No Clue What To Do

Hello:

It was suggested by another member I try this board for information that might help me out. So, here I am.

First, you must understand that I am not any kind of financial wiz, nor do I understand “bankers talk” or financial lingo of any kind. If it’s not in layman’s terms, I will not understand what you are speaking about.

I have lived from paycheck to paycheck all of my life. I live in a “hole in the wall” and have for many years now. At every opportunity I have had to get out of this hole, I have been knocked back down one way or another.

I’m 52 years old, and for once in my life, I have been able to save about $500 over the past several years, which I would like to see if I can have it work for me, instead of the other way around.

I thought about attempting to buy some kind of residence to get me out of living in crappy apartments, but over the years, I have not met any ethical or honest realtor to give me any advice or information on how to go about doing such a thing.

So for the past few years, I have been looking into investing what little I have, in order to make me more. I’m not looking to get rich, but only to get by, without having to worry about paying bills if I have to end up retiring early for some reason.

I have looked into a few options on investing, but the person I talked too refused to speak in layman’s terms, so I had no idea what they were talking about, or I was told I would need several thousand dollars to be able to invest in something.

I am interested in investing in 3D printing technology, but was told that is very high risk at this point (what new tech isn’t?).

Without writing a novel on this, my questions are:

Where do I find someone who can explain things to me in layman’s terms, to were a dullard like me can understand what they are talking about?

Where can I find options for investing my $500. or less that might make me a few extra bucks over the next 5 years or so?

Where can I find someone who won’t take advantage of my stupidity in this realm?

What other options might there be, for someone who has nothing, to make something?

Thanks in advance

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Read, read, read and read some more. The more you read the more you will understand investing and the risks involved.

You can start by going through this board from beginning to end. It will take a while but the information contained therein is outstanding.

Investing is very personal with everyone’s situation and goals being different so there is no step by step playbook. One thing that is consistent with all that invest is we will make mistakes and we will loose money at times.

Ray

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At 52 with only $500 to spare and clueless by your own admission, the stockmarket is not the place to try to build a retirement egg’s nest. That’s not to say it can’t be done, you just have to find a better way. Let me see if I can help.

When you invest $500 you give someone the money so they can do their business better. In exchange they will give you a part of the profit. Say the $500 lets them make an extra $500, they will keep $450 and give $50. You have a 10% profit which is nice by investing standards. But the other fellow has $450 because he did the work.

Now suppose you invest the $500 in yourself. If you do as well as the other fellow you get to keep the full extra $500, a 100% profit. This is called “going into business” or “being self employed.”

Young kids open lemonade stands. Older kids have paper routes and shovel snow. Young adults do home repairs. Older folks whittle wood, weave baskets, bake cookies, write stories. Imagination is the limit but the first step is to gain some self assurance. I’ve read your posts here and at 3D Printing board. You are very negative on yourself but attribute your failure to outside circumstances. You wrote:

I am one of those people who have worked from paycheck to paycheck all of my life, mainly because the economy has kept it that way. Every time I have a chance to save a few bucks…the price of food doubles, rent goes WAY up, utilities go up…but my pay stays about the same (Well, thats a whole different story).

Your first step is to convince yourself that you can do it, that “the economy” and all other adversities are not going to keep you down.

Don’t let the bastards wear your down.

Denny Schlesinger

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Purpleocelot,

I like your handle! I do not like your situation at all. At the risk of being paternalistic,

  1. Are you carrying any debt? If you are, pay it off now, before investing. Your interest rate is a risk-free rate of return. In other words, it is like having a savings account a x%. When you pay off debt early, you effectively save the amount of your interest rate on the loan.

  2. Do you have emergency savings that can get you through a few months if you lose your job? If not, do this, before investing.

  3. Is there any reason you might need your $500 for an emergency expense in the next 5 years? If so, that is probably not money that should be in the market.

  4. Close your eyes. Imagine putting your $500 into a nice pile, striking a match, and setting your hard-earned money on fire. How does that make you feel? I ask because that is a possible outcome of investing in the market, especially for someone like yourself who wants to make up lost ground by chasing riskier (and potentially more rewarding) companies to invest in. If you are comfortable with losing it all, go for it.

