What is the best way to invest $400 automatically every week??

Question

I want to take $400 a week or every other week and put it into either drip accounts, mutual funds, or index funds. I already have a set amount in indivudual stocks which I plan on leaving in that account for trading. This is for the long term 15+ years out. What is the best/easiest way to invest this money automatically every week, I am just looking to get the average market returns 8-10%. I would like to diversify between 3 or 4 different options.

Thanks in advance

Answer 1

If you want a return of 8-10% you have to invest in equity and derivatives. Fixed income products would not bring you this type of return unless you invest in high coupon, low quality bonds with significant credit risks.

Since you are asking to diversify, I would recommend you to trade both equity, commodities and options. (in that order) When the economy is in recession, the best hedge is commodity as they are counter cyclical. Also, you will have the chance to find undervalued stocks. If you believe the economy is eventually going to go up, holding a few covered CALL options on blue chip companies may provide you the returns you required.

Answer 2

Pay off your high interest credit cards and loans and make sure you have 2-3 months emergency cash before investing. Contribute to a Roth IRA.  Take advantage of a company sponsored 401k and match (if available).

READ: The Bogleheads' Guide to Investing: Taylor Larimore, Mel Lindauer, Michael LeBoeuf, John C. Bogle

Unless you are an experienced investor, I would caution against individual stocks and get rich quick schemes.  Your idea of investing early and frequently is a great one! Reduce your risk and check out Vanguard

(http://www.vanguard.com )

Now is an excellent time to put your money to work. Spread the risk by investing in a mutual fund (Vanguard's STAR is a fund of funds-a fund which buys shares in other funds-and therefore carries a lower risk) . It is comprised of 65% stocks and 35% bonds.  Depending on your age, this may be too coservative.  Take their questionaire and adjust your investments as necessary.  With an index fund you will neither be ahead or behind the market very much (the smaller the fees the closer you will be).   It can make for restful nights.

Vanguard is a low cost, no load mutual fund company. There are others such as Fidelity; I have been with them for 30 years and retired early. Your results may vary.

Read the "Planning and Education" tab if you visti their website.

Good luck

Answer 3

I have some suggestions.  Whether they are the  best or not only time will tell.  Actually, to be quite honest, they probably are not the best.  There are just too many options for the probability to be in my favor.

Most open end mutual fund companies have automatic investment options.  Some closed end fund companies also have such an option.  I believe most however are on a monthly basis rather than a weekly basis.   I hesitate to recommend dsp plans because it is so difficult to find links to do so.  GE for example is said to offer such a plan, but if you go to their site and click on the supposed link, it take you nowhere. Another disadvantage is that in order to achieve good diversification, one would need to enroll in about 15 different plans.  

T Rowe Price is one mutual fund company that I am familiar with that has automatic monthly investment.  It also has a wide selection of mutual funds to choose from, many of which have averaged returns of better than 8% annually over long periods of time.  Fidelity and Vanguard also.   Among closed end funds General American Investors has an automatic investment option.  Their fund has an annual return 12% over the last 10 years and better than 15% annually over the last 28 years.  Beyond that period the annual return has been forgotten, but the fund has been in existance since 1928.

So you do have plenty of choices.  It will be up to you to pick the best however.

Answer 4

For starters, max out a Roth IRA.  Then invest the remaining amount in no-load tax-efficient mutual funds.

Answer 5

Investing in mutual funds is not the best path to follow.

What I would suggest is to educate yourself in the workings of buying and selling stock options, (calls and puts).

With good strong companys you can realize profits of upwards to 30% or greater without having to put up too much risk capital.

Buying and selling stock option contracts can provide a greater return in a shorter amount of time.

I own five shares of Visa which has just recently started traded on the public market, March 19th, 2008.

I cost averaged my shares for a total purchase price of $61.47, however, I made the mistake of not selling when the price hit $89.00, if  I had sold at that price my total realized profit would have been over 50%.

Right now as of the close of business on Friday the 13th my profit on the stock is 32.75% Visas current price is $81.60

You do not have to own the underlying stock to trade option contracts, with the exception of covered calls.

I have just recently purchased a call option contract on Solarfun, ticker symbol SOLF. My current position on this trade is the $22.50 strike price for the July 2008 expiration date.

I purchased this position at $1.60 per share, for a total price of $160.00. One contract controls 100 shares.

If I were to buy 100 shares of the underlying stock it would currently cost me $1,874.00

The positon currently is not making any money for me right now as the price of the underlying stock has dropped some since my initial purchase.

The options current price is $1.15 which has given me a loss of $45.00. However, solar stocks as with all energy sector stocks tend to follow the price of oil.

By the time the expiration date arrives when oil is expected to be around $150.00/bbl the price of the option contract will go up along with the rise in the price of the underlying stock.

If the price of Solarfun rises to around $21.00 before expiration I intend on selling this position back to the market at around $2.40/share or $240.00 for the contract which will give me a profit of $80.00 or more minus commision. If you do the math on this, thats a 50% profit in less than two months time, and you can do this over and over, month after month.

I'm only a novice trader, and I'm still learning.

It does take a lot of time and the learning curve is steep, but if you do your research and plan accordingly the rewards are well worth the effort, with much less risk involved.

Answer 6

put it in gold until you get $5000 or so.  Then find a broker that offers structured finance products, specifically those that are principle protected.

You are in effect buying a note, and it is paid back 100% in the worst case scenario.  But the note is tied to the success of a commodity, usually currency.  If the Euro increases in value versus the dollar, for example, your principle protected structured finance note would increase with it.  You could see as much as 20% APY returns, with absolutely no downside risk (except the possiblity of Merrill Lynch or Smith Barney going belly up, of course.. which is small, even in our current panic).