Investing for European dummies: how are things going in the States?

[Ninja]

The dollar is currently worth very little, meaning that those of us with Euros in their pockets can get a lot of bang for their buck. Everywhere I look, I see exchange offices being hesitant to accept dollars from American tourists and family and friends who are planning (online) shopping trips to the states. If I can get clothes and electronics for such a low price, then why not stocks? I know squat about American companies (or Dutch ones, for that matter ), but I could get into an indexfund. The fees for those are low, and they beat about 80% of the 'normal' mutual funds. Even Warren Buffet recommends index funds for newbie investors, so it sounds like a good bet

I can already see it: I invest my money in an american indexfunds at the tender age of 22, then leave it alone and take another look at it in 20-30 years or so. Not only will the companies have probably gone up in value, but with a bit of luck the dollar will have risen from the ashes as well. Woohoo! Double jackpot, baby! Early retirement, here I come!

Then again, there is the possibility that the 'Chicken Little's' are right and the dollar crashes. Things like hyperinflation do not just happen to third-world countries like Zimbabwe. It has happened to many countries, including developed ones like Germany. If the sky does fall down and the dollar plummets, I can kiss my savings goodbye.

Anyway, I remember a great story about a succesfull group of women investors. They did not look at charts and figures to see how the economy was doing: they looked at their local grocerystore. If the parkinglot was crowded and the store was filled with people, they would buy stocks and ride the wave. If the store was abandoned and employees were getting laid off, they would sell before everyone else began to panic. If the government says that everything is fine, but all you can see is homes for sale, people without jobs and cars being reposessed, who should you really believe? I take the real people from the street over the fat cats in the white house everyday.

So Americans, how are things going over there? How are they really going? If you were in my shoes, would you invest?

[Brutha]

Nobody can really say whether the dollar will continue to fall or rise again.
If you read through the world affairs forums you will the a few Americans who believe that the dollar will fall even further down.

Anyway, I remember a great story about a succesfull group of women investors.

The Forbes dartboard fund also bet the market.
They hanged a list of funds onto a wall and threw darts.
Afterwards they brought the funds that they hit.
Picking stocks with high returns is mostly luck.
But you can reduce your risk by not risking that the exchange will move.

[Ninja]

Hmm...

I don't really believe in stock picking, timing stocks or other get-rich-quick schemes. I do believe in investing for the long term. Since I don't want to risk investing in one single stock and I don't have a money tree in my backyard, I would buy an indexfund, so I have diversification but without having to pay so many fees.

The women, I believe, were trying to time the market and I don't know how well they are doing today. I do like their idea of reading the real streets rather than the wallstreet journal. I don't live in America, so I don't get to see how well the country is doing with my own eyes. I have to trust on second-hand information, which often conflicts. If I have to trust the 'officials', everything is hunkey-dorey. War debt? Subprime crisis? Creditcard chaos? Oh, you silly European goose! What has gotten into you? *pat on head*.

However, I do have some online friends in the States, and they tell a different story. They see people being forced to sell their homes, pawn their cars and pray that they will still have a job tomorrow. Real people, with real problems. The dollar (or the Euro, for that matter) is only worth what people believe it's worth and if they panic, the dollar will take a nosedive.

People here are sceptic and believe the end of the dollar is at hand and that I would be a fool to use my pricey euros to buy into a cheap dollar-based index funds. I think the fund is a bargain: they think it is a sinking ship.

I'm also a bit sceptic, since the dollar is seeming to set a new 'record' everyday and with America's ridiculous spending habits (*cough* war *cough* credit *cough*), it doesn't look like things will get better anytime soon. But what if they do? People are sheep and I'm no better. Just when was the last time you used that fall-out shelter in your backyard? Yeah, I thought so. If the whole thing has been blown out of proportion ("the sky is falling!") and the dollar rises again, I will have missed out on a great opportunity. I don't want to invest when everyone else does and sell when everyone already has.

Man, this is hard *ponders*

[Ninja]

Originally Posted by jsh

Abesolutely true Ninja,, its getting nasty over here

Sounds like a good time to invest then. Or do you think it will get worse? I know it's a fools dream to buy at the lowest point, but if you get zimbabwe like inflation scenarios.... ouch!

The market sure is ficke. Before 2000, one euro got me 80 dollarcents. Now I can get 150+ dollarcents. If you had bought euros before the new millenium, you would have made a nice profit . Now that the tables are turned, it sure is tempting to try the same. I wouldn't trade my euros for dollars and let 'em sit there, but I would buy American stocks. There are some very solid ones I have on my wishlist and with the low dollar, it's like getting a special discount