BootsnAll Travel Community

So I really want to learn more about Investing in the market. How to make money with the money one has saved. I want to do this on my own with some monies I want to set aside. I have done the route of somebody else managing the money but I want to be able to ask prudent questions and also get more brave with investing on stocks on my own.

Anybody have tips on how they learned to do this. I know some of you are "natural" investors but for those who need to LEARN..how can one go about doing this.

Personally I don't try to buy individual stocks. I do have a few but it's less then 10% of the money I have in the market and they are big stable companies. The majority of my money is in low cost index funds. I don't remember the exact numbers but somewhere around 80% of actively managed mutual funds underperform the market over 10 years. Basically that means even the professionals you pay to manage your money can't beat the market averages. I just throw money into a couple index funds and look at how much money I made every few months.

If you're looking for a big score quickly buy one of those trading programs you see on infomercials at 2 in the morning. If you want steady growth for the next 20 years look into index funds.

Well there are a number of routes to take. The easiest is to buy a few very low cost diversified index funds and then ignore them for the most part. As Joe said, over time, you'll beat most managed funds.

As far as more active investing goes, there are a zillion ways to go about it. Stocks, Bonds, ETFs, Commodities, Options, Shorting, etc etc etc. Depends what you believe are good investments, how much you are willing to risk, and how much time you want to spend reading books and articles and fiddling with stocks. Yes, you may make more this way than index funds, or you may make less. But you are guaranteed to not get the time back you spend fiddling with stocks, whether they go good or bad.

I'm not saying not to be a more active investor, I'm just recommending keeping it fairly simple, conservative, logical, and low cost. Get some books by guys named Benjamin Graham or Warren Buffett. I'd stay away from Kyosaki and other such shysters. Realize there's a lot of luck involved -- history shows that the "experts" have a horrible track record predicting how markets and economies are going to move. Have fun!

http://www.morningstar.com/Cover/Classroom.html

I was looking for some real basic stuff to refresh and learn more. I found something on Morningstar but wish these were taught in person.

Thanks for recommendations..will check out those books.

Hi Madhu...check out the book "Smart Women Finish Rich" by David Bach. It is a really good start.

Then, I recommend talking to a financial adviser, or perhaps a friend that does this for a living. That's a great way to learn.

I have the book...read it many times but it really does not tell me how to research stocks etc etc.

So this is what I have done so far...checked where I have some mutual funds and accounts and looked at classes and seminars they offer.

Went to one from Charles Schwab..it was pretty good. There a older gentleman said he will help me ...he sounded very sincere and said he would give me some old books he has. So we'll see.

Financial advisor...done.. with CS again.

Some of my gf's and I are starting our own little investment club 101. That should be fun.

Thanks.

I learned technical analysis -- basically, looking at the charts for specific trending patterns. I would draw on charts all day to wonder when I should get in/get out. In addition to technical analysis, I looked at statistical analysis as well as what was going on in the world.

I personally take more of a conservative approach -- long term investments. I don't trade individual stocks. I've seen too much of what one stock can do to itself or to the entire market in a day (think 2001). I've found that EFT's (track the indices) have been really good to me when the market is on an upswing. I bought into them in 2003 in the uncertainty of - are we going to war or not, which was a huge risk. But it had hit a particular low (9/11 time). I thought it couldn't go much lower than that, so I jumped the gun (based on the technical analysis charting I did). I saw my portfolio in the red for a bit, tempted to get out altogether, but I kept it in because I knew it was really volatile, but didn't think it could go any lower. It worked in that case. I rode the market till more recently. I've gotten out of those positions because I have no faith in the market now.

I worked as a daytrader/market researcher and hate staring at the ticks of the stocks every 1 or 5 minute bar. It drove me nuts, plus was really stressful. Sure you could potentially make a lot of money that way. But you can also lose a lot that way. I made 10% in 2 hours. Then I ended up getting cocky, thought I knew what I was doing, and ended up losing that gain in the next 2 days. Too stressful for me. So I'm a long term investor.

You could try paper trading to test some ideas before you jump fully into it. Make your mistakes in the paper trading and learn from them. It's a great way to start out.

You need to head to The Motley Fool and start reading. They'll teach you everything you need to know about investing and personal finance in a very easy-to-read style. They have books as well. A lot of their site is dedicated to different types of investing newsletters (I subscribe to two), but you don't need those right now. They have plenty of free articles that will explain everything from getting out of credit card debt to finding a discount broker. They also have plenty of articles on using index funds if you want to go the simplest route.

