies slice their ownership into more slices of pie than others. But whether you eat two pieces of a pie cut into 8 pieces or one piece of the same pie cut into four pieces shouldn't matter, right? Buying one share of a $1,000 stock or 50 shares of a $20 stock shouldn't make a difference to you the shareholder. What matters is what the value of that stock is relative to the price you pay. If you don't have a good way of determining the value of stocks, I'd recommend sticking with index funds, specifically an S&P index fund like VFIAX or a total stock market fund like VTSAX.

Your goals of making money relatively quickly and letting it alone to grow are mutually exclusive. You need to determine what is most important to you. Long term, and I'm talking roughly at least 5 years out from now, the stock market might give you an average compounded annual return of maybe around 5%. That's over twice as much as what you can make in a high yield savings account these days, but during those 5+ years, the stock market will go up and down like a roller coaster, and only average out to something like 5%. You have to be comfortable holding through those down periods to get that average higher return over time. If you want the risk free return of around 2% you can get that in a savings account, but it' a lower return than what you'll probably average holding money for long periods of time in the stock market. On the plus side, the money will always be there every month should you need it. If you need the money in the next 2-3 years, don't invest it in the stock market.

Yes, Edward Jones has very high fees. Double check, but I wouldn't be surprised if you're paying at least 1% or more in fees. You could remove that cost by moving to low cost index funds. To do that you would have to move the money out of Edward Jones and move it to somewhere like Vanguard, or to your brokerage account and then invest in a low cost index fund there.

Print the post  


What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.