How to put my money to work...

Ok, I have a few thousand laying around in my savings account and I'm interested in advice as to what to do with it. 

In b4 Hookers and blow...

First, do you have an emergency fund?


If yes: Put the money you don't need right away in to mutual funds.

If no: Make an emergency fund.

I've heard of a fellow named Madoff, your money would probably do well with him.

Waits for the penny stocks bot to chime in.

As someone state above, if you don't have an emergency fund, stick it in an interest earning savings account. If you do, mutual funds are a great way to go. Roth IRA is also good as, "there is no greater force in the universe than compound interest." You are never too young to start saving for retirement.

Stay away from CDs right now. If the interest rates were higher and inflation wasn't an issue, then sure, but right now, if you compare the CD rate at your bank to the inflation rate, you'd actually be LOSING money by putting your money in a CD rather than a high yield savings account (ING and other online banks give good rates) or mutual funds or an IRA.

Remember IRA's aren't liquid. They're retirement funds. While you can raid it in an emergency, the tax penalties are stiff.

Personally, GE looks good to me in a long-term investment strategy. They produce a wide range of products, are increasing their wind turbine production and will probably be the forefront manufacturer in big solar projects too.

I'll second Tallen's recommendation of General Electric. I listened the first time he gave that advice- they were trading betwen $10.30 and $13.00 per share when I got in. It then went up to nearly $19 a share. It's trading at $15.90/share right now, but it's been a rough summer for a lot of stocks. They're a solid company, broadly diversified, and are the largest corporation in the world. they've already largely squared away the GE Capital component of the conglomerate that was a large driving force behind their price drop during the recession.

At the same time, as a major manufacturer of big ticket industrial items - AND of provision of decades of maintenance and upgrade services to same - they're well poised to continue upwards as the economy climbs back.

Generally speaking, don't invest in stocks for the short term; actively trading - unless you REALLY know what you're doing and are broadly diversified - is a good way to get hurt. Picking a solid long term stop with a low current valuation, a solid track record, and a healthy dividend is a good way to see your money grow win the long term. It will rise and fall in that time, but you ought to see a net gain. And don't get scared when prices occasionally plummet. If you're willing to sock some money away over a time frame of a few years, this is a very safe bet.



Tallen- In addition to their investment in wind turbine technology, they're a big player in the 'smart grid' market, and GE Health is a solid long term bet; America is one of the last developed nations without a modern system of networked and digitized patient records, and GE is constantly picking up contracts for these systems. Aviation's been hurt about as badly as it can be, so their jet engine business ought to pick up from here on too.


Edited by brihard - 09 September 2010 at 3:17pm

tallen702 wrote: . . . the Volt promises to scoop up more than its fair share of hippies and celebrities who want to be seen in something more environmentally friendly than a hybrid.

I don't know about that, it does nothing for me.  It's not that it's revolting or anything, it just doesn't generate a spark of interest for me.  (Maybe I'm just not amped about alternative vehicles in general.)  Oh well, at least it's nice seeing a US company lead the charge towards improved electric vehicles.

Yes, Proctor & Gamble is typically held to be a very good long term stock. Dividends are solid, and they sell the kind of things that people will always buy regardless. I need to look at them again next time I'm putting some cash into stocks.

I disagree with you regarding General Electric. They still make at least half their revenue from financial services through GE capital- they finance a lot of industry and research. Besides that, their manufacturing is so broadly diversified that it's far from dependent on any one thing. Additionally, GE sells worldwide. While some plans of the current administration are indeed favourable to them, they're hardly dependent on them either. Less than half of their earnings come from within the U.S. There's tremendous potential for them as developing nations such as India and China develop their major infrastructure and industry.

Yes, GE aggressively pursues emergent initiatives, such as the green energy sector, network-centric healthcare, etc, but they are so broadly diversified and so entrenched in so many markets that long term they are an absolutely solid bet.

I vehemently disagree that mutual funds are 'for suckers'. For people who don't have the assets to invest extensively in stocks, mutual funds are a great way to ensure diversification. Are the potential gains as high as stocks? No, absolutely not, if the rights stocks are picked. Mutuals, however, are at much lesser risk of a permanent loss of value than any individual stock is. They also allow you to gain broad exposure to a particular sector, such as funds focusing on emerging markets, or a particular geographic region, or a selection of stocks in particular parts of the economy such as energy, or finance, or resources, or what have you. Someone with a modest amount of cash - like what's being discussed in this thread - wishing to invest in the emergent markets in Brazil, Russia, India and China, for instance, is far more likely to find mutual funds of quality than to successfully pick one or two stocks that will do quite well.

Many people simply don't have the time or the knowledge to properly research individual stocks for investments. It's easy to get sucked into charlatanry and to make bad investments based on some glowing articles. Mutual funds - particularly reputable ones - make it much easier to avoid this. Yes, you lose some of the potential return in the management costs of the fund, and yes, you're unlikely to 'win' a gamble and pick one of those stocks that ends up climbing and climbing. But if you're starting out investing and don't want to put all your eggs in one basket, mutual funds can be excellent if they're well picked. Also recall that we've just been through a tremendous economic slump followed by a fast but partial recovery, so looking at returns in the past few years is going to be hard make make sound investments on. Better to figure out what will be good in the future.

Some prognostications that are pretty safe:

China and India will continue industrializing and will consequently need vast quantities of all resources. Think currently underdeveloped or unattractive sources of resources like the oil sands in western Canada. If Pelosi wants to complain about how dirty it is, that's fine, China will buy it instead.

Lots of people are going to get old and sickly. Industries that cater to the elderly should do very well in the next few decades as the early baby boomers start hitting retirement and also start having health problems.

Our lifestyles will continue to be consumerist. Look at the companies making the stuff you use daily- cereal, shaving cream, soft drinks, etc, figure out who ultimately owns them, and look at what else they own. If they're consumer staples it's a solid long term bet.

My personal preference for a lot of my long term stuff is natural resources, particularly the energy sector.


Our government did something pretty cool a few years ago. They passed a law creating a 'tax free savings account'; essentially what it is is a registered account at any bank where each year you can contribute up to $5000 (will be indexed to inflation in $500 increments), and you can invest and trade within that account completely tax free. You can take it out at any time, and you can recontribute cash once you have it again- not just up to the $5k/a,  ut up to the total value of what was in there when you took it out. So if you invest five grand, and it increases in value to $20k, you pay no tax, you can take it out whenever you want, and when you later have $20k again you can put it back in and continue to invest. Potentially some massive tax savings if the investments are successful. These accounts are in their second year of running now. One of the few things our government has done which I heartily approve of... For some reason most people are using them for low yield investments like GICs and government bonds though, which is dumb.


Edited by brihard - 10 September 2010 at 5:07pm

The exact same arguements made for GE were made for Enron... We all know how that ended.