How do you understand investments and how much you will get back in return?

[Ginglay]

I have always been interested in investing money somewhere but I have no idea where or how I would understand the risks and how I could make a good decision about my investment. My definition on an investment at the moment is spending $1000.00 on my hair. Can someone help me understand how to invest my money and how to know what risks I am taking?

I would suggest you take a business approach....
I would suggest the following 2 books and also find yourself a good text book on accounting and financial statements...
- The Warren Buffet Way, by Robert Hagstrom
- The Intelligent Investor, by Benjamin Graham

Accounting is the language of business, you need to be able to read financial statements.
When you are able to deep dive into a company's operations and finances, you will be able to access risk/reward/pricing

... or you can take the other road and roll the dice...

 

[splooge]

Rule #1 for me is don't lose money. Everything stems from that rule. Nothing in my investing plan is likened to gambling. My average annual rate of return fluctuates greatly each year...from 5% to 18%... never a negative year, thanks to dividends and avg aror of 12%. i know, nothing to brag about, but not losing your money is important in wealth creation.

 

[oil&gas]

Rule #1 for me is don't lose money. Everything stems from that rule. Nothing in my investing plan is likened to gambling. My average annual rate of return fluctuates greatly each year...from 5% to 18%... never a negative year, thanks to dividends and avg aror of 12%. i know, nothing to brag about, but not losing your money is important in wealth creation.

If you did manage a gain of 5%plus in 2008 you've got to be the God
of stock trader/picker.

 

[JohnLarue]

If you did manage a gain of 5%plus in 2008 you've got to be the God
of stock trader/picker.

Equity markets got hammered in 2008.
However bonds in buy and hold strategies would have produced a positive return (from the coupons).
There is a whole lot more to investing than just stock trading and picking

 

[splooge]

If you did manage a gain of 5%plus in 2008 you've got to be the God
of stock trader/picker.

Are you kidding me? Alot of self directed investors did well through the down turn.
Wal-mart was up 17% for me that year... A fairly easy pick. I did however find myself fortunate to have owned Autozone and Wrigley.

 

[richaceg]

at the current economy...paying your debt to at least 25% to 50% is a good start. now if you are dead even in debt...it's good. if you can make 5X your current stash in the next 6months i'd say go for moderate risk funds but then it's slow...just keep your money for now.

 

[hinz]

Are you kidding me? Alot of self directed investors did well through the down turn.

Really? Anything to support your claim? Did they short the index by inverse ETF or something?

Wal-mart was up 17% for me that year... A fairly easy pick.

You could win big time if you had a pair trade like buying long on WMT, while shorting the same amount on US Financial ETF.

I did however find myself fortunate to have owned Autozone and Wrigley.

Maybe you should thank Warren and Bill for that if my memory serves me right.

 

[oil&gas]

Are you kidding me? Alot of self directed investors did well through the down turn.
Wal-mart was up 17% for me that year... A fairly easy pick. I did however find myself fortunate to have owned Autozone and Wrigley.

A handful of stocks did well through 2008. It came as no surprise that Metro
was one of them. Stock investors following the conventional investment approach
of diversification would not normally overweight even defensive stocks like Walmart or
Metro to more than 10% of their portfolio. A conservative investor who had the foresight
to concentrate on defensive stocks prior to the market crash would likely include stocks
from other sectors like BCE and Royal Bank. I don't think there is one single sector that
survived the crash. Seems reasonable to assume that vast majority of stock portfolios exited
2008 in red.

 

[jamilv]

Go with stocks and do a TON of research before hand, so far I am 6/6 on all my stock picks in the last 2 years because I did a ton of research, I am averaging 350% return per stock thus far
Bits its all about filling your head with as much information about the company, its competitors and any companies/investors associated with the company you want to invest it

 

[splooge]

I'm the opposite. I prefer to keep investing simple and make good boring choices.

 

[JohnLarue]

A more simple approach is to examine where you spend your money.
If you like the latest I-phone then consider Apple
If you find your self spending lots at Canadian Tire, perhaps they have a good business model
If you think that Rogers or Bell is gouging you, then perhaps they have a market dominance and are able to make big margins
If the fees your bank or Insurance company charge you are outrageous, then perhaps they are making money hand over fist.
Then you start to investigate their business by reading their annual report

 

[GPIDEAL]

I would suggest you take a business approach....
I would suggest the following 2 books and also find yourself a good text book on accounting and financial statements...
- The Warren Buffet Way, by Robert Hagstrom
- The Intelligent Investor, by Benjamin Graham

Accounting is the language of business, you need to be able to read financial statements.
When you are able to deep dive into a company's operations and finances, you will be able to access risk/reward/pricing

... or you can take the other road and roll the dice...

Generally I'd agree with you - it's good to know the basics, but I heard or read from many that the old, tried and true ways didn't work in these turbulent times.

 

[koreanenvy]

I have always been interested in investing money somewhere but I have no idea where or how I would understand the risks and how I could make a good decision about my investment. My definition on an investment at the moment is spending $1000.00 on my hair. Can someone help me understand how to invest my money and how to know what risks I am taking?

Your own research and education is the first step to success in this business. Don't listen to anyone or any book, but rather trust your own judgement and research and stick with a plan. I run a small hedgefund and have returned at least 130% annually since inception 8 years ago. IMHO buy and hold is dead, bonds are riskier than ever. In today's environment (and likely going forward), you will need to be able to go long and short, and at the same time be nimble in getting in and out of the market.