What is meant by the term holistic play?

Investing at a young age, Short term buying or for the long run?

• I'm 18 and in army training right now. I only make 1,500 a month, but I have absolutely no REQUIRED expenses (gas, internet, all things I could live without) I have 1,000 in a couple usaa mutual funds, ( 200 in different funds) and its made me 50 bucks in around 2 months. It doesn't seem like alot to me now, but I have 5k in a saving account that made me 1.25 $ last year.. My dad says I'm better off throwing my money in a savings account but I've been reading books watching shows and I want to get into stocks. I basically have 6 months to build the basis of my investments and then I can't put anything into it after that. Is it worth the risk and gamble of getting into stocks, mutual funds , bonds etc or should i just shut myself off of this idea and play it safe? Thanks in advance for answers. 5 hours ago - 4 days left to answer. Additional Details 2 things that influenced me was a teacher and a sgt who talked to me about it, over time, while throwing their dividends back into the stock, their stocks have went from 1000 initial investments to around 20 k over 15-20 years, crazy thought. Also it's kinda funny, I look into google stocks at the beginning of my senior year for a stock market game I had to do, and at the end of the game they jumped up roughly 500 $ per stock. I wan't the short term gamble and the long term investment sides of it, but I don't know if I can afford it. 5 hours ago I'm reading the books to learn the basic facts and terminology, As of right now I'd have a hard time looking at a stock and decifering what all the details meant. I also have no knowledge of how the fees or taxes work. Any idea where to look up all this at?

• Answer:

  Investing is for life. While you work you invest, when you retire, you distribute from the investments. You've often heard the adage, buy low and sell high, well how is it that you can buy low and sell high? You do so with rebalancing. If you had $1,000 and invested 50% in a stock and 50% in cash, you would start with $500 stock and $500 cash, if the stock dropped in half you would have $250 stock and $500 cash so you would rebalance by buying $125 of stock giving you $375 stock and $375 cash, if the stock should return to it's regular price then you would have $750 stock and $375 cash for a portfolio value of $1,125. Had the stock doubled then dropped, you would've gone from $500 / $500 to $1,000 / $500, rebalanced to $750 / $750 and dropped to $375 / $750 for a balance of $1,125. Ben Graham says it's best to rebalance 45% stock, 55% bonds and to never go below 25% or over 80% stocks. Markowitz ( Efficient Frontier ) says the safest is 25% stocks, 75% bonds, safer than 100% bonds and better returns while 50% stocks and 50% bonds have the same risk as 100% bonds but much better returns. Claude Shannon at MIT proved that a 50/50 split between a random walk and cash had the optimal gain. So if 50/50 or rather 45/55 is optimal, why do they say be aggressive when young? Let's say that you were going to max out your IRA with $416.66 a month from the time you're 18 till you are 60 which is 42 years. That would be like owning a bond that paid $416.66 a month for 18 years and had a zero face value, what's the market value of such a bond? If we use 4.4% per annum returns which is the current expectation from the stock market due to the total market value to GDP ratio then the value of such a bond would be $466.66 * ( ( 1 - 1 / 1.044^42 ) / ( 1 - 1 / 1.044^( 1 / 12 ) ) - 1 ) = $108,463.99 so as long as you've committed to making that $466.66 per month deposit, you effectively have $108,463.99 invested in a bond paying 4.4% ( you would adjust this to be as high as you expect from your investments cause you can't sell your job ). That means your portfolio can be more aggressive till your equity equals your bonds plus the present value in your remaining contributions. It's probably still wise to heed Ben Grahams advice not to exceed 80% equity.