The beginning of a new approach.
Imagine one day that you had a windfall of n piles of $2,000. In this hypothetical situation, you have no debt, and thus do not need to worry about using the money to pay off loans. Since you received the money in a windfall and were not planning on having it, you are free to invest it to the best of your abilities. In order to achieve some diversification, you decide not to invest more than $2,000 in any given investment. What would you choose?
In order to help answer this question for myself, I visited mturk.com, and paid people to give me investment advice. It’s amazing how helpful will be for a reward of 10¢. Here are what seven respondents said:
Personally, I would invest in NAT. This is a shipping stock, and the company is involved in shipments of oil, as oil rises, so do their spot prices (revenues received for their transportation of oil). The stock itself has been somewhat volatile, but it has a dividend that hovers around 13% which helps to make up for the natural fluctuations in the stock price, especially with its revenues so closely tied to oil prices. Right now it is relatively low compared to a couple months ago and could see a big up turn if oil prices return to the higher ranges 60 and lower 70. Having only 2000 to invest, I would either put it completely in this stock (somewhat risky) or I would split it up and put the other 1000 in a completely different sector to offset losses if something bad happens in the energy sector. I would not recommend the options market just yet unless you truly know what you are doing because it takes a thorough understanding and many years of experience in just stocks to learn how to play that game, and newcomers to the options market are just seen as easy money. Also, if you want high returns, I suggest staying away from Mutual Funds because most fees are high and eat into the profit and often it just isn’t beneficial to be in those funds for less than a year. Good Luck.
I would start a home-based boxed lunch business catering to Indian doctors and nurses working in hospitals and pining for the tastes of home.
I would put it in the Romanian Stock Exchange market with a 100% percent return until Feb 2007.
I would invest half the amount in Bank Fixed Deposits which will guarantee $1055 at the end of the year. Now I have to ensure that the rest of the amount will not become less than $745 in 90% of time while having enough potential for growth. So I’d invest half the amount in a Mutual Fund which invests heavily in Large Cap stocks (probably some Index Fund) while the rest of the amount ($500) would be invested in a Mutual Fund which invests in high risk high profit potential stocks like Mid Caps or stocks of some niche industry like IT.
First off, if your savings account is paying 5.5%, I’d say you ought to consider taking it. 5.5% is an impressive return for a completely liquid and guaranteed investment. But, if the goal is to do even better than that extremely generous rate in today’s market, then examining the risk side of the equation becomes most important. You say you are willing to risk a 10% chance of losing more than $200. How much more? There is a huge difference between $1800 and $800, or $0. A lot of hedging strategies put the full value of your investment at risk, and more. (e.g. short-selling a stock has unlimited exposure if the price keeps rising). I am inferring from your characterization that you are most accurately willing to endure a 10% risk of ending up with $1800 for the upside chance to realize a superior gain the other 90% of the time. (Or something like that). This sort of risk profile suggests to me that you would be most comfortable with a well-rated equity investment. However, with the Dow recently achieving another record, it’s less likely that the next 12 months will offer the same sorts of returns as have been realized over the past 12 in any sort of broad market or large-cap play. In this case, I’d want to look at the cycles within various industry segments, to identify those portions of the markets that are undervalued. An investment in utilities just a few years ago would have more than doubled by now, and it is this same sort of cyclical upswing that would be advantageous to time. (e.g. buying Buenos Aires real estate at the bottom of their crash would have made you rich by now). Right now, the auto stocks and airline stocks would seem to be beaten up the worst. I’d head to a large fund manager, like Fidelity, and invest in a transportation fund.
Buy as many shares as you can afford to of Garmin stock. It split recently and is on its way back up, and it’s a terrific earner.
I’d buy a Mexican CD for $2,000 USD, delivering a yield of 15% and maturing in July 2007.
How would you invest $2,000? Please leave your response as a comment on this entry.
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