How Do I Start Investing in Stocks?

[Bullet1987]

I want to control my money...and I want to take part in this capitalist system we have. I know about investing...but I don't know what to invest in. I've research gold...but I heard it's not safe right now. I'm currently watching Jim Cramer talk about his new book and investing in stocks on MSNBC with Tim Russert. Only problem is...I have NO CLUE where to start!! I remember my 5th grade teacher telling us about it and we even bought stocks for fun and played this little game with it. But I don't remember what he said...I'm in college now.

[1monster]

1. Check out stocks that do DRIP -- You can buy your stocks directly from the corporations

bypassing the middle man broker who will charge ten percent and more. Further, if you so chose, you can reinvest all your dividend back into more stock.

Google direct reinvestment plans or DRIP

http://www.dripadvisor.com/education/learnaboutdrips/

http://www.commonstockdividends.com/Association/Philosophy.asp

P.S. Do your homework. Check out the newspaper stock prices and see how they've done in the past year (or more if you can), whether or not they pay a dividend. Also check out any news stories re: the companies you are interested in to find out if they are they type of company you want to partially own.

[ginnyinWI]

2. I just asked my husband, who has been doing it for a long time--

He says to start with some mutual funds. They're safer than buying individual stocks. Dodge & Cox is a great mutual fund company, he says.

Then read books and magazines and learn. He operates day to day by reading Investor's Business Daily (online subscription) and following their advice.

[backscatter712]

24. Mutual funds are good. Start with index funds.

Why index funds? Traditional funds pay insane amounts of money to a fund manager who uses his psychic powers to predict which stocks will rise in price and which ones will drop. Of course, the problem is that the highly paid fund manager has no more psychic powers than anyone else, and his predictions are thus frequently wrong.

Instead, index funds don't have a fund manager - they just use computer software that automatically buy and sell stocks in order to match a stock market index like the S&P 500. If a company's on the S&P 500, then the computer buys stock in it, in the same proportions that it's in the index.

Most actively managed funds underperform the indexes. The index funds do exactly the same as the indexes, so they perform as the indexes perform, minus administrative expenses, which are smaller than they are with managed funds.

It's a pretty safe way to participate.

[jwirr]

3. Go Green?

[Squatch]

19. And not make a single cent?

[Warpy]

4. I remember experiments

One was schoolkids picking stocks and keeping score against the stock market pundits. The kids won. Another was putting the newspaper page with stock quotes on a dartboard and throwing darts to pick stocks and keeping score against the pundits. The darts won.

The stock market is a casino and the odds are with the house. Just be clear on that and you'll do OK in the long run but don't expect much short term.

Personally, I'd steer clear of mutual funds, banks, brokerages, insurance, and other outfits that were likely to buy laundered subprime mortgages through hedge funds to try to goose their profits.

If you don't have much to invest and are looking for a mutual fund, then check out the socially responsible ones. They perform as well as most other funds without holding military, booze or tobacco stocks.

You'll want to talk with a financial advisor on your goals, whether it's monetary growth (something that will be a near impossibility in the short term as we enter recession) or income. If it's the latter, s/he'll be able to steer you toward income producing stocks and bonds.

Stuffing it into a mattress is not a good idea right now, either, since we're also in a highly inflationary period the government is lying about. At least with investments, you hold equity that produces income, even if that equity loses face value in the short term.

[peacetheonlyway]

5. This is a great post, so I'll try to help you out....

no matter how bad the economy gets, if you have a DIVERSIFIED portfolio of stocks, bonds, money market and real estate, you will not suffer and if you have a long term buy and hold strategy with stocks, there is NO WAY you can lose...

FIRST you have to set your intent to put money into stocks and pretty much leave them alone. don't try to buy and sell and drive gains quickly until you are the Jim Cramer level of investor...

That's hard for most people who see stocks as a scary or unknown entity and their early approach is to buy and sell stocks quickly to make quick profits. the fallacy with that approach is a. beginners make mistakes that cost them dearly such as paying the commissions to trade stocks and losing out bigtime on taxable gains from selling profits.

Here's what I recommend. Cramer's books are OK but they are geared toward the expert investor.

as a beginner, here's what i did.

