Going to echo my main man Burton Malkiel here.

Step 1.) Don't invest in a mutual fund.

After the mutual fund's management fees, sales fees, advisory fees, profit sharing fees, breathing fees, and fees for having fees... don't forget about those taxes too (ouch). The margins are around the same as a long S&P 500 portfolio.

"A man can convince anyone he's somebody else, but never himself."
 

Basically for individuals to pick a stock is actually to pick a good company. You wanna find the undervalued/potential companies to invest in. To do that you need to do some research by yourself. Checking the financial of your target company is a good thing to start.

How is the revenue/sales/capacity in the past five yrs and how is the expected r/s/c in next three years? what is the recent govermen policy of the industry you are looking at?

Also comparing p/e, p/b ratios within the industry would help. They don't mean anything seperately but can help you grasp a sense in the grand picture. Index stocks, like s&p 500 or small companies index, can also be interesting to look at.

I am also a college sophomore currently interning for a F50 company under their Asset Management arm. When you have an internship on buy side then things get a bit easy cuz you have plenty of research reports from sell side and the screening process of your firm could also be helpful for your learning. So a buy-side internship will definitely help, especially portfolio management group (Well it's hard to land it, I know)

I would also recommend you to read books wrriten by Peter Lynch. "Learn to earn" could answer your questions about how to start. "Beating the street" & "One up on wall street" also introduce some interesting investment ideas. "Reminiscense of a stock operator" is a must-read, i would say.

Hope this can help. PM me if you have any other quesitons

 
Xaipe:
Basically for individuals to pick a stock is actually to pick a good company. You wanna find the undervalued/potential companies to invest in. To do that you need to do some research by yourself. Checking the financial of your target company is a good thing to start.

How is the revenue/sales/capacity in the past five yrs and how is the expected r/s/c in next three years? what is the recent govermen policy of the industry you are looking at?

Also comparing p/e, p/b ratios within the industry would help. They don't mean anything seperately but can help you grasp a sense in the grand picture. Index stocks, like s&p 500 or small companies index, can also be interesting to look at.

I am also a college sophomore currently interning for a F50 company under their Asset Management arm. When you have an internship on buy side then things get a bit easy cuz you have plenty of research reports from sell side and the screening process of your firm could also be helpful for your learning. So a buy-side internship will definitely help, especially portfolio management group (Well it's hard to land it, I know)

I would also recommend you to read books wrriten by Peter Lynch. "Learn to earn" could answer your questions about how to start. "Beating the street" & "One up on wall street" also introduce some interesting investment ideas. "Reminiscense of a stock operator" is a must-read, i would say.

Hope this can help. PM me if you have any other quesitons

Pretty sure he's wondering about funds not specific securities to invest in. OP, I've found vanguard funds to be a good deal as their fees are very low and they do a good job explaining what each fund does/aims for. I would check these out.

 

Are you in the UK? I'm not, so I don't know which companies are the best, but I'm sure Charles Schwab, E*Trade, Barclays, HSBC, etc. offer individual brokerage/retirement accounts and tons of info about retail investing and retirement planning on their websites.

The most important thing to do is to save as much as you can and start as early as you can. If you are a sophomore and starting to think about this, then you are ahead of the curve. Most people don't think of these things until they get their first "real" job after college.

As far as what to put your money into, well my theory is either go all in and manage your money yourself by picking individual stocks, bonds, etc. or just put your money in an index fund and don't worry about it. If you decide to go the MF route and want low-risk pick a MF with a mix of half stocks and half bonds.

"Hope for the best. Prepare for the worst. Capitalize on what comes."
 

As you're in the UK you may want to invest using an ISA as it is a tax-efficient wrapper, unless your company offers you a SIPP and you are happy to have your money tied up in a retirement fund. If your capital base is low most of your money will be eaten up by fees if you try to buy and sell stocks and the churn will kill you. In the UK you usually pay £10/trade, so £20 to buy and exit a position. If your capital base is small I would suggest building a portfolio using cheap index funds or ETF's and just keep adding a monthly amount to your portfolio via direct debit. Over time this will do very well and avoid the fees that closet index hugging "active managers" charge you. If you are hell bent on picking stocks, to avoid the fees you need to be a long-term buy and hold guy, otherwise the £10/trade will kill you.

As for brokers, in the UK TD Waterhouse are good, and most of the banks build their platform around them.

Best of luck!

 

There's a lot of academic literature suggesting the futility of active management. But mutual funds will always be popular because they're an easy package to get. With so many options out there (value, growth, balanced, high yield income, international, etc.) and the perceived diversification/expertise, it's easy for many investors to end up choosing a product as they see fit. A lot of it is how they're marketed. I guess some people don't really care to look into the high fees. But this isn't to say that there aren't any solid funds out there with great track records, dedicated PMs, and relatively low expense ratios. You will encounter many that serve as decent long-term investments. But of course if you want to track an index, an ETF would be a cheaper (and more liquid) option compared to passively managed funds.

