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Where would you invest $3,000


I got an email from a friend recently and she said that she had $3,000 and wanted a suggestion about where to invest it. She was thinking about day trading.

Anyway, I explained the pros and cons of day trading to her and advised her not to do it with only $3,000 not because that is too little money but more because I don't think that she has the time to dedicate to it. Day trading, if you haven't done it before, requires a lot time and hard work to get to an intermediate level. It also costs a fair packet on books and software not to mention DSL etc.

My final suggestion to her was to learn Texas Hold-Em Poker and play that professionally and I thought that she would (1) probably have a similar return on her $3,000 to day trading, (2) it would be faster to become intermediate or proficient at it and (3) she would have a lot of fun at the same time.

In recounting that I also remember reading Peter's Lynch's book One Up on Wall Street and thought that this is a good book for her. Peter Lynch talks about how the small investor can identify and buy stocks that are not available to Wall Street Investors because of their mandates and hence the name One Up on Wall Street.

Peter Lynch talks about getting 10+ baggers - stocks that rise more than 10 times their original price giving you in excess of 1000% return.

I suggested to her to try and identify some companies that in the future could benefit like that from how the world is changing now. My suggestion was to look for a small company that provided essential components for hybrid cars. I believe that with the rising price that we're seen in oil and the fast uptake of hybrid cars when they become available that providers of components for hybrid cars - even makers of hybrid cars - are going to benefit enormously it the future.

Stock prices of car makers are unlikely to be 10+ baggers because these companies are too large and diversified to increase in multiples that big. However, the smaller companies that provide parts and services to this expanding part of the motor industry will no doubt be able to increase their stock prices in these sorts of multiples.

I haven't spent anytime investigating this area of the market and so I'm sure that most people reading this will have more knowledge about this than me and may well have read better prepared researched articles on this subject.

Please let me know what you think - and if you think I'm off track here...