If you want to look at investing in individual stocks, I recommend that you read "One Up on Wall Street" by Peter Lynch. It is about 20 years old, but the advice still stands true. Find good companies whos stock price has been unfairly beaten down and buy. Hold on to the stocks for years, not days, and diversify appropriately.

Good luck!

I saw Peter Lynch on TV yesterday....

Thanks guys. Slowly learning..still have a way to go before I get all this. Stocks, Bonds, Mutal funds, ETF's...what not.

I am very hesitant to jump into this thread…

Anyway, I am assuming that the main purpose of investing here isn’t for the fun of it, but to build up a nice equity, retire young(er), travel the world, etc. In that case the key nomenclature here would not be how do I invest my money but how do I manage my personal finances (to best achieve my goals).

If that’s the case than buying/selling stock or even picking that winning mutual fund is maybe 10% of the whole equation. Probably even less, since the simple reality is most people can’t consistently beat the market anyway. So spending loads of time learning the ins and outs of investing and neglecting the other 90% isn’t a long term winning solution. What would be more important is to spend the time picking apart ones budget, determining one’s actual net worth, knowing how much one really needs to be worth to retire, determining how much a year to contribute to retirement plans, determining how much a year one should be investing outside of retirement plans, understanding tax planning, etc.

Unfortunately this stuff is a lot more boring and dry than stock picking and not nearly as fun to talk about at parties or on forums. And frankly it can get complicated. My recommendation is to work with a financial planner. They should be able to determine what your worth, what you need to be worth to retire, how much you should be putting away every year, and where you should allocate your money between real estate, stocks (large cap, small cap, foreign, etc) and bonds so that your portfolio is not only diversified but consistent with your goals. And, if you can't find one that can do that, find another one.

Then instead of spending your time trying to pick the next winning stock, use your time cross checking and learning about the advice the financial planner is giving you not only for your own edification but to make sure they are getting it right.

halfnine has some great advice. He's right that it can be quite difficult to beat the market average return picking your own stock. That is the main reason index funds are so popular is because 80% of mutual funds also don't beat the average market return and those guys are professionals.

I have the government equivalent of a 401k that I consider my "real" retirement savings. The other money I invest into individual stocks is really more of a hobby because I find it interesting. Hopefully, I'll end up with a good return over the years, but right now I'm just having fun. It keeps the pressure low when the stock market tanks -- as it has been regularly for the last few months.

Just wanted to say this was more for personal learning experience so that I can understand for my own good what the market is all about and how one reads all that is going on.

I have contributed the maximum into my 401K since 1997...from the day I started working. Have other investments as well and finally got some advice from a financial consultant at Schwab.

This is not an attempt on my part to make some quick gains but learn how all these dynamics work. When my financial consultant tells me something I want to be able to ask intelligent questions. Learn how to better be aware of my own money.

Lastly its also about control...i do not like taking peoples word for anything..i want to know for my own. Basically buyer beware attitude.

These are all personal opinions:

If your financial consultant is spending most of his/her time specifying which stocks or funds to buy it's time for a new financial adviser. The main use of a financial advisor is to look at everything you have (assets, debts, wife, kids, retirement, etc.), compare that with what your goals and expectations are, and then line out a plan to make sure you are on track and within your range of risk. They may say your portfolio is short on small caps and offer some recommendations. But recommending individual stocks/funds should be a very, very small part of the service they are providing you.

For financial planning you might have a look here. Although, I honestly haven't looked through it, it should have some solid advice. It is from money magazine, which is the only subscription I have. Mainly because they are the only real personal finance magazine out there that's more interested in helping you with your personal finances than selling you a stock or fund.

I know I'm late to join the thread...but I have been trading off and on for about ten years now. Up until recently has been entirely small time...nickel and dime stuff. I now have more that I can afford to lose, and have moved into an entirely new class, have become much more aggressive and adjusted my strategy so that it works for me in the current market.

The trading term that would most closely fit my style is "swing trader" and occasionally "day trader". I fumbled around for quite a few years until I adapted a strategy that I read about for myself. The basic premise of this strategy is that if one makes 2.5% per trade, one can double their money in 40 trades. It seemed reasonable enough to me to make 40 such trades within 52 weeks...so doubling my money each year. It wasn't quite that easy, but for several years I did fairly well, far better return than a savings account and much more liquid than a CD or similar investment vehicle. This has been much more difficult for me to attain lately, so I adjusted my strategy...the original idea was to take small gains and take them often, but now I take even smaller gains and take them much more often. This is strictly small time for me, but it works nicely....I am meeting my goals and that is important...I am not George Soros or Warren Buffet. Basically, it goes like this...I am a seasonal worker, so for several weeks out of the year I am eligible for, and collect unemployment insurance. My income then is ~$300/wk. I figure if I can double that, I can live pretty good...so that is my investing goal. I'm working with a margin account with ~$50,000 in buying power, I need to profit $60/day...that's .1% of that $50,000. Very realistic, and since I've adopted this strategy I'm way ahead of that target...margin accounts, however, aren't for beginners for several reasons.