I found a local Edward Jones and started with a $100 per month commitment. I invested in dollar cost averaging and put half the money into Cisco and half into a store called Dollar General that has grown like hotcakes.. My money grew very rapidly..

at the time I could easily afford to part with $100 per month. I don't suggest you only use Ed Jones as you can also go online and open up an Etrade account which pays you 4.7% interest on money you have not invested, so think of it like a savings account that you can buy stocks anytime but when you're not buying stocks, you earn better than most bank rates for savings.

So pretend you go the etrade or Ed jones route.

THE BIGGEST THING to do is have some sort of automatic pull of $100 bucks per month from your checking account or directly from your bank when you have a payday. if you get paid twice a month , have them suck $50.00 per paycheck for a total of $100 per month. Even as a college student I was able to sock away this little amount of money that I ended spending on burgers, and eating out and other crap I didn't really miss once I started saving it away for stocks.

SO, to make you excited, I went from that amount of savings to 3 years later upping the amount each month over time till I got to $600 month that I stashed away. IN less than 4 years I had a little over $60,000 from stocks growing, the reinvested interest and I didn't sell a single one of the stocks in my portfolio.. but kept reinvesting the gains and buying more.

What it allowed me to do was buy stocks in an area I was familiar or interested, telecomms and wireless.. so buy stocks in areas you are interested, if you like technology or medical or whatever your personal passion, buy stocks in that area chances are you're reading about companies in that area anyway and can have a gut feel for who's doing well.

even during the dotcom crash, I sold some stocks I should not have, had I kept my Cisco stock amount before and after the crash, I'd be a millionaire right now, so I really mean it when I say BUY and HOLD those stocks and such.

So you'll have to picture a pie with 4 equal wedges.. one wedge is BONDS.. they're safe and keep growing at a steady rate, the other wedge is Stocks (Riskier depending on the stock, so 2 kinds of stocks, BlueChip which are considered more SAFE and less known stocks, which are more risky but for instance a GREAT STOCK I CAN RECOMMEND NOW IS NUANCE. TICKR NUAN... they have a virtual monopoly on speech technology and I have researched their customers and such and so I know they have some big ongoing customers and will not go out of business.. their stock was at $7 when I bought it and now it's around $19.00 in less than a year I've not only almost tripled my money, but by being patient and not selling quite yet, it can only stand to go up.. as you become more expert you can do what I do which is sell a stock when it reaches 3x it's price sell only 50% of the stock, cap the gains and buy even more risky small cost stocks in the $1-$10 range to keep the cycle going... but that may be an advanced topic for another time.

the bottom line is with all the books out there the investment principles are pretty simple.. invest into the pie wedge in equal proportions so that if STOCKS tank you still have 25% of your money in real estate and your'e safe... or if real estate and STOCKS fail, you have 25% in bonds/Gold, etc. and 25% in mutual funds which are protected also with cash and bonds to make sure your investments keep going up.

here is an example slice from my schwab account which shows very detailed and wonderful research on every stock I buy:
oday's Price Performance as of Close 12/14/2007

Option Chains Margin Requirements Interactive Chart
Loading Chart
1 Day | 5 Day | 6 Mo | 1 Yr | 3 Yr | 5 Yr
For a detailed view of this company's financial statements, view NUAN's Growth & Earnings.
$19.00
Friday's Last Trade --
Today's Change $19.00
Today's Open 2,028,863 Below Avg.
Today's Volume
Bid Ask Market Capitalization $4B
Day's Range $18.99 - 19.41 Earnings per Share -$0.08
52 Week Range $11.00 - 22.56 Price/Earnings NM
Avg. Volume (10 Day) 3,736,237 EPS Date November 15, 2007
Trade Tick Next Ex-Date --
Div. (Yield) -- Next Pay Date --
Shares Outstanding 193.46M Shares Held By Institutions 78%
NM = Not Meaningful


it shows a thing called 52 week range showing the stock went from 11.00 to 22.56.. and now is at 19.. that means if you buy it now at 19.00 likelihood is that it will go up over say a 10 to 20 year future, and by looking at the graph, unless the company goes out of business it will likely go up to say 30 or 40 bucks in 10 years which means you can double your money.

don't let the oncoming economic recesession scare you... yes the US dollar is weak, yes there are huge banks failing at the moment... so that's why buying actual gold and gold stocks is also a hugely important part of your diversified portfolio.. oil stocks too, we have oil at 100 a barrell, it will likely go to 200 a barrel so look for oil stocks to rise just because know oil is a rare and dwindling resource...

coke / Microsoft / these are stocks that if you buy, you're pretty safe will always go up because I don't predict folks will stop drinking coke or that they'll let a VP ruin their revenues too bad... stay away from having too many technology stocks, it's a lure most folks including myself have fallen for.. buy some food and drink stocks to balance out the Speech/Computer/Software stocks, ok?

and when you buy your first stock, ping me, because you're asking the kind of questions that if you start now, will make you a millionaire not by winning the lottery, but instead by a strategy of wise, disciplined 'hiding money from yourself' in your etrade account or wherever and watching it get bigger and bigger...

good luck!

