With a $1000 dollars is it Mutual Funds or individual stocks?

Question

taking into consideration fees charged by mutual funds as against by low priced stocks in the current bear market and holding them for a period of time

Answer 1

Agreed with jeff

Answer 2

Mutual funds because with the low amount you cant diversify well.

Answer 3

If you yourself decide not to buy the "low-priced" stocks then the mutual fund you buy will.  The price of the stocks should not be a factor in your opinion -- it should be what you know about stocks and investing.  Others pointed out that you will have problems diversifying, which is true as well, but if you sacrifice $50 (with a discount broker) to make a 10-stock portfolio it's the same as going in with $950.  You have to decide if that's something you're willing to do.

... You could always put that money in an Exchange-Traded-Fund (ETF).

I would suggest learning at investopedia.com if this is something you were interested in.  You can also email me if you like.

Answer 4

It's important to look at stocks that are over or undervalued relative to those in their industry or sector...that is, to look at if the stock's projected PE or PEG is below or above the industry average...I've found a web-based tool that helps figure this out...it ranks stocks:

http://www.freestockvalueranker.com/

Answer 5

Buying individual stocks is risky.  It is better to invest in mutal funds. You might be able to split the $1,000 in two and invest in two different mutal funds.  The mutal funds are buying the same lower priced stocks you are, they are just buying many different lower priced stocks so they spread their risk of one stock going down.  

After you invest the $1,000 then you should automatically invest a set amount each month.  Be amazed at how fast it adds up.

Answer 6

Well If I am in your shoes I would go for the second option. Bears have made the market more affordable and I don't imagine a situation like this an year after now. You can make great income with stocks

Mutual funds are managed by people who are educated and they have better intuition than us. It is up to you to decide. There are various other options to invest your money.

Answer 7

This is a crappy time to be getting into the market. It's very turbulent right now and no one can say for sure whether the current 20% down will continue on to 50% down or head back up again.

I advised my daughter (who is also just starting out with $1000) to put it into the mutual fund, PRPFX. It's generated an average 7% annual return since the fund inception in 1982, and lately (last 1 year, 3 years, and 5 years) has been getting around 14%. Beta for the last year has been 0.27 and Sharpe was 1.55.

Answer 8

Hey Billy,

I think you need to learn a little about investing strategies before you decide, there's really no wrong or right answer. I would personally recommend either a good no-load mutual fund with a strong 10+ year performance history and a low expense ratio, or an ETF or Index fund that tracks the S&P 500 or some other broad index.

Before you put your money anywhere, take the time to learn a little bit about different investing strategies. I think you'll have a great deal more long-term success if you get excited about a strategy and then work hard to master it.

Here are a few of the most popular strategies and a blurb about each:

- Value Investing: “I won’t buy unless the stock is selling for less than it’s worth.”

- Growth Investing: “I’m willing to take some risks for portfolio growth.”

- Income Investing: “This money has to last a long time, I’m playing it safe.”

- Mutual Fund Investing: “I want professional expertise guiding my portfolio.”

- Index Investing (Index Funds and ETFs): “I’ll let the market do the work for me.”

- Momentum Investing: “I want to own hot stocks until they cool off.”

- Market Timing: “Ride the Bull and hide from the Bear.”

- Day Trading & Technical Analysis: “I have no fear of risk, I will take big chances for big gains.”

Any of these sound interesting? There's a great list of Investing Reviews at http://www.money-and-investing.com/Stock...  You can read the major goals, investment selection methods, strengths, weaknesses, risks, long-term outlook, and investor profile for eight popular strategies.

Best of luck, Billy, and post back here often, it's fun to watch someone on their wealth-building journey.

Cheers,

Odd Lot