Stock charts...can't read 'em...P/E ratio...I have no idea what that means...I was only ever into anything for the short term, so I just run a stock screener to find potential candidates. Over time, I made rules for myself...such as avoid certain sectors, minimum volume, strong brand identity...these are all individual preferences and don't really indicate how the stock will perform, but is important nonetheless...

Here are some things I would offer to the aspiring short term investor (I am not a financial professional...investing is a high-risk activity, this is not an endorsement for any product or service...if you can't afford to lose money, don't invest in stocks)

Set rules for yourself. A couple very important ones:

Have a solid reason for buying a stock. It doesn't matter what that reason is, but own the reason. Deciding when to sell can be very emotional...if you don't have a solid reason for buying, your decision to sell can be adversely affected by your emotions.

Never ever ever second guess yourself...this is self-defeating and self-destructive. If you decide to buy at a security at $15.00 and then immediately after your purchase, it falls to $12.00...don't beat yourself up. You had your reason to buy at that price and it should have been a solid reason. Stick by it. Likewise if you decide to sell at $16.00 and immediately after you sell it skyrockets. The extra amount it went up wasn't yours to have...you should have had a specific goal in mind at $16.00...rejoice in having met that goal.


and now, a few tips...
Your profits can be maximized by using a discount broker. If you're trading with less than $25,000 a full-service broker wouldn't help you that much anyway.

Inexperienced traders should always use limit orders

Stop-limit (sell) orders are a good way to lock in profits while at the same time capitalizing on any further upward momentum

Stay the hell off of internet messaging boards/threads that deal with specific ticker symbols...by all means, read general investing advice, but if a thread or board is for say MMM (3M) or whatever stock...stay away - ignore it

News releases often have the opposite effect on a stock than what you would expect...or at least this has been my experience. YMMV, but I have learned to ignore them.

Stay away from penny stocks...just don't mess with them. An inexperienced investor should stick to stocks priced at $15.00 or more...these have the liquidity necessary...also, set a minimum average volume indicator for yourself, probably at least 100,000 shares per day though I opine that higher volume is preferable, my bottom line is 250,000 shares per day or I won't buy

*This is an endorsement*
As discount brokers go, I really like Scottrade. Even though I mentioned before that I have no idea how to read stock charts, they have a feature called "smart text" that makes it easy for a neophyte like me....information is power. They have $7.00 trades (market & limit), live people who answer the phone in three rings or less...and they'll give me free trades if I "refer a friend" so....if you're reading this, and decide to open an account...P.M. me for a referral...help a fellow traveler out!

mOloch,

I was going to point out that what you are doing is extremely risky, but it sounds like you know what you're talking about. I hope it continues to work out for you. It is especially tough in this market to do this sort of quick trading, but the extra volatility does present opportunities, especially if you look into shorting as well.

As you said, the key is to keep your expenses low. You might also look at Zecco for trading. They do trades for free if you keep a minimum balance (I think only about $2,000), but they don't offer any extra perks.

Of course, I wouldn't recommend this approach to novices.

skobb,
thanks for reiterating the fact that investment does involve risk, and for pointing out that short-term day and swing trading involves risks which can be significant. Especially when shorting stocks...you can potentially lose more than 100% of your investment capital, which may set your dream vacation back quite a bit.

Something else I should mention is that the IRS takes a pretty big chunk out of short-term capital gains...If you factor in the time needed to research and execute good trades, brokerage fees and commissions, imminent loses and taxes...it can seem like it's not worth it.

and thanks for the tip on zecco.com I signed up (less than 10 minutes and entirely online) - they offer 10 free trades per month if you maintain a $2500 balance. All other online equity trades are $4.50...I'm gonna give it a go. Anyone who is interested, here's a link(a bonus to me and you if you sign up and fund an account!!)

So... with the dow dropping 400 points friday, hows everyone doing?

I have cash ready to invest. I love it.

I'm with Steve. It's good news if you're investing consistantly and for the long haul. Lots of bargains out there when the Market decides to punish every company whether deserving or not.

Just wanted to revive this thread so I could say.....HOLY CRAP!!! I don't think any of the experts foresaw the market dropping the way it has in the past month or two. How low can it go? It has to start going back up at some point, right? Right??? Sadly, for myself, I have a fair amount invested in the market, all in index funds (both US and international) and have lost a fair amount of money in the past two months.