Hello Friends! Thanks again for stopping by. I was pretty excited this morning checking the mailbox (I felt like Steve Martin in the Jerk when he got his Phonebook!)...and had an email with an inquiry.
Ross D., from Anchorage, Alaska writes:
My initial investment is going to be around $500-$1,000 and add in around $300 monthly into my investments (split them up accordingly). I came across sharebuilder.com just a few minutes ago and found out that Wells Fargo offers their service too. Again, not sure if I should spread things around or do everything under one house. Seems like a good concept, but wouldn't buying the stocks individually be better? Also, is it good to have only one account versus having multiple accounts with different brokers?
First of all Ross, I am NOT a professional investment advisor so I cannot give you specific advice on equities. But let me share with you my own start in investing...I am afraid to say that was about 35 years ago (!)...when I had a sharebuilder account with Merrill Lynch. I don't believe they still have this...but I may be wrong on that.
In general, if you are starting an account, I would stay with ONE brokerage house as paperwork gets tricky enough as it is...I like starting with about $1000 and adding $300/month. What I would do is start with the $1000, buying a single investment for about $750, and leaving $250 in a money market. Then I would each month place $250 in a total of four other investments, alternating each investment each month...with a cycle of four months. After twelve months, you should have $750 in each of five investments. I would continue rotating the five investments over a 5 month period of time until such time as each investment has $5000 value. If you do the math, at this rate, this will take several years...adding about $600/yr to each investment. You will also be building a money market fund, which I would draw upon if buying an additional position.
How do you manage this? Probably would set up a mental stop (that is in your mind keep a stop) about 10% below your purchase price. If any of your investments are down 10% from their total cost...then I would liquidate the investment, and purchase a DIFFERENT stock adding sufficient $'s from the money market to have the new investment pretty equal to the others. I probably would not sell any portion of the holdings until they were at a $5,000 level, then consider starting to sell a portion of the holdings when they hit a sell point...you can use the "sell 1/4 on a 1/3 gain" strategy that I use in my trading account.
You asked about currency investments and quite frankly, that is a sophisticated investment area that I know little about....so if you do that, good-luck!
Also, what about Wells Fargo vs. a discounter like Scott-Trade? I do not have any experience with Scott, but do with Fidelity and Schwab that I like. I would prefer to see you with a moderate discounter like Fidelity than a deep-discounter like Scott...mainly because you are a NEW investor and might need some of the additional services that are probably available with the less-than-deep discounters. Just a thought.
I am not sure if all of my discussion is helpful to you. Please remember that I am a fellow amateur investor so I would suggest you discuss these ideas with a professional investment advisor.
Please let me know how things work out and if you have any questions about my blog or website! Again, thanks for writing.
Bob