Investments?
Posted by admin on 28 Jul 2008 11:43 am. Filed under Investing.
PokeYoMoms asked:
I’m interesting in investing in the stock market, what would you all recommend, I will research your suggestions of course, but how does one start meaning, how do you go about getting into this? how much would you recommend investing and what’s best, by yourself or with a broker, if so, are there any reliable brokers out there. I’ve heard or E-Trader or something like that. what has been your experience so far?
I’m interesting in investing in the stock market, what would you all recommend, I will research your suggestions of course, but how does one start meaning, how do you go about getting into this? how much would you recommend investing and what’s best, by yourself or with a broker, if so, are there any reliable brokers out there. I’ve heard or E-Trader or something like that. what has been your experience so far?
On July 31st, 2008 at 12:06 pm
I recommend you start with mutual funds. In this way, you can leave the stock picking to the experts. The most practical way is to invest in a mutual fund that tracks the S & P 500. Standard and Poors are always updating their list, so the fund managers don’t have much to do, and their fees are very low.
I have investments with T Rowe Price and have done well over the years.
There are over 5000 publicly traded companies in the US. It is not possible to know all of them.
My own record of stock picking is not that great: one winner, one loser, one paying dividends but not increasing in value.
On August 2nd, 2008 at 1:51 am
For someone new to investing, I would suggest a mutual fund since mutual funds have built in diversification.
Suggest you take a look at the following web sites for information (of course, there are lots of others):
You should search for funds that have good track records over 1, 3 and 5 year time horizons (look at the 10 year results also, if available for the fund)and that have had the same funds manager during this time frame. If a fund changes managers, past performance becomes irrelevant.
On August 3rd, 2008 at 7:24 pm
As with all investing there are many factors involved with regard to what makes a good investment. You have to take into account many factors including tolerance for risk, time horizon and the amount of money you have to invest to name a few.
That being said, as a general rule, you would be best off investing in various index funds. These are mutual funds that have a low cost basis meaning they don’t cost a lot of money to invest in and they track an underlying index such as the S&P 500. To increase your returns and lower your risk you should invest in domestic as well as foreign markets.
An S&P 500 index fund, a MSCI EAFE index fund (which is Europe, Australia, and the Far East), and a small percentage in an emerging markets fund would be the best way to go. Also a long term bond fund if you are looking for more stable investments and possibly a REIT fund. You could break it down in the following manner:
S&P 500 = 35%
EAFE = 25%
Bonds= 20%
REIT = 12.5%
Emerging Market = 7.5%
Diversification in this manner is the best way to get the highest return with the lowest risk. This is how the richest people tend to invest their money and is the rough model that they use for the Harvard and Yale endowments. This should get you on the right track.
With regard to brokers you can do this using any of the online brokers. Schwab and Fidelity are good as well as TD Ameritrade. If you want someone to help you out Morgan Stanley or Merrill Lynch is the best way to go.
On August 7th, 2008 at 7:00 am
You can start by reading Fortune or Money magazine.
TDAmeritrade does not have any minium investment.
No hidden fees.
Don’t get a broker, unless you have tons of money and no time to run it.
Brokers are only good to help you trade and to tell you if a stock had moved too high or too low.
It’s better to do your own research and buy it thru online for $10 or less.
I tried many broker over the past 10 years. I cancelled Waterhouse Securities (now own by TDAmeritrade), E*Trade, Fidelity, Bank of America, and others.
E*Trade is the closest to TDAmeritrade.
You can even get a broker that will call you from TDA.
However, if he trades for you, it will be at least $40 per trade.
If you want advice, just IM or email me with specific questions.
When you open a TDAmeritrade.com account, put down my referral number 784671304. Good Luck!
On August 7th, 2008 at 9:16 am
Hi,
e-Trade and Scottrade are good online brokers. Be very careful of Big firm brokers – remember, they are just sales people working on commission. The more they buy and sell the more they make so they have a vested interest in churning your account otherwise, they make no money.
Here’s the skinny, cupcake, the nitty gritty.
Do your own due diligence. Your own ideas are the best. Do not depend on someone else to select stocks for you. Learn about investing so you don’t have to ask what stocks to invest in. Be self reliant.
Remember what Emerson said: A foolish consistency is the hobgoblin of little minds, adored by little statesmen and philosophers and divines. With consistency a great soul has simply nothing to do.
Find stocks that have steadily rising net profits (earnings), low debt, and good P/Es, lots of cash, companies buying back their stock..
