Monday, October 5, 2009

Stocks and stuff

DN had an article this weekend on how to invest your money, in stocks or funds. These are only my two cents, but I'd stay far away from funds. My experiences with these two are the following:

+ Buy shares for any amount of money, and forget.

- Problem is, you fund agent will also forget. To manage the fund, that is. No matter how "actively" a fund is supposed to be managed, in the real world they usually don't do much trading.

- You'll pay quite a lot, often 1-2% of your total share amount in fees. This will eat up quite a lot of the profit.

- Selling your fund shares is a hell. It often takes two business days, and during that time the rate might have dropped significantly, which could cause you to lose a lot of money. Quite simply, when you press that "sell"-button you have no idea at what rate your shares will be sold.

+ Quite a lot more fun than buying and forgetting those fund shares.

+ No fees except the broker's commission when you buy and sell.

+ You get your dividend usually every year, some times even several times a year.

+ You buy and sell at the price you want, and the transaction is made more or less instantly.

- There is a risk that a company in which you own stocks goes bankrupt, which is why it is important to spread your risks.

If you want to put your savings in a fund, consider the exchange traded XACT funds, Bull or Bear. There's no annual fee, and you trade it just the way you trade stocks.

Apart from that, forget about those funds. Create a nice and diverse portfolio of stocks instead, with a couple of investment companies with different strategies, some "safe" large cap stocks, and a smaller number of underdogs, just to make it a bit more interesting.

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