I’m still trying to work out if the first comment on my post about finance a few days back was a helpful hint, or spam. I let it through because it seemed pretty genuine, although it raises quite a few doubts in my mind. I’ll repeat the main point here so you don’t have to bounce around the site.
If you are starting out investing in stocks and shares, you might want to use a share tipping service. They point you in the right direction, and then it is down to you to decide if you want to invest in what they suggest or not. You might decide not to invest in everything, but it tends to broaden your horizon and show you companies you would never have looked at before. If it is good, it will also keep you up to date with what the stock market is doing.
The site link which followed is useless to me, being a UK share tipping site (I live in California, for anyone late to the game). And even so, there are a couple more reasons why it doesn’t help much.
Personal Finance is about more than “playing the market”
As I mentioned in passing in that previous piece, I’m at a stage in the game where I’ve never really thought about money (and long-term wealth generation) before. Like many twenty-somethings, I’ve earned money and then spent most of it. Couple that with a spell of bad luck and an expensive move across the globe, and when I sat down and computed my current net worth it was a sobering thought to realise that, were I to walk under a bus tomorrow, I’d leave my loved ones nothing but minor debts (life insurance notwithstanding).
Since I’m hurtling towards 30, I really should be making better decisions with my money, a process which involves (in loose order)
- Paying down those final debts so that I don’t owe a single cent to anyone.
- Monitoring my expenditure a lot more closely (I have no real idea what I spend my money on each month), and trimming the fat.
- Starting to invest in earnest in a 401(k) plan (“a pension” for the Brits following along).
- Starting to save in earnest each month towards a general-purpose “emergency fund” and a long-term investment fund.
I’ve started using a couple of tools to formulate a plan around all this, with the aim of getting all 4 points somewhat covered by January. I’ll share those tools later.
Share tipping sites just aren’t the best way to get 100% value
Even once I get an investment fund up and running, single-share investments on the recommendation of dedicated “share tippers” probably aren’t the way to go. 3 reasons why:
- If you’re just starting to build up capital, diversification is a good thing. Whilst an index fund is extremely unlikely to deliver the 200%-in-6-months gains which many investors might dream of, over the long term (10 years or more), it’s a reasonable guarantee of good returns, in the 9-12% range (compounded, that makes for good money).
- We’ve just entered a new period of extreme market volatility, thanks in large part to mortgage-debt worries in both the US and the UK. It may lead to a full-blown crash, or it may simply last a while. As of today, the markets rallied at close again, but more bad news could easily reverse that. Even more reason to diversify, and to avoid short-term gambles which might eat up significant capital.
- If you’re going to be bullish about putting money into individual stocks, nothing comes for free. A lot of share-tipping sites are likely to pick up on “the next big thing” pretty late, by which point the best possible gains in the stock in question are long-gone (ie, a bunch of people already bought in and moved the price up). If you’re going to “play the market”, the only way to ensure even a middling chance of good returns is to do as much research as possible yourself, and buy-in ahead of the crowd. It doesn’t end there either. Once you’re in, you need to keep researching (Jim Cramer recommends one hour per stock per week) to catch any signs of impending doom.
At any rate, I’m not quite there yet. To give you some idea of where I’m going, though, I’ll share my current financial web reading list.
Personal Finance Advice
I’ve found that most of the personal finance sites, be they individual blogs or professional sites like MSN Money, are pretty samey. The classic “tell” is the number of times they refer to lattes. Yes, lattes – it seems that “cutting out the morning latte” has become so pervasive in the world of “how to save money” advice that all else falls by the wayside. Since I can read a piece of advice as well the first time as the tenth (and don’t drink a latte every morning), this advice is a sure sign of uninventive tedium.
The stand-out in the pack is The Simple Dollar, written by a twenty-something father who hit rock bottom after years of snowballing minor financial mistakes. I’m not at rock bottom (far from it), but the situation he found himself in resonates somewhat, and he writes with incisive common-sense and good humour. The site is also sprinkled with solid book reviews and specific advice in answer to reader questions.
The Financial Markets
I picked up on 5 blogs (out of thousands) which cover a good range of ground. Importantly, most of these provide copious links out to the “cream of the crop” on other finance sites. I may drop one or two of these if there turns out to be significant overlap, but at the moment they’re throwing all sorts of useful concepts my way.
- The Big Picture – A heady mix of not-too-technical analysis, financial humour and intermediate-level advice. Makes me feel a little out-of-depth occasionally, without being baffling. About where I want to be right now – it means I’m learning.
- The Kirk Report – A trader’s personal observations – generally a concise post at market open and market close, with occasional other observations thrown in during the day. A pretty simple way of keeping on top of daily market fluctuations. Bonus points for starting the day each day with a cordial “Good morning”.
- Finance Trends Matter – Regular round-ups of interesting finance pieces from all over the web, as well as beginner-to-intermediate studies of current trends (again, containing a wealth of links).
- Abnormal Returns – Most link-aggregation posts, again with occasional intermediate-level in-depth studies of particular concepts.
- The Smart Money Report – 3-4 extremely concise pieces per day, usually quoting the salient part (and linking to) pieces on other finance sites.
I began with another site, Minyanville, which is pretty darned interesting, but I’ve dropped it for the time being because the load was too much (20-25 reasonably complex articles per day, well-written but littered with extrememly complex concepts that I’m not yet at the level of fully understanding). Rather than continue with the blog, I’m going to work through Minyanville’s education section first to get myself a bit further up to speed.