Cheers,
avo

Second, remember the basics:

The greater the potential return, the greater the risk.

Therefore, if you want to make sure your money is still around in 2 years (i.e. you’re not concerned about it doubling, you just want it to not sit around and languish), go LOW RISK.

Things like bonds and CDs are just that: LOW RISK and you can get ones that are guarranteed to beat inflation. They are also DIY, so you can buy them yourselves without brokerage fees.

In general, stocks are higher risk but with a higher potential return. There are low risks stocks/funds, but your investment and return are still not GUARRANTEED – there’s still a chance you can lose it all.

Therefore, the question is: “How much risk can you take?”

If you can take some risk, then maybe it’s worthwhile to put 50% in stocks/funds and 50% in bonds. That’s higher than I would go, but it’s up to you. I certainly wouldn’t go higher than 50/50 and would probably not recommend going over 30/70 (stocks/bonds) given that you want this money back and you want a guarrantee of that.

But it all comes down to risk and how much you’re willing to accept.

I don’t know the first thing about trading stocks (though perhaps I should learn because this seems to be a period that favors trades over buy and hope strategies).

Funny thing is, a successful local millionaire real estate investor had exactly this plan a couple years ago for the multi-story office-building at the end of St. Charles and River road. He wanted to convert it to a day trading school– whatever that would be. Later, I learned about his stock trading style from a friend of his. (It sounded like a very naive strategy at best, but I keep hoping some New Orleanian will unlock an exploitable market inefficiency and benevolently teach (a few) others the secret of the universe.)

I need to get back on my own Scottrade individual investment account which I’ve dreadfully neglected since Katrina.

Oh, and don’t invest in housing materials (when is the bubble going to burst on that one?) and tech stocks for too long.

Very true, but then you’re not doing something that’s higher risk. Risk=reward.

I thought it was a good time to try something higher risk. I don’t have insider information, but I do have some confidence in my father’s savvy. He’s been doing this for most of my life, and he’s got a pretty good track record so far. Further, by selling options on these stocks I’ll limit my risk somewhat. Covered call options are bascially hedging your bet. It also means that I won’t be able to profit wildly if the stock takes off.

My father is convinced his strategy is relatively safe, even conservative. I wouldn’t go that far, but I think I’m in a good position to handle the risk right now. Worst case scenario: I lose all this money. Eh, so what. We’ll still be ahead of where we were pre-Katrina.

Unless you have inside information, it’s unlikely that you would ever be able to beat the market. (This is why congressmen are the best investors in the world.)

You also have to consider your transaction cost (i.e. the cost of trading).

I personally don’t have enough money to invest, but if I did I would start with an index fund. As a volunteer, I’ve been on the investment management committee of a non-profit and running their $40 million endowment. My experience has been that even the best managers in the business (and we never hired anyone but the best) can rarely beat the markets for large and mid cap stocks.