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Old 10-02-07, 01:42 PM   #1
Bob Ross
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Short term investment suggestions?

Okay, let me preface this by saying that I am so stupid about financial things that I am actually here asking for advice on a Bike forum ferchrissakes!

But it's sort of germane: Basically I'm planning on ordering a custom bike with a ridiculously long waiting list, and I want to take advantage of the wait time to save the money for the bike itself.

So here's the deal. I've got $1000 in cash as starter "seed" money. And I have the ability to contribute $100 per month for the next five years. What's the financial instrument with the best 5-year ROI that I can throw this money into?

For reference, if I just stick the money in a mattress, at the end of 5 years I'll have $7000 ($1000 seed money plus $100 x 60 months). So is there something like a 5-year Certificate Of Deposit w/ compound interest that can turn this sum (and this schedule) into something significantly greater than $7000? (Or, perhaps five separate 1-year CDs?)

I have no idea what I'm talking about (clearly). And I do plan on consulting actual "experts" before making any investments. But I thought I'd see if anyone here has gone through a similar process and has any recommendations. Thanks.
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Old 10-02-07, 01:47 PM   #2
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Buy low, sell High.
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Old 10-02-07, 01:51 PM   #3
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Depends on how active you want to manage it and how much risk you are willing to assume.

That being said, a fairly decent investment would be to put the money in an index fund.
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Old 10-02-07, 01:54 PM   #4
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Best ROI depends upon your emotional-makeup and investment-knowledge and skill. A lot of people get into investing in the reverse order. They put their money into some instrument, then try to milk it for maximum returns, wrong. You first must pick a ROI, a return-rate that you desire, and then put your money into the instruments that yield that kind of return. Here's the break-down on various investments and their average yearly returns:

cash: -7% over past 30-40 years due to inflation
CD/MM: 3-4%
bonds: 3-6%
real-estate: +7%
funds: -10 to +20%
stocks: -15 to +30%
stock-options: -100 to +1000%
futures & commodities: -1000 to +2000%
futures-options: -100 to +3000%

Now your question should be, "In what time-frame do I want to grow my $1000 into $7000?"
The other question is, "How much time do I want to devote daily to managing my investments?"
Finally, "How much time do I want to devote to education, trial-and-error testing, and fine-tuning my investment knowledge?"

I can assure you that anything after the funds and stocks investments will require at least 5-10 years of training before you can be on the positive side of the game. But what a glorious game it becomes at that point.

Check out these forums: http://www.elitetrader.com
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Old 10-02-07, 02:03 PM   #5
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Originally Posted by DannoXYZ View Post
Now your question should be, "In what time-frame do I want to grow my $1000 into $7000?"
The time frame is a given (60 months), the seed money & the regular contributions are a given ($1000 to start, plus $100/month for 60 months) so the only variable is the final dollar amount. My question really is (and can only be) "given those fixed amounts, what instrument will yeild the greatest return over $7000?"

...with the least amount of risk, naturally.


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The other question is, "How much time do I want to devote daily to managing my investments?"
Zero. Absolutely none.


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Finally, "How much time do I want to devote to education, trial-and-error testing, and fine-tuning my investment knowledge?"
See above.
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Old 10-02-07, 02:09 PM   #6
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cash: -7% over past 30-40 years due to inflation
CD/MM: 3-4%
bonds: 3-6%
real-estate: +7%
funds: -10 to +20%
stocks: -15 to +30%
stock-options: -100 to +1000%
futures & commodities: -1000 to +2000%
futures-options: -100 to +3000%
Wow, I have to invest more into Real estate. Only upside potential with 0 risk. Gotta love that.

Actually it sounds like Bob has a specific time frame and goal, therefore I assume he wants to preserve his initial investment in a lower risk investment vehicle. I would assume a money market fund (at around 3.5%) is the way to go. Otherwise he starts to take on risk which I assume he's trying to avoid.

