hypothetical question about what you do AFTER silver spikes or you sell...

Hmmm... not sure about that.
Stocks have gone to zero in the past and will in the future. I have never seen PMs do this.
Stock is not money. Using your example, a minining company's stock can lose all of its value while the metal itself 'will' not.

 

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I'd buy a gold coin or two and enjoy them. Then leave them to my wife, then my daughter, then the grandkids who are the" Light of Our Lives ".

 

Yes they can but that is why you choose a company with low financial risk as opposed to a highly leveraged firm that can offer higher prospective returns but is at risk of going bankrupt, so that the stock goes to zero. I am not trying to say a firm cannot be mismanaged, but fundamentally stock is fractional ownership of a firm and all it owns, subject to loans it has taken out and other liabilities.

 

DING DING DING... There is a smart guy in the group!

I would do it a bit differently. I like using the internet based bill pay options that Banks offer plus having access and flexibility with a slush fund is ...

That $2100 could make ~$1500+ annually over the next 20 years when averaged by applying it to your mortgage.

OR

48 months of $1200 payments that you wont have to pay.


Take WINDFALL money & put it in a separate account then set up an Automatic payment to be made every month towards the principal. On $2100 I would have a $100 sent sent each month.

That will buy you nearly 2 more years to find additional "windfalls" to keep the extra payments going. You can always adjust the payments up or down.

Sending $100 extra every month on a 6% $200k loan with 25 years left will have it payed off in ~21 years. Aprox.. (48mo x $1300) less $4800 =

 

http://www.bankrate.com/calculators/mortgages/mortgage-loan-payoff-calculator.aspx

 

If you don't have the knowledge to distinguish between a stock that is going to zero and one that is financially sound and prosperous, then you definitely should not own any. In this case, you probably are better off owning gold or holding cash [assuming you know something about valuing gold and aren't just jumping on the bandwagon because you read a few internet articles that told you that gold can't go to zero.

 

The other side of the coin is that investing $2100 in a single well-chosen stock may turn out to be less risky than investing a much larger amount in a number of stocks. I wouldn't hesitate to invest $2100 in a single stock. Diversification in small portfolios is probably overrated.

 

Some good answers, I also think like others that one of the best uses for a small windfall is to eliminate debt, start with the highest interest rates first, it can also help to take advantage of zero interest rate offers.

 

Ask the so called experts about Worldcom, Adelphia, Webvan, Enron and Sun microsytems if they ever saw those stocks plummeting exactly one year before they crapped-out? It wasn`t just the employees that bought in out of convenience that got burned.

Bottom line is that it all amounts up to a crapshoot.....guys like You and I can do all the research We care to, but there will always be the sheep who buy in out of compulsion, whether due to annoying commercials promoting gold, or an inadequate online article.....and if they make money when it`s all said and done.....God love em. After all, nothing is a given. Remember the golden rule...He who has the gold makes the rules. Nowhere does it say anything about how or why they got the gold.

 

There has been some GREAT advice on this board for you to contemplate, Alex. I would like to throw another one out there for you. It sounds like your 51% (OR MORE) investor, 49% collector. If there is a coin series that appeals to you the most, buy a Key Coin within that series, a 1909 S VDB Lincoln Cent, or maybe a 1937-D Three legged Buffalo. These are good values that continue to go up with time. I am not a big fan of third party grading, however, in this instance BUY certified that way you are protected for authentication! Happy Collecting!
Steve

 

Great advice, especially b/c you get to blend the joy of collecting with something that has the potential to appreciate.

 

It's only a crapshoot when you don't know what you are doing. I didn't hold any of the stocks you mentioned. Anyone who looked at their financial statements and bought anyway sealed their own fate. Anyone who bought the stocks without understanding the financials has no business making their own investment decisions. What you didn't mention is that many institutional investors hold these shares because they are part of an index or computerized trading operation that doesn't look at the underlying fundamentals of the stocks owned. They play a different game from the individual investor. For better or worse, the stock market remains one of the best ways to build wealth for the average individual provided they do the necessary homework.