 
Best Response

"Fund size erodes performance" is a pretty uncontroversial statement. The main issue is "how much does it erode performance?"

Kahn and Shaffer wrote a paper that developed a strategy alpha vs. capacity model (http://www.iijournals.com/doi/abs/10.3905/jpm.2005.599498) and conclude that fund size isn't a big deal. The result isn't surprising, since they worked for BGI, who had been criticized for not closing some of their larger strategies. The problem with applying their framework to most managers is that this is for a quantitative manager - when you already have 600 stocks in a portfolio and are running 3% tracking error, another billion in AUM probably doesn't matter much.

There's a few issues behind this, but two of the biggest are trading costs and alpha/idea strength. If a fund gets new money, they can either plow more money into their existing high conviction ideas (incurring higher trading costs on entry/exit) or they can go to the next idea on their buy-list and put the money into slightly lower conviction ideas. At the margin, this isn't a big deal if you already have an extremely diversified portfolio, but it is a problem if you have a 20 stock portfolio,

Generally, higher turnover strategies are always more affected by AUM, and strategies being run in areas with greater available alpha or lower available liquidity (small cap vs large cap) are more affected.

1999: https://umdrive.memphis.edu/cjiang/www/teaching/fir7410/Readings/fundsi…

2002: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=327960

2002: http://www.iijournals.com/doi/abs/10.3905/jpm.2002.319831

2003/2004: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=510325

2004: http://faculty.chicagobooth.edu/john.cochrane/teaching/35150_advanced_i…

2007: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=951367

2008: http://journals.cambridge.org/action/displayAbstract?fromPage=online&ai…

 

[quote=raisondebtre]"Fund size erodes performance" is a pretty uncontroversial statement. The main issue is "how much does it erode performance?"

Kahn and Shaffer wrote a paper that developed a strategy alpha vs. capacity model (http://www.iijournals.com/doi/abs/10.3905/jpm.2005.599498) and conclude that fund size isn't a big deal. The result isn't surprising, since they worked for BGI, who had been criticized for not closing some of their larger strategies. The problem with applying their framework to most managers is that this is for a quantitative manager - when you already have 600 stocks in a portfolio and are running 3% tracking error, another billion in AUM probably doesn't matter much.

There's a few issues behind this, but two of the biggest are trading costs and alpha/idea strength. If a fund gets new money, they can either plow more money into their existing high conviction ideas (incurring higher trading costs on entry/exit) or they can go to the next idea on their buy-list and put the money into slightly lower conviction ideas. At the margin, this isn't a big deal if you already have an extremely diversified portfolio, but it is a problem if you have a 20 stock portfolio,

Generally, higher turnover strategies are always more affected by AUM, and strategies being run in areas with greater available alpha or lower available liquidity (small cap vs large cap) are more affected.

1999: https://umdrive.memphis.edu/cjiang/www/teaching/fir7410/Readings/fundsi…

2002: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=327960

2002: http://www.iijournals.com/doi/abs/10.3905/jpm.2002.319831

2003/2004: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=510325

2004: http://faculty.chicagobooth.edu/john.cochrane/teaching/35150_advanced_i…

2007: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=951367

2008: http://journals.cambridge.org/action/displayAbstract?fromPage=online&ai…]

Very helpful! Silver banana for you.

 

First, depends on what type of mutual funds you want to invest in. Some are very specialized and some are broad. There are bond mutual funds, specific equity mutual funds, etc. Morningstar is good. Investopedia helps with the terminology. Looking at the mutual fund's website though is the best. It gives in-depth details about the mutual funds and how they diversify their investments.

 

If you are near your college campus, try using your school's Morningstar log-in. Ask a professor for it, that's how I managed to prep and get information for some mutual fund interviews last year as an SA.

The rating system is so-so but they really got the universe/organization thought process that would be beneficial foundation for your search.

 

For what it's worth, I think Morningstar is horrible. Their whole business model is based on an enormous conflict of interest because mutual funds pay Morningstar for various services. Separately, there is a whole host of academic papers describing how mutual funds under perform the broader market (because mutual fund managers generally are not skilled, and then they take fees). Your best bet is to just dollar cost into a Vanguard index fund.

 

Since the author has neither interest in the leg work, or skills and training, nor seems inclined to consider the time spent fun, I would conclude that he should stay well away from stock picking. His strategy should be passive indexing with broad indexes using either ETFs or low-fee index mutual funds.

Starting a brokerage account to buy ETFs creates all kind of mental drivers to trade (to your detriment) but index mutual funds may have a higher cost to purchase. Best to find the MF with the lowest cost to purchase - eg TD Ameritrade i-funds.

 

cuz there some many people and companies to buy it.... pension funds... family wealth groups.... that what it is... try to go for a brazilian and tell him to change his 12% to 15% year profit with fixed incomes to some volatility...

 

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