[L. Coyote]

6. By reading the biography of Mark Twain.

He said something like August is a bad month for investing in the stock market. Other month are Jan. Feb. Mar ....

You get the idea. First, know what you are getting into. Twain went bankrupt by investing his capital.

[OutNow]

7. Consider Social Investing

I believe that no-load mutual funds are the way to invest in the stock market. Each fund has people who spend all their time picking when to sell and buy stocks. Even at age 57 and retired, I don't have the skill or the time to do that.

As a decidedly left-wing member of DU, I would also ask you to consider investing in funds / companies that share your values. Calvert is one firm that includes socially responsible funds. It's always been interesting to me that some of my very peace loving, tolerant friends have no hesitation investing in war profiters and major polluters because these companies offer higher returns. Of course they do, war has always been very profitable (except for the troops fighting it and the civilians caught up in it of course).

Bring the troops home now!

[peacetheonlyway]

8. one more good Mutual Fund

I bought this mutual fund lately... it has gone up $122.00 in no time.



Symbol Name Qty Market Value ($) Quote1 Change Total Cost ($) Gain/Loss ($) Gain/Loss (%) Buy/Sell Link to:
GIGAX NATIONWIDE INTL GROWTH FD CL A 64.683 $1,122.902 17.36 - 0.42 $1,000.00 + 122.90 +12.29% Trade
Totals $1,122.90 $1,000.00 + $122.90 +12.29%
Cash3 $47.08
Total : $1,169.98 $1,000.00


the problem is many accounts require an initial investment of $1000 so try hard to save for 10 months an additional $100.00 per month on top of your other stock purchases and do mutual funds... and then eventually another $100 per month into gold/oil stocks and bonds , after 10 months you can get yourself into these funds.

I found mutual funds did MUCH WORSE than my stock buys.. and I agree about drips if you have the time to do all that direct investing.. but I found for a $7 trade cost.. I'll just let schwab or etrade do the transaction for me...


REALLY nice comments about green investing and I agree.. our planet needs wise investors to go green in their investment strategies..

CHINA an European Mutual funds are better bet than US only stock based mutual funds.. this way if US economy crashes, you're diversified with stocks from the countries benefitting from US market failure...

[high density]

10. Those are class A shares... Did you consider the load you paid in that return?

Unless that fund is in a 401k you probably paid a 5.75% load to purchase those shares. International funds also likely involve currency risk, so that's something to keep in mind as well if the dollar rebounds. Also, that fund has a hugely high expense ratio of 1.69% stripped yearly off of the returns.

[peacetheonlyway]

13. it was a schwab NO LOAD fund

and the "If the Dollar Rebounds"

are you kidding me...

the Dollar started off against the Euro as Equal to the Euro..

it has steadily gone DOWN TO .70 of the Euro.

Canadian Vs. Dollar, STEADILY DOWNWARD

pick a currency and I"ll show you a steady 1 to 2 year downward climb.

WIth Iran abandoning the Dollar, and 6 other countries that buy oil about to abandon the dollar..

there will ONLY BE A DOWNWARD CLIMB in dollar value.

so stocks that are in other countries, funded on other currency exchanges are good ideas.

[high density]

18. Whatever floats your boat

I'm just saying a lot of the gains you are seeing in that fund are from currency maneuvering, not from rip roaring 30% European and Asian stock markets. If you have a magic ball that says the dollar is just heading down further permanently, then I guess you'll be fine on the path you're going.

[high density]

9. Open an account at Vanguard.com

And purchase an index fund. The Total Stock Market Index is a great place to start. This fund lets you ride the ups and downs of the stock market at minimal expense to you. Having 100% of your savings isn't a good idea though, unless you don't plan on using that money for many decades to come. Otherwise it's a good idea to have some bond exposure as well to help make the swings of the stock market a little more gentle.

