I believe you should identify yourself and your credentials as a financial adviser.

I also believe that you should offer concrete alternative investment vehicles to what Neville uses.

What should Neville Invest on? How? Share your knowledge, please.

I for one like to invest in banks. USB, C, BAC. I also like vice: MO and MCD. Do you have any good suggestions?

All:

I do believe in diversified portfolios. Apparently Neville has a portfolio composed of stocks and revenue generating websites. Over time he will probably acquire a real estate property (a house maybe?) or some other alternate investment. That would be three asset classes. That would probably be diversified.

People! You have to understand that there is no single correct investment strategy. Most people don’t invest at all. Neville is investing. Neville is trying investment strategies that could be good or bad… Either he wins money or he doesn’t. But in the end… chances are he will certainly end with a lot more money than the average American that doesn’t even have other investments than his/her home (assuming he/she didn’t got an equity line to pay up credit card debt).

Neville:

Keep investing.

Use whatever strategy you believe on. Diversify smartly.

Let us know how good is the digital camera. I might have to buy a new one in a year or so (the one I have is kind of old).

– Jose
Money and Investing

Let’s suppose I-bonds are guaranteed to perform better than stocks (or other investment vehicles) with less risk. If this were the case, no one (or no one who works in the financial industry, at least) would invest money in anything else!

What you’ll actually find is that for all the investment choices out there, there is a tradeoff between risk and reward and they may have different correlations to each other. This is not like Vegas! In Vegas, you actually take negative expected returns in exchange for more risk. On Wall St, you expect greater returns for taking on more risk (otherwise you wouldn’t buy that product, the price of that product will decrease, so the expected returns go up).

Neville is young, so it is understandable to me why he would want investments that he won’t touch for 40+ years to be in higher risk, higher reward investments. I’m not necessarily saying that 100% stocks is the right move, but I don’t think 100% bonds is either. Also realize because Neville is at a different stage in life than you, he probably is willing to take on more risk than you, because over many years the risk becomes smaller and the returns substantially larger. In any particular year, the stock market can go up or down quite a bit … but historically, over any 30 year period, the stock market has not lost value. Plus, the historical returns on stocks has been greater than bonds. This doesn’t make stocks any better than bonds, only another choice for the risk/reward and the correlation between the two.

I’m personally of the opinion that holding 4 individual stocks will bring Neville more risk without any added expected returns. Over a 30-year period there are many companies that lost ALL of their value. But, I believe my reasoning still holds.

Stock Market can make you poor as well as rich. We call that gambling where I come from. Nev is going to need to buy a house, settle down, and have kids soon. He is assumming to much risk. Just cause you are young does not mean it is wise to assume alot of risk.

I am going against the conventional wisdom but sometimes it is older folks who already have their ducks in a row…are better suited to assume more risk then a young man.

I like your site. I am invested in both individual stocks and broad index funds … For me personally, I find indices more attractive for long-term investments, because it takes quite a bit of work to be constantly re-evaluating your individual companies. How one particular company performs in the stock market, in the long run, depends a lot of the industry it’s in, it’s management and strategy compared to its competitors, etc etc. Many professionals working full time dealing with a lot of money have tried to evaluate companies’ current value and their future performance. It seems quite unlikely that you or I would be able to more accurately access these companies, even if we worked for them!

On top of that, holding four individual companies seems extremely risky. If just one or two of the companies disappoints Wall St expectations, your portfolio can lose significant value (or alternatively, it can gain significantly as it seems to have so far in your case). I think you will find that when you compare investing in 4 individual stocks to a broad index, the 4-stock holding will be quite a bit more risky but not with any higher expected returns.

Anyway, I encourage you to read up on ETFs or index mutual funds. As someone else mentioned, for the amount of money you are investing, the strategy you pick will not make a huge difference in your lifestyle, but the biggest value you get is the experience of investing that you will use as you accumulate more wealth.

Good luck