Lux Investing
should i invest some oneelses money?
i have been given an offer by a friend. the offer is for me and him to get 500 dollars each and invest it in the market. i will be doing all the investing because i have been researching the market and trying to learn how to properly invest. he knows nothing about investing. that is why he want me to do it and in the end as we make money, we split it 50/50. we are going to talk about this more later tonight but i all ready see 1 problem. i dont want to screw up and lose his money. any advice on what i should do here?
Public Comments
- Rule of life---Never borrow money from a friend or relative- and though you are not borrowing the money--if you fail and lose his money--your friendship will be in jeopardy--is it worth it to you??
- When he comes over, discuss the possibility that you could lose the whole ball of wax. That's always a possibility in investing. You will have to have a joint account for things to be above board - you know that, right? I wouldn't give anyone five hundred bux and say "invest it for me" and expect a payout. Otherwise, you'll end up paying the taxes - and having to account for the funds (gain or loss, plus/minus associated fees, etc). Given that knowledge, if he wishes to proceed - go for it, it will give you more to work with. You don't want to screw up and lose you OWN money either!
- I admire your friend's willingness to put his fatih in you. But, you said I'm learning how to invest, not I have learned how to invest; there is a difference. you need not take his money since you're in the process of learning. I'd suggest you go to a professional and receive an investment analysis to discover wants he wants to do. there they'll ask you about goals, risk tolerance, experience, and time horizon. naswer these questions first before you invest your money. i hope this helps.
- By its nature, investing in common stocks includes the risk of losing money. Over a long period of time, perhaps 5 to 10 years, the risk of loss for a well-diversified portfolio lessens significantly. There are two primary types of risk when investing in stocks. The first is systemic risk, which is the risk of the overall market losing value (e.g., Dow goes down). The second is company specific risk, which is the risk of an individual security (e.g., IBM). When a portfolio is well diversified, the company specific risk diminishes, approaching the overall market risk. The problem I see is that you want to achieve high returns permitting the 50/50 split of profits while still not losing money. By investing $500, you will be taking significant company specific risk. I read a column recently by Gail Marksjarvis in the Chicago Tribune which indicated that there were no mutual funds for individuals (not IRAs) accepting less than $1,000. One possible alternative is purchasing an Exchange Traded Fund (ETF) with the $500. You will gain diversification within the index you've chosen. If you choose an S&P 500 ETF, you've effectively chosen the market. Doing so is perhaps the safest alternative, but then I don't see any reason to be accepting 1/2 of the profits. Other ETFs are available with varying degrees of risk depending upon how narrow the focus is for that ETF Index. If you're interested in ETFs, there are a number of resources available at your disposal: marketwatch.com yahoo.com moneycentral.com Just to name a few.
