Investing only a small amount

[Newt_Buggs]

Normally when people ask me for advice on how to start investing after I tell them that I know nothing and they shouldn't be asking me I recommend Vanguard funds. I got asked by a friend though who is looking to invest only somewhere between $2,000-$3,000 and I figured Vanguard might not be the best way to go if it is under $3,000. I was thinking ETFs might be a better way to start her out investing. Thoughts? If ETFs any recommendations on which ETF(s)?

[almostbusto]

your question is really much to broad and general to answer 'correctly'.

however, i would suggest:

penny stoxxx$$$$$$$$


but if the 2-3k is a lot to this person that might not be the way to go.

seriously, i would recommend watching some cramer, reading the intelligent investor, reading whatever website you like, whatever keeps you interested really. then read up on a few microcap stocks (perhaps limit yourself to one's that roughly fit ben graham's/warren buffet's criteria) and make some picks.

the education part is much more valuable than the couple percentage points (which adds up to tens of dollars) you MIGHT be costing yourself off of a small investment.


i am basically assuming this money isn't her life savings, and she is looking to learn about investing, and she will likely have much more money to invest in the future as her income grows (learning now will pay big dividends then).


personally, index funds and etfs are great but they are so passive they don't really help the learning process. if you never want to learn, have other areas of life you rather focus on, then i wouldn't blame you for going straight to etf's.

[Newt_Buggs]

Thanks for the great response

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personally, index funds and etfs are great but they are so passive they don't really help the learning process. if you never want to learn, have other areas of life you rather focus on, then i wouldn't blame you for going straight to etf's.

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Sorry for being so vague in my OP. I think the above quote fits her situation right now though where she would rather focus her time and energy on other areas.

[curtains]

whats difference precisely between Index funds and efts. Advantages+disadvantages?

[Newt_Buggs]

[ QUOTE ]
whats difference precisely between Index funds and efts. Advantages+disadvantages?

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Use the search function, there has been a lot of discussion and controversy over this on the forum lately.

[curtains]

F U can't someone just list the positives and negatives next to each other without 30 pages of conversation!!

[RollingRockMike]

I wouldn't recommend an ETF because you have to pay a commission every time you buy or sell. If she's investing such a small amount, I assume she will be adding small amounts periodically, and it doesn't make much sense. I would suggest an no-load index fund. Even if she goes with Vanguard and gets the $10 annual surcharge for accounts under $10K, she's almost certainly going to be ahead in the long run. If she doesn't plan to add periodically, then ETFs may be a better choice but the difference is so small I'd probably recommend an index fund anyway in case she changes her mind about adding.

[curtains]

what about just Target Retirement Fund 2050 on vanguard?