What interests you? Find stocks that pique your interest and passion.
You need fast growing good stocks with good earnings and in good sectors. You need to learn more about the stock market before you even think about investing in it.
The stocks world is divided into 12 sectors such as energy which chevron belongs to. It is next to last in the sectors list today.
Technology is numero uno currently, but that can change in a New York minute and within the sector, the fastest growing are computer services, not Microsoft. Then, Electronic Instruments and controls. Next is computer storage devices.
The next hot sector is Healthcare, but heed the warning below. Go here for sectors: (http://clearstation.etrade.com/cgi-bin/Itechnicals?Event=srp&Section=redge&Refer=/redge.html)
Incidentally, Clearstation is run by E-Trade.
The best software is Vector Vest if you can afford it. It has sector investing.
Here is a free Web site for charting stocks: (http://www.incrediblecharts.com/).
First of all, stay away from “professional brokers” and tips coming to you via e-mail or friends and acquaintances – and especially e-mail tips. And tips at Yahoo! Answers. Do your own due diligence – don’t rely on someone else. Read Emerson’s essay “Self Reliance.
Hey! They will say anything to get you to buy their junk. If it’s too good to be true, it is.
Remember this, they are just sales people trying to sell you what their firm is pushing. They are not security analysts or financial planners, not even financial advisers. Trust me, I know from experience that they cannot be trusted especially with a million dollars. You risk losing it all. A million dollar account is known as a “whale” and they would love to get their greedy little paws on it and suck it dry. They just want to make commissions on what they buy and sell for the suckers, err…clients..
Risk avoidance is the name of the game.
Remember, the harder I work, the luckier I get.
Penny stocks are great, but highly speculative. I would avoid the ones under a dollar a share. For example, Best Buy started at less than $5. So there are some good companies, but it takes a lot of digging to find the good ones. You are looking for companies with good earnings, little debt, low capitalization, and good P/Es. For stocks under $5, very few will meet these requirements.
Stay away from the pharms unless they have patented drugs – do not invest in generic pharms, no growth there.
Check out which business sectors are the most popular and invest in the companies in those sectors. The number one, two and three are: technology, health care, and cyclicals (retail). These change periodically so keep current.
Go here for a list of growth stocks:
There are these lists all over the Web – you pays your money and takes your chances.
Watch CNBC, but don’t pay too much attention to the talking heads, except for Jim Cramer, the wild man – but he tries to teach you how to invest and has some great advice.
Get Jim Cramer’s Real Money: Sane Investing in an Insane World by James J. Cramer
Listen to Jim Cramer on CNBC.com
Go to Clearstation for quotes and tutorials on investing at (http://clearstation.etrade.com/). Sign up is free. Look up a few stocks. Do their tutorials. Check out the sectors.
Get this book: Value Investing: From Graham to Buffett and Beyond (Wiley Finance) by Bruce C. N. Greenwald, Judd Kahn, Paul D. Sonkin, and Michael van Biema.
Another good book: The Motley Fool Investment Guide for Teens: 8 Steps to Having More Money Than Your Parents Ever Dreamed Of (Motley Fool) by David Gardner, Tom Gardner, and Selena Maranjian
Jim Cramer’s Mad Money: Watch TV, Get Rich by James J. Cramer and Cliff Mason
I Want to Make Money in the Stock Market: Learn to Begin Investing Without Losing Your Life Savings! by Chris M. Hart\
Sensible Stock Investing: How to Pick, Value, and Manage Stocks by David P. Van Knapp
Stock Investing For Dummies (For Dummies (Business & Personal Finance)) by Paul Mladjenovic
All About Stock Market Strategies : The Easy Way To Get Started by David Brown and Kassandra Bentley
The Motley Fool Investment Guide and their Web site (http://www.fool.com/).
The Little Black Book of Microcap Investing: Beat the Market with NASDAQ/AMEX Microcap Stocks, OTCBB Penny Stocks, and Pink Sheet Stocks by Dan Holtzclaw
How To Make Money In Stocks: A Winning System in Good Times or Bad, 3rd Edition by William J. O’Neil
Trading for a Living: Psychology, Trading Tactics, Money Management by Alexander Elder
Big Trends in Trading: Strategies to Master Major Market Moves (A Marketplace Book) by Price Headley
Extraordinary Popular Delusions & the Madness of Crowds (Paperback)
by Charles Mackay (Author), Andrew Tobias (Foreword) This book talks about the Tulip craze in Holland where people would mortgage their homes to buy Tulip bulbs. Same thing happened in 2001 – 2002 with the Internet bubble that brought the stock market to its knees. The dot com companies were the Tulip bulbs.