To your specific questions:

Where do I find someone who can explain things to me in layman’s terms, to were a dullard like me can understand what they are talking about?

Start here: http://wiki.fool.com/Foolsaurus?source=ifltnvsnv0000001

Where can I find options for investing my $500. or less that might make me a few extra bucks over the next 5 years or so?

See my answer at the bottom.

Where can I find someone who won’t take advantage of my stupidity in this realm?

You ultimately need to rely on yourself and not let other people take advantage of you. That means learning about and understanding how investing works and what you are investing in.

What other options might there be, for someone who has nothing, to make something?

You might look at an online high-yield savings account (like Capital One 360). Or if you want some risk, consider putting half in a savings account and by 15 shares of New York Community Bankcorp (NYCB). It pays a nice stable dividend and the bank is well-run. It will not make you rich.

Disclosures: I have cash in a Capital One 360 savings account. I do not own NYCB.

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Your story got me thinking about parallels to someone I listened to recently.

I was in a seminar with a retired Muay Thai kick boxer. Retired for his world is thirty. He was sold, by his parents, into kickboxing at 14. He has every right to be angry about this, but he considered himself luckier than most.

His motto is win/lose/forgive. This could apply to investing too. You may win or lose, but always forgive past decisions, advice, etc, and move forward.

He also talked about always having a “cold” brain in the ring. This is true of investing too. Don’t get excited about new technology, angry about price drops, etc. Think without emotions. Your goal is to make gains on what money you have, not help companies with their latest technology. If you want to help, take a percentage of gains and give to others in need.

Hope this helps,
Iain

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Denny, that was a beautiful example of responding to the real need instead of merely responding to the question asked. Nice job.

I would suggest that $500 be considered more of a start than anything else. Since like all of us you have limited management and time. I suggest you put it into an index based exchange traded fund (RSP my favorite), buy and hold, and use your time working outside the stock markets to build up a bigger investable sum.

Meanwhile thanks to the WWW learning about how stock markets work is free dollar wise though it does demand time and effort.

Anything in 3DP at today’s prices is a pure speculation. My favorite by far is Arcam (AMAVF) but it is a bet for 5 to 10 years down the line .And almost assuredly that period will include another recession and a big price drop.

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Thanks tamhas!

Denny Schlesinger

Hello Purpleocelot,

It’s time to start learning about money and finance. You are on a journey to improve your life and that is exciting!

Congrats on having $500 saved. If this is your only extra money, it should go in the bank.

I would suggest that you check out Dave Ramsey, he is a very personable, down to earth personal finance advisor. He has a radio show, a daily 3 hour podcast, and a good Web site. His baby steps will help you. His positive attitude will help you too.

More than investments, you need a budget that will allow you to save money every month. Your first goal is to save up $1,000 for emergencies. You keep this in a savings account at a bank.

Here is a list of the baby steps:
https://www.daveramsey.com/new/baby-steps/

Check out the radio show or podcast, I hope you find it inspiring. The main thing for you is to figure out how to save money, and how to make more money at your job so you can save more.

You can do it!

Karen

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Another place where you can go and read is Mr. Money Mustache:

www.mrmoneymustache.com

Read the articles. The blog is about living low-cost. They have forums too and people there will help you with your budget.

Save up $1,000 for your emergency fund and then keep saving to have the minimum to get into an investing account. For you, finding a home you can own and afford would be beneficial, but you need more savings so that a home will be a blessing to you and not a curse (home repairs are very expensive).

How can you boost up your income? A second job? How can you get more savings? That will be your key to getting started.

Hang in there, you can do it.

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Along the same lines I’d recommend checking out the book The Millionaire Next Door from the library and reading it. It’s 20 years old but still great reading.

Good for you for asking these questions and actively trying to take control of your future.

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Hello:

I have tried many times to “work from home”, as I can pretty much do anything…sew, cook, basic mechanics, and such.

