A question I get a lot from my friends and classmates other than “Will you teach me?” is “Where should I put my first 1,000 dollars?” This answer is actually super simple: ETFs and Long-Term Equity. Now I try to keep these pages nearly math-free because numbers are scary but there is a rule that every finance undergrad knows called “The Rule of 72.” It states that if you divide 72 by the annual interest rate, the quotient (answer) will be the amount of time in years that it takes to double. If you invest 1,000 dollars at a rate of 7.2% then it will take 10 years for your account to double.
This may seem like a long time but we are in a bull market that has caused growth in certain indexes to be ~20%. Math would dictate that at that pace the 1,000 dollars would take 3.6 years to double. This is why I am so pro-long-term growth right now. It’s not worth the risk to hit an options trade out of the park during earnings season when all year you could have no more than three straight down days in any given stock.
If you are new to the stock market I highly recommend you pick an ETF or Mutual fund that has a standing track record so you can follow along with some of the pros and learn which stocks they pick and why.
My pick is LDRS. It’s a new ETF sponsored by Investor’s Business Daily and since December 25, 2017, it has already grown 7.4%. LDRS has 60% of its holdings internationally and it specializes in acquiring industries that have the largest growth potential. The largest holdings are in precious metals, energy, and Asian consumer goods. I like this ETF for beginners for a few reasons: it’s cheap, it focuses on emerging markets, and it’s rebalanced monthly. It is usually normal to see ETFs as a strong base for a portfolio but not often are they positioned for growth like this. I’m predicting a 10% growth rate by August of 2018.