Expert: Paul Henneman - 2/11/2010

Question
Hi there, I am a 21 year old, my dad has set up a few stock options for me already. I am wondering whats a good investment that requires small monthly payments yet is a sure fire way to make money in the future? Thank you.

Answer
James,
  Thank you for your question!
Unfortunately there simply is no sure fire way to make money in the future. If it were that easy, everyone would do it!
  The one main thing to keep in mind is that the higher the return you are looking for, the more risk there will be in the investment. If you are content with a few percent interest on your investment, then something very safe such as a CD (certificate of Deposit) or money market account would be the answer. If you want a bit more returns on your investment, say around 6% on average per year, a general bond mutual fund or ETF (exchange traded fund) would be better. If you want higher returns than that, you would need to invest in stocks, the riskiest kind of investment.
   If you do invest in stocks, the most appropriate action to keep the risk to a minimum would be to invest in a general stock fund, either an index mutual fund or ETF. These are investments that trade just like a single stock, but represent a group of stocks. For example, the ticker symbol SPY is an ETF that copies the S&P500, perhaps the most stable and appropriate index for this purpose. SPY will almost identically match in performance the overall S&P500 index, a group of 500 stocks tracked by Standard and Poors.
   It simply would take a huge amount of time, research, and experience to pick single stocks successfully, and if you make hasty decisions you stand a good chance of losing money rather than making it.  I do recommend that you take a look at a few sources to get up to speed: the book "Investing for Dummies" will give you a great foundation of most forms of investing, including mutual funds, ETF's, and stocks. You can then do more specific research into the areas that interest you most.
   AAII (American Association of Individual Investors) is a great organization, with a monthly newsletter that will be of great help. Finally, my company's website www.ValuEngine.com has a free newsletter link that you can sign up for, and read our commentary every Friday (no cost at all).

I hope that this helps gets you started. Investing should be a life long hobby, and you should spend time every week learning, and putting into action long term financial plans. It is your future, and should not be taken lightly. Stay away from anything that guarantees a high return, if it sounds too good to be true, it is. There are alot of thieves in this business!  However, spending time on this and having the discipline to follow through year after year will reward you down the road.
Please do not hesitate to follow up with me if I can be of any additional service,

Sincerely,
Paul Henneman
President
ValuEngine Inc
www.ValuEngine.com