Problem is, everybody wants what I can do, but they don’t want to pay for it…everybody expects me to just give away my wares and services for free. People claim they want what I am able to do, but they refuse to pay.

I do not have the money and the time to be wasting on more ventures into working for myself without the benefit of actually making a profit from it.

And yes, I have advertised, placed my wares and services on ebay, etsy, Craigslist, and other such places…with no luck.

It’s not like I’ve been sitting on my butt waiting for money to roll in from nowhere. I have tried, many, many, many, many, many, many times over the years. To no avail.

People keep telling me, “make your money work for you”…so now, that is what I am trying to do. Find some way for my money to work for me. It is not a lot of money, so I do not expect a lot in return at first. But I am willing to let it accumulate and roll over into something bigger and hopefully better.

I just don’t know how…or where to start.

Hello:

Thanks for the info.

As I stated, I have lived from paycheck to paycheck my whole life.
For once in my life, I have a few bucks I am willing to “play with” to see if I can get this money to work for me, as people keep telling me I need to do.

With the “holes” I live in and the high mileage vehicle I have, I am used to never having any money left, for having to constantly fix something on the vehicle or to have to combat the lazy and worthless management of the apartments I’ve had to live in.

I know it’s like buying a lotto ticket…but what the hey…I have a few bucks I’m willing to risk on something bigger. I just don’t have anyone to help me out with finding out what I can do with it.

Thanks

Purple,

I’m going for a really different suggestion from the great advice you have already received. I think everything mentioned by other posters has merit (although Dave Ramsey is way too conservative for me, and to be clear I mean financially, I won’t get into the political arena).

If you really want to put some money into investments despite all the ideas mentioned above, I would suggest a company you can buy into and then not think about four the next ten years. Pretend that money is gone. Something boring but stable like SBUX, Nike, Sherwin Williams, Costco, or Disney. I know not very exciting but if you look at what each of them have done in last 10 years it’s not bad.

This might satisfy your desire to get started investing and provide decent returns. Given your strong sense that life has not been fair to you I would hate to see your life savings disappear, which I believe could more easily happen with the wrong 3D company right now.

Good luck with your decision.

D.

Purple,
I don’t hang out on this board, but I read the thread and you really should listen to Denny. He gave you excellent advice.

I do not like being a wet blanket, but $500 is not enough money to effectively invest in the market. If you decide to invest it, you will have to both open an account and pay a commission to trade the money. With only $500 saved at age 52, I think that just opening the account will be difficult and will probably cost you money. Do you have a bank account? By moving the money will you incur fees at your bank? Typical commissions on trades are now around $8 each way (Pay $8 to buy, pay $8 to sell.) This means that if you loved Apple, you could pick up 3 shares at $135.80 each for $407.40 plus 8 (commission) for a total of $425.40. If Apple moves up to $150 (a 10.46% move) you could sell your three shares for $450-8= $442. This gives you a profit of $16.60 or 3.9% on your invested cash. If I invest in 1000 shares of Apple, at the same time as you, I receive a 10.44% return.

Figure out something that you can control and can lever with your hard work to make money. It isn’t fair, but the stock market is not a place to play with your life savings if your life savings are this small at this age. You can get advice that is more suited to your situation at the LBYM board.

If you decide to shun my advice, open an account at the broker that will give you the cheapest commissions. At this amount of money, execution really does not matter. (Since you say you do not want technical terms, commissions is what you pay to trade a stock, execution is how well the broker buys and sells for you (speed and how good a price you get.) If you had $500M you are worried about execution more than commission at sub $3M you are worried about commissions.)

Sorry.
Charles

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Expanding on what Charles is saying, and not to be mean at all – most people at the Fool who are buying individual stocks have more savings, usually a lot more. I don’t know average port size, but I would guess that the small portfolios are thousands of dollars.

Now, don’t let that hold you back! Everybody starts somewhere!

Do you have a steady job and income? How were you able to save the 500? If you can make it a habit to build up that nest egg a little bit more every month, you will see things start to grow.

You need a low cost broker – a business that will help you buy the investments.