If he's willing to risk some of his capital, he likely has a long enough time frame to invest in stocks to try and better his return. Perhaps a balanced mutual fund (mixture of stocks, bonds, etc). A safer investment vehicle than stocks, however you can still have a negative return depending on the asset mix.
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Old 10-02-07, 02:10 PM   #7
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Talk with a rep at your bank. Find out what the rates are on a money-market account. Then find out the highest rate you can get on a CD for the shortest time (sometimes, 48- and 60-month are the same). Tell that person your goal, and how much money you can afford to save each month, and then decide the best way to maximize your interest. This is the safest, short-term option I can think of.

Securities and bond investments should really be a long-term thing, where you have the ability to absorb short-term losses and achieve long-term gain.
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Old 10-02-07, 02:11 PM   #8
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Given the short time frame (3-5 yrs) and the lack of interest in actively managing the money, I would strongly suggest that you keep this investment plan very simple.

Following a very basic investment plan of CD's every 5months, if you can get 4.5% on a 5yr CD with the 1,000 now and every 5 months a new CD at about 4%, at the end of the 60mos you should have a total of 7,880 & change. Of course this does not take into account income taxes since I have no idea what your marginal rate is.

This plan is very conservative, so you should have little trouble making these numbers or higher.
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Old 10-02-07, 02:25 PM   #9
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Given the short time frame (3-5 yrs) and the lack of interest in actively managing the money, I would strongly suggest that you keep this investment plan very simple.

Following a very basic investment plan of CD's every 5months, if you can get 4.5% on a 5yr CD with the 1,000 now and every 5 months a new CD at about 4%, at the end of the 60mos you should have a total of 7,880 & change. Of course this does not take into account income taxes since I have no idea what your marginal rate is.

This plan is very conservative, so you should have little trouble making these numbers or higher.
Yep, good advice. In Canada we have GIC's (Guaranteed investment certificate) which work the same way. Typically they're running at around 3.5 - 4%.
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Old 10-02-07, 02:31 PM   #10
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at the end of the 60mos you should have a total of 7,880 & change
Wait, so you put away $7000 of your hard-earned cash for five years, and you get back $7880 at the end? That barely even seems worth the trouble.
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Old 10-02-07, 02:34 PM   #11
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Plastics.
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Old 10-02-07, 02:36 PM   #12
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Wait, so you put away $7000 of your hard-earned cash for five years, and you get back $7880 at the end? That barely even seems worth the trouble.
No...you invest $1,000 for 60 most at 4.5% and have a approximately $1250 for that investment at the end of the 60mos.
Then every 5 mos, you invest 500 in a CD at approx. 4% for the remaining months of the period.

The total value of both pools of funds will be approx. $7,880 at the end of 60 mos.

And I'd much rather have $7,880 than 7,000. Its $880 more.
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Old 10-02-07, 02:38 PM   #13
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For simplicity I would go with a 5 year CD. Or, especially if you might need to access the money, a savings account at an internet bank (e.g. 5.05% available at the bank I work for).

5 years may work out with stock/property, but might not.
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Old 10-02-07, 02:49 PM   #14
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One option for investing that is management free is an online savings or money market. There are many banks doing this now, and you are sure to find some with rates you like. i am using virtualbank.com which gets %4.5 compounded daily. At that rate you would have $7,981.28 at the end of 5 years.
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Old 10-02-07, 03:47 PM   #15
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Online bank... how 'bout ING at liek 4.5%? Search the internet for one of their $50 bonus codes.

Right now my savings is with Amboy Direct and got a $50 bonus (already got the ING bonus), plus some money (about 25% of savings) I fool around with stocks.

Last edited by Jerseysbest; 10-02-07 at 04:18 PM.
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Old 10-02-07, 04:09 PM   #16
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Wood in Costa Rica - might be a bit hard but I buy wood all the time, sit on it for a few months and then sell it for more. Sometimes a lot more.

But, you have to know the market and how to sell, buy, etc. Resources are like that. I do this with horses too and sheep believe it or not. Also, older vehicles. I will buy them and have our mechanic fix them up and then sell them.

I can turn a pretty nice profit that way, much better than 7 to 10 percent.