 

First you put aside enough to pay your tax bill on the gain. Then take what is left to your county tax sale and buy a slum property. If it gets redeemed, you get your money back with interest (our state allows up to 12%). If not, you become a slum lord.

I also liked the idea of investing in certified key date coins.

 

All of those stocks you mention had the same problem, obscure income from non verifiable sources. That is why they could go high and go down quickly. I never advocated investing in any of them, even before they crashed. Like Cloud said, a person would need to do their homework and not treat stock market picks like playing at a dog track. If you do, it truly is a crapshoot like you describe. I do my homework, pick companies on fundamentals and what I think growth prospects are, and do alright. If someone was lazy, just get a hold of Berkshire Hathaway's annual report and see what they invest in, and simply invest in the same things. They have the same philosophy as I and many investors do, wanting veriable returns from a well performing company.

Edit: Sun shouldn't be lumped with the others Sun's problem really was overpricing and not moving with market technology. I still never liked the stock.

 

Those stocks that I had mentioned were just a few that I thought of offhand. The list of companies that have fallen from grace is a long one. My point is that there have been many investors who did all their homework and still came out a loser in the end. (but much like gambling, We only hear about the big winners, never the losers)

You two (Medoraman and Cloud) seem like intelligent individuals.....You know darn well that making real money on Wall street is not as easy as You insinuate. If it were, people would be making a killing on a mass scale and We would see more new people investing daily. Basically the market as a whole has been dormant for the last 10 years.

Part of it is indeed luck....there`s no way around it. Again, I`m not condoning anyone getting into anything blindly, but too many factors can take place that nobody can predict or foresee. Look at how many companies replace their CEOs and have done a 180 degree turn for either better or worse.

 

The only reason I lumped Sun into the mix was to list a more popular stock that had fallen from grace that most would recognize. I never liked them either, even before Oracle bought them out.

 

Alex, for whatever it's worth, my original post was inappropriate. I am sorry. I read your OP and popped out a response - I think I was probably reading right before I had to leave for work. So I was rushed and was probably P.O''ed about semthing else and let my fingers do the talking.

Doesn't make it any better. But I apologize.

 

Obviously they didn't do their homework, even if they thought they did, and that's why they lost. I looked at a couple of the stocks you mentioned for potential purchase and rejected them. NEW was another.

Think of the market as a casino. But it's a different kind of casino. Instead of the odds favoring the house, they favor the player since the long term trend in prices is up. If you stay away from leverage, fads, tips, and stocks with little or no business track record; and avoid paying high multiples of earnings and cash flow, things generally work out well for any diversified group of such companies. I'm not a genius by any means, but I've done well. I also taught my sons what to look for, and they have done well. I think just about anybody can do this successfully as a dedicated amateur.

I agree it is part luck. But good and bad luck tends to cancel out in the long run.

 

I hope this thread is still on topic for the OP. I understand his concerns about threads wandering and I guilty of it too.

Generically, the best advice I could give someone looking at stocks would be to buy stocks that are larger companies, (no penny stocks), have either bad news or no news about them, (most money is made in down markets, smart investors buy up the good deals), have products that you think is a great product, you like the growth prospects personally, (not just the same crud that some researcher thinks), and you can buy it over a period of time. All of these things will lead to growth of stock prices.

Too many small investors "research" by seeing what Kramer has to say, or the same old investment advisors in NY. Warren Buffet was quoted as saying the only reason he is successful is that he is 1000 miles away from Wall Street. Buy stocks of companies you know, that are good firms. Do not chase "hot" stocks because believe me you will never be the one who is making the real money, you will be the sucker money taking the largest risk for the smallest return.

 

I agree. I read an interview with Jim Rogers years ago, and the interviewer asked him what he looked for in stock purchases. He just said that he looked for stocks of companies that were fundamentally sound, inexpensive, and that had a catalyst for change [i.e., something about the business was improving].