Buy Investors Business Daily. It has lots of tutorials and I like it better than the stodgy Wall St Journal.
Money Game by Adam Smith
Common Stocks and Uncommon Profits and Other Writings (Wiley Investment Classics) (Hardcover)
by Philip A. Fisher. Recommended by Warren Buffet who took $100,000 and grew it to $34 billion!
Value Investing with the Masters by Kirk Kazanjian
Valuegrowth Investing by Glen Arnold
The 5 Keys to Value Investing by J. Dennis Jean-Jacques
The Intelligent Investor Rev Ed. (Collins Business Essentials) by Benjamin Graham. Warren Buffet was his student at Columbia.
The Money Masters by John Train
The Bogleheads’ Guide to Investing by Taylor Larimore
Common Sense on Mutual Funds: New Imperatives for the Intelligent Investor by John C. Bogle
Why Smart People Make Big Money Mistakes And How To Correct Them: Lessons From The New Science Of Behavioral Economics by Gary Belsky
Rule #1: The Simple Strategy for Successful Investing in Only 15 Minutes a Week! by Phil Town . See his Web site at (http://www.ruleoneinvestor.com/). Free sign-up. I got the book at the library.
Listen. You don’t have to spend a lot of money on these books – most can be found at your library and those that your library doesn’t have they can usually get from other libraries in your state.
Most of these books talk about stock and mutual fund investing, but for a good introduction to other forms of investing Gerald Appel has a great book called Opportunity Investing – How to Profit When Stock Advance, Stocks decline, Inflation Run Rampant, Prices fall, Oil Prices Hit the Roof and Every Time In Between.
First, Break All the Rules: What the World’s Greatest Managers Do Differently by Marcus Buckingham and Curt Coffman Not a book on investing, but it’s a nice segue into the next book.
Now, Discover Your Strengths by Marcus Buckingham and Donald O. Clifton
Go Put Your Strengths to Work: 6 Powerful Steps to Achieve Outstanding Performance by Marcus Buckingham
Finding your strengths is important when investing. These books teach you to build on your strengths, what you a good at. Everyone is good or passionate about something. Why not get better at what you are good at?
Another good book is: Opportunity Investing: How To Profit When Stocks Advance, Stocks Decline, Inflation Runs Rampant, Prices Fall, Oil Prices Hit the Roof, … and Every Time in Between (Hardcover)
by Gerald Appel
Most mutual funds do not even keep up the the return on the S&P. That’s like 99% of them.
Vanguard Index funds are a no brainer.
A CD is better than a savings account. They range from six months to several years. You cannot touch your money tho until the time limit is up.
Check out this Web site on Direct Investment Plans where you can buy shares directly from companies: (http://www.fool.com/School/DRIPs.htm). Usually no fees and you can buy one share at a time.
Bonds are probably the safest. You might try a bond fund. They might return 5 or 6 percent. At 5% a million would return $50,000 a year – not a bad income. Remember, you have to pay taxes on the $50,000.
There are also municipal bonds and the income from them is taxfree especially if you buy them in a state that offers them, but they only pay about 3%, but it’s mostly taxfree.
Look into Fidelity sector funds. Buy the top three, then in six months look how they are doing and if not so hot, select the next three that are best. Do this for a few years and you will make lots of money.
Kindest Personal Regards,
Walt Brown
Site Build It Certified Webmaster
P.S. This is a life-long learning process. Reading these books and applying the rules to analyzing stocks that may be good It takes time. Be patient and keep reading and listening. Don’t be a sucker and follow someone elses advice. Be your own man or woman. Depend on no one except yourself. You can only get smarter and stronger that way.
P.P.S. Internet has lots of good stuff, for example (http://stockcharts.com/school/doku.php?id=chart_school:technical_indicators:moving_average_conve
Stockcharts.com is very good and their discussion of MACD is one of the best, barring its originator, Gerald Apple, but now we are getting into Technical Analysis and that is not for beginners. But it is an important factor in finding good stocks that are going up and growing. Remember, tiny acorns grow into mighty oaks.
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On August 11th, 2008 at 11:44 pm
Get a financial advisor—although most full service brokerage firms won’t talk to you if you have less than $100,000 to start.