Sharebulider has a $0 minimum for its brokerage account and trades are $7.

Ideally, you want your fees on your trades to be 1% or less… so for example, you would want to invest $700 for a $7 fee to be 1% of the trade.

That might be where you will be going in the future, but honestly, you need more money. Keep saving. Figure out how to scratch up some more money and have a bigger income so you can do more for yourself.

That $1,000 starter emergency fund and then a bigger emergency fund is important for your financial security. Please don’t skip that step!

Karen

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Poor people buy lotto tickets. Investors make money by buying shares of profitable businesses.

You want to be an investor. Do not just throw this away, the money is not easy to get in the first place!

I don’t think that we can give you responsible advice until you have more money. I am sorry. Do not be discouraged, keep saving and figure out how to increase what you have. You can do it!

Karen

I have tried many times to “work from home”, as I can pretty much do anything…sew, cook, basic mechanics, and such.

Problem is, everybody wants what I can do, but they don’t want to pay for it…everybody expects me to just give away my wares and services for free. People claim they want what I am able to do, but they refuse to pay.

Selling is an art that must be learned. The most basic rules are that you need customers who have a need for, and can afford, your services. At the insurance sales school they made us list all the people we knew, the list needed to be at least 100 names long. Then they made us whittle down the list to just the “real” prospects, people with a high likelihood of becoming buyers. We had to apply three rules:

  1. Did they have a need for insurance (substitute your services)
  2. Could they afford the insurance (substitute your services)
  3. Did we have access to them. If you can’t talk to them you can’t sell them.

The next lesson was that if you could not close a sale on the first or second visit, drop them. Don’t waste your precious time!

And the last really important lesson is that you need to make at least 40 visits per week to meet you sales quota.

If you are not selling you are visiting the wrong people, spending to much time on them and not visiting enough real potential customers, people with the need, and the money to pay or it.

Denny Schlesinger

PS: “Want” is not “demand.” For want to be demand it has to be backed by the money to pay for it.

PPS: Selling insurance was one of the nicest jobs I ever had. I selected a small number of middle class people who had a home and a business. They had a need for all kinds of policies for the cars, the home, the business, for healthcare, jewels, etc. If the spouse was a professional, so much the better, they had a need for additional insurance. Too bad that insurance companies are such a PITA.

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I’m a fan of the Dave Ramsey approach, so I’d say first make sure you have an emergency fund, and either pay off your non-housing debt, or at least get it well under control. (If you lost your current source of income, would you be able to pay your minimum bills for the next three months while you find a new job/income?) Then put a plan in place to save and invest on a regular basis (eg., monthly, or every paycheck).

You CAN invest with amounts as small as $500, or even smaller. One way is to invest in mutual funds. Every brokerage I have used has a set of no-commission mutual funds. They all include an S&P 500 index fund. They usually include other index funds, and other diversified funds. It may not be as exciting as investing in individual companies, but it is absolutely a way to grow wealth.

An initial $500 investment by itself won’t be enough to fund retirement unless retirement is many, many, many decades away (you’ll probably be dead by then…). So an important part of investing is making sure you can save and invest on a regular basis. You want to be adding money regularly, whether the market is up or down. This is called Dollar Cost Averaging, and can definitely increase your profits since you’re buying more shares when they’re cheap and fewer when they’re expensive. What it also does is keep you in the market. People who try to time their investments when the market is down often miss, or end up with their money out of the market for long stretches as it continues to go up and up (losing out on all those gains).

Having some diversity in your investments is important (so that if one or two companies you’ve invested in go bankrupt, you haven’t lost most or all of your investments). If you have $500 now, and will be able to add $500 per month for the foreseeable future, you could also buy up to $500 in one stock now, then keep buying different stocks every month for the next year. You wouldn’t be very diversified at first, but you’d get there. But if you have $500 now, and you’re not sure when you’ll have another $500 (or if it will be more than a few months), then I would not be buying individual stocks just yet because you’re taking too much risk that that one stock goes down significantly.

Good luck and Best Wishes!

-Mark

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