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I am new to investing and have $ 1000 to begin with. Are there any suggestions on how I should begin ?
Should i spread it out over a number of stocks buying only a couple shares of each ?
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$1000 is really too small an amount to use to buy a variety of individual stocks. The commissions would kill you.

I'd suggest a mutual fund or an ETF (especially the latter). Schwab is a good place to buy these. (Vanguard used to be the best place, but most of their mutual funds have a minimum of $3000. And Schwab as amazingly low expense ratios -- and low expense ratios are, I think, the number one thing that matters in buying funds).

culcha
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I have the cash in a vanguard acct. What types of ETF do u suggest ?
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I would suggest the Vanguard ETF VTI Total Stock Market.
Another suggestion would be a Target Retirement fund. I believe these have a $1000 minimum.
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The VTI ETF at Vanguard, as was suggested, is an excellent choice. You'd get broad market exposure (and thus, instant diversification) right from the get-go.

We recently had 6 days in a row when the market went down, followed by one day when it went up. An early lesson for beginner investors to learn is that you have to be in the market for a long time. You may experience losses for a few days in a row -- but probably not for a few years in row. An investment is not something that you can expect will pay off in a few days. But in will definitely pay off in the long run.

Good luck!

culcha
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"You may experience losses for a few days in a row -- but probably not for a few years in row."

culcha,

Why are you giving a new investor such bad advice?

The DJIA is an imperfect proxy for the equities markets. But it's good enough. There have been decades --not merely years-- prices when down, e.g., Jan '66 to Jul '82.

Why have the past ten years been good for investors? The Fed's free money and a lot of financial engineering, not genuine economic growth. The bubble will burst. Newbies need to be aware of that.

Arindam

https://www.macrotrends.net/1319/dow-jones-100-year-historic...
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"You may experience losses for a few days in a row -- but probably not for a few years in row."

Why are you giving a new investor such bad advice?

It's not really bad advice. Mentioning the possibility of a few years in a row when the market is down is a pretty rare occurrence. I must admit that it happened for the first three years that I myself got into investing, right as the tech bubble burst in 2000 -- but, looking at historical records, it has not happened at any other time during my lifetime (71 years, and counting). It's only honest to set out an improbable downside ... even if it's only a once-in-a-lifetime thing.

I'm wondering though -- why did you suddenly start talking about the DJIA???

culcha
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culcha,

Thanks for your level-headed, civil reply.

I linked a chart to the DJIA, because it was easier to find than one for the SP500. But given the 97% correlation between the two, one is as good as another for long-term, historical look-backs.

The point I was making is that 'investing' isn't a sure thing in either the short-term or the long term. In fact, the only sure thing is that "On a long enough time frame, the survival rate for everyone drops to zero." Therefore, expecting that future markets will bail you out of present mistakes is naive foolishness.

We're ten years into an asset bubble. When it will burst is anyone's guess. But the fact that it will burst is a certainty. Therefore, how to hedge that event --or to profit from it-- should be foremost in a new investor's mind.

Arindam
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toba,

Money is almost never the limiting factor in learning to invest in stocks. Given that there's a half dozen brokers these days who offer free commish and the ability to buy in fractional shares, you could buy hundreds if you chose to, simultaneously or serially.

What's going to kill your account, though, isn't getting into those positions, but knowing when to get out. So focus on learning 'risk management' before you get yourself into trouble. Working your way some of the investing classics would be a good way to begin. For sure, you need to read Ben Graham's, The Intelligent Investor. But I add Wm O'Neil's stuff and that by Justin Mamis.

Arindam
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I’ve been looking at dividend stocks. Am I correct in thinking that investing in these will always give me a return no matter how the market trends.
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Companies cut their div --as well as eliminate them altogether-- when they encounter financial distress. Also, if prices never recover to your entry point, you suffered a capital loss probably larger than any divs received.
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Companies that pay dividends will usually be severely punished by investors if they cut their dividends. Hence, they usually resist dividend cuts (or worse omissions) as long as they can.

However, most will not borrow money to pay dividends.

Hence, investors want to keep an eye on dividends paid as a percentage of earnings. You can get a quick number by multiplying dividend percent yield published by many services by price earnings ratio. Most companies keep that number at about 50% or below. But if it gets much larger be very cautious. The dividend is at risk.

Similarly investors like companies with a good record for increasing their dividends. In essence they are sharing their results with investors. And this makes for a good stock to put in your retirement portfolio.

But also note that fast growing companies have many needs for cash to invest in growing the business. They are reluctant to pay dividends. Hence, highest growth rate companies often pay no dividend. It's the mature industry leaders that tend to be good dividend stocks.
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