The point is if you are alert you can pick things up for a low price and sell them for a high price - but you have to know what you are doing.
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Old 10-02-07, 04:18 PM   #17
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Orange Sunshine. From the looks of it you'll have a bunch of strong customers in Foo
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Old 10-02-07, 04:21 PM   #18
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give your money to me. I guarantee a 50% return.
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Old 10-02-07, 04:22 PM   #19
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Give it to me and I promise a 70% return - I will give you 70% and keep 30%...
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Old 10-02-07, 04:27 PM   #20
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well, that was implied (to me anyway)

(you're supposed to tell them that after you have the money and a plane ticket to tijuana)
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Old 10-02-07, 05:03 PM   #21
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The point is if you are alert you can pick things up for a low price and sell them for a high price - but you have to know what you are doing.
That is also my point exactly. Investing in myself and my education has always been the best value for my money. Especially in the very beginning when I knew nothing about investing and didn't want to bother with managing my money. I gave tens of thousands of my hard-earned savings to a stockbroker. Well... we all have had these experiences or heard the stories; there's a reason they're called 'BROKERS!!!

So with the measly $1k I had left, I took it on myself to learn and train in investments. Got my series-7 & 63 licenses, then my series-3 so I could have direct access to the markets. Took that $1k and turned it into $234k in less than 3-years. Cashed out right as the dot.com was crashing. Bought a house and three Porsches and have lived on my investments ever since. The most important thing for me in my life was learning to manage my own finances, because in the end, it's really you that's doing it anyway. Even if it's simply to pick a financial-planner and giving him a cheque.

BTW, there really ARE people that will handle your money and give you +50% returns. But they also take a LARGE portion of those gains for themselves. And they won't even look at you unless you walk in with at least $1mil cash in the bank.

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Old 10-02-07, 05:08 PM   #22
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BTW, there really ARE people that will handle your money and give you +50% returns. But they also take a LARGE portion of those gains for themselves. And they won't even look at you unless you walk in with at least $1mil cash in the bank.
well duh. We all knew that; especially the last part.
(I apologize in advance to anyone who did not know that)
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Old 10-02-07, 05:13 PM   #23
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For simplicity I would go with a 5 year CD. Or, especially if you might need to access the money, a savings account at an internet bank (e.g. 5.05% available at the bank I work for).

5 years may work out with stock/property, but might not.
Best advise here. Any money that you NEED at the end of 5 years is best invested in a secure vehicle like cds or possibly a bond fund, maybe a bond index fund like Vanguard's Total Bond Index fund. Stocks are generally at a high price to earnings ratio at the moment and are not a particularly good value right now. Plus, while historical trends for the long term predict stocks will produce the highest return, 5 years isn't really long term.

The S&P 500 is at the exact same level right now it was at in March 2000, and it is still overvalued when compared to historical averages. Between 3/2000 and now it has been almost 40% lower than it is now. So if you had bought $1000.00 of stock in an S&P 500 index fund in 3/2000 at some point you would have been down close to 600.00 and after 5 years, in 3/2005, you still wouldn't have been back to the level you paid for it.

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Old 10-02-07, 05:56 PM   #24
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The S&P 500 is at the exact same level right now it was at in March 2000
Even then, it's really not the same value. If you put $7000 in the S&P 500 in 2000 and sold it today for $7000, you'd actually have only 1/2 of the purchasing power in goods & services today due to inflation. EVERY investment has its risks, even straight cash has inflation risk. Bonds face tremendous pressure from rate changes and very few of them can beat inflation. Rather, they're used to maintain purchasing power. Appreciation and growth is best done with other instruments.

Funds actually provide a lot of flexibility without a whole lot of time-commitment. Take a look at the performance of China-related funds. They're the hottest on the market right now and outperforms the NYSE, S&P, DOW, NASDAQ, etc..
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Old 10-02-07, 05:59 PM   #25
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The time frame is a given (60 months), the seed money & the regular contributions are a given ($1000 to start, plus $100/month for 60 months) so the only variable is the final dollar amount. My question really is (and can only be) "given those fixed amounts, what instrument will yeild the greatest return over $7000?"

...with the least amount of risk, naturally.




Zero. Absolutely none.




See above.

The absolute lowest risk would be any FDIC Financial Institute that offers 4-6% interest rate
ING, HSBC, offer 4.3%+ etc.
Most banks offer CD rates of similar nature.
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