[meaghanchan]

I agree 100% with baselle, though would like to expand on it a bit:

Most individual investors who try to 'beat the market' fail. Most investors see a stock going up, they say, 'hey, it's going up like crazy! I'll get in now and it will go up more!' and then it falls- it was valued at more than it was worth. If you were to do some research, and you found out what mutual funds/individual stocks did really great this year, you'd find a lot of stuff in the energy and real estate sectors. Both have done really well this year. But here's the thing: They may go up. Or they may go down. Nothing can go up forever, and I would be very wary of investing in either right now. These are just examples-- it could be anything. In the late 90s it was tech stocks. If you went around chasing performance in the late 90s, and looking at mutual funds that had done really great, you would have had A LOT of money in tech stocks when the market crashed.

There is a certain amount of research about investing that I think is good. I really devoted time in September to learning about mutual funds, because I knew I was going to be investing in one before the end of the year. But keep in mind that a little knowledge can be dangerous; Trying to time the market often fails, and so does chasing performance. You might get better returns over the long term just putting your money in, like baselle suggested, a good low-fee index fund. (which, despite all my research, is the way I'll be going!)

Ultimately, I think there's a couple questions you should ask yourself to answer this question:

1) Do I have as much money and resources to put into this as a mutual fund manager who does this for a living 40+ hours a week? If not, why do I think I can make better picks then him?

2) Do I have _enough_ money that getting a better return is worth it?

Let's say you spent your time on coming up with great ways to save money. Let's say you came up with a way to save $10 a month. That's $120 a year. Great!

Now, let's say you spent your time instead on researching investments. Let's say you did good research, didn't fall into the pitfalls many investors fall into, and managed to beat the S&P index, consistently, by 1%. If your investment is $100,000, you'd be increasing your investments by an additional $1000 each year- much better than the $120 return you got through finding ways to save. But let's say you have $1000- you'd be increasing your investments only an additional $12.

Unless you have a really large amount of money, you're better off increasing your savings.