SINLetter Investment Forums / Getting Started / The First Steps

Getting started with the SIN Model Portfolio

Raja — Fri, 31 Aug 2007 11:47:11 GMT

Dear Asif:

Many thanks for helping people like me get started (and educated in this field).

I am an average investor with modest mutual fund investments in 401k and IRA. I have never owned any individual company stocks. I am, however, planning on following the SIN Model Portfolio in near future using my IRA funds. Following are my questions, given my situation. Hope you don't find them unreasonable.:w00t:

1. There are currently 21 positions (incl. options) in the SIN Model Portfolio. How should a new, average investor get started and migrate from 0 to 21 positions, given that it is a "Portfolio"? :ermm:

2. Once that is accomplished, what is the best (and a cost-effective) course of action to dollar-cost-average additional monthly contributions to the portfolio? I would like to stay away from investing in one or two stocks at a time, as it does not provide the diversity a portfolio does.;)

3. Which of the 21 positions do not hold as much promise presently, as they did when they were initially added to the portfolio? Given the budget, can one eliminate those stocks and still maintain reasonable diversity?:unsure:

Would appreciate it if you can suggest a site that has an Options-101 course with easy-to-understand examples. Seems like a somewhat complicated topic to understand!:crazy:

Separately from the above, I am curious about your take on the current Indian Stock Market. Don't you think a serious correction is overdue?:exclamationmark:

Again, thanks. ...And try to have a non laborious Labor Day Weekend -- but looking at your newsletters and blogs, something tells me that you won't!:)

How to apply for an IPO

NiravJ — Tue, 14 Aug 2007 11:52:55 GMT

I am currently interested in the VMware IPO but I am could not find a palce/site where I can apply for it. My ameritrade trade account does not show any 'upcoming IPO' links either. So my questions is, in general how can one apply for an IPO?

Thanks.

How Do I Start Investing?

sinnerMan — Sat, 05 May 2007 11:08:41 GMT

A question I often get from subscribers of the investment newsletter and from SINLetter visitors is about the first steps they have to take to start investing.

Here are a few ideas that should help you get started.

If your company has a 401K plan, start funding that right away. If your company matches your contribution, it would be a 100% instant return on your investment and there is nothing out there that can match those returns. You will then have to pick from a bunch of mutual funds in that 401K plan to invest your contributions. If your company does not offer a 401K or you are not eligible, you can set up a personal retirement account called a Roth IRA and fund it with upto $4,000 a year. To learn more about the Roth IRA and a traditional IRA, check out a couple of articles about them in the "Articles" section of SINLetter.com. You can set up an IRA (Roth or traditional) through a broker like Ameritrade, Etrade, Fidelity or Vanguard.

Before you start investing make sure that you have at least 3 to 6 months of living expenses in cash. This way if you have an emergency you will not have to sell your investments at an inopportune moment. You can put this emergency money into a money market account or one of those online checking accounts that pay upwards of 4% in interest. I use ING Direct for this purpose and am happy with their 4.5% annual interest (as of 5/5/2007). You might also be able to find other accounts (Citibank, HSBC) that pay a higher rate of interest.

Once you have this in place, you could set up an account at one of the discount brokers (Tradeking, Etrade, Ameritrade, Scottrade) or a free broker (Zecco, Bank of America, Wells Fargo) to start creating your portfolio. Bank of America and Wells Fargo require you to have a balance of $25,000 (across accounts) to give you free trades. I personally use Ameritrade Izone and am very happy with their $5 commissions. About $5,000 to $10,000 is a good starting amount but you could also start with $2,000 and add to it monthly or quarterly. The key is to trade less so that brokerage commissions (which can add up very quickly) do not eat into your returns.

To learn the basics of investing, check out this Investing 101 tutorial on SmartMoney.com. It is the best online tutorial I found about the basics.

http://www.smartmoney.com/university/Investing101/?nav=dropTab

After you get a hang of the basics, check out this book by Peter Lynch, a legendary mutual fund manager who consistently made almost 30% a year for his investors. The book is easy to read and discusses many strategies.

http://www.amazon.com/exec/obidos/tg/detail/-/0743200403/qid=1127713478/sr=2-1/ref=pd_bbs_b_2_1/104-3898871-3849504?v=glance&s=books

Start out investing very slowly and consider any losses in the beginning as nothing more than paying "tuition" to the market so that you can learn from your mistakes and become a better investor. Diversification is very important and should help you weather market drops much better than a portfolio consisting of very few concentrated investments. By diversification I mean diversification across sectors (healthcare, technology, transportation) in stocks as well as diversification across asset classes such as gold, bonds, stocks and real estate.

If you have any questions post them as a response to this topic and good luck. :)