Buying individual stocks is too risky. Buying loaded mutual funds is a waste of your money. Loaded funds are those which you typically find at brokers or "financial advisers" (i.e. Edwards Jones, Merrill Lynch) that basically require that you pay a fee (sometimes as much as 5.75%) for the opportunity to purchase the fund. Low cost mutual fund companies like Vanguard, T. Rowe Price, and Fidelity allow you to purchase diversified mutual funds without having all of your earnings drained by excessive fees.

[W_HAMILTON]

42. I agree with this

That's sort of how I started up. I was young, and had NO CLUE about stocks and the stock market. I didn't even know where to begin. I'd watch shows like Suze Orman, and found them interesting, but all the lingo she used, I had no clue what most of it meant.

Well, I got a better job, with a 401k (quickly learned what that was!), and actually got into "saving." First, I started with a simple ING savings account. Then I built up a few thousand, but wanted more. So, I read more about investing, and read about index funds, and especially about Vanguard. I found out what IRAs were, and what a Roth IRA was, did some research, and found out Vanguard would be a good place to use (lots of places spoke highly of them). When I had the initial investment, I transferred all my money from savings over to a Roth IRA account for them (it's one of the Target funds, where you put in the year you expect to retire, and they automatically adjust your funds accordingly as you get closer to retirement age). Vanguard seems to be a great site.

However, if the original poster is in college and doesn't have earned income, I don't believe you can participate in a Roth IRA, which seems to be the second-most easiest way to get into the stock market, behind a company 401k.

Here's a few links I saved up when I first got into investing, maybe they will help you some:

http://www.kiplinger.com/columns/starting/archive/2006/st0824.htm
http://www.fool.com/school/basics/basics.htm
http://www.fool.com/school/13steps/13steps.htm
http://www.fool.com/dbc/qa/qa03.htm
http://www.fool.com/school/indices/introduction.htm
http://www.fool.com/school/Drips.htm
http://www.kiplinger.com/columns/ask/archive/2006/q1009.htm
http://www.kiplinger.com/columns/ask/archive/2006/q1009.htm

Good luck. As an aside, one thing I like about my Roth IRA account with Vanguard, is that in a way, it does act as a savings account (although not a very "safe" one). I put money into it that I've already paid taxes on, and when I withdraw it at retirement age, I believe I won't have to pax taxes on that money. HOWEVER, if I need the money I've invested for some reason, I can withdraw it from the account without being charged a penalty. You just can't withdraw any gains you've earned, or at least can't do so without a penalty. You can only put $4,000 each year into an account like this, but it works for me, because I can reach that limit, whereas I can't really afford to contribute the maximum to my employer's 401k (I think it's around $15,000 per year).

[W_HAMILTON]

43. ALSO,

As a college student, I imagine you don't have much income (so I could be wrong).

My suggestion is to start slow, but again, I'm not some great financial wiz, but here's what I did.

First, as others have said, get into the habit of saving. I always put $200 of my paycheck into a savings account. If you don't have a high interest savings account, like ING or HSBC (which I switched to after ING due to the higher interest rate, even though I prefer ING's layout...but money is money!)

If you have an employer that offers a 401k, always put in at least the limit to get the employer match, no matter what. That takes precedence over putting money into your own savings account, because you automatically get a large return on your money, better than what you would get in any savings account.

Next, once you are contributing to your employer's 401k enough at least to get the full employer match, and putting away money consistently into a high interest savings account, AND you've accumulated some money in that savings account, THEN I would look into a Roth IRA (if you have earned income, ie through a job). I would recommend always keeping at least a little bit in the savings account in case of emergencies, but when I opened my Roth IRA, once I saved up enough to open a Roth IRA, I pretty much pulled it all out of my savings and put it in my Roth IRA. Now, I've built back up another $2,000, but I plan to deposit that in my Roth IRA at the start of the year, then put most of my $200 savings per paycheck into the Roth IRA until I meet the limit for 2008, then deposit additional savings back into my savings account.

So, in order of importance (everyone tells you this anyway)

- Participate in your 401k, AT LEAST up to the point where your employer stops matching
- Start a high-interest savings account and build that up
- When you have enough in that savings account to open up a Roth IRA, do that

Unfortunately, I don't make enough money yet to really invest in anything else. I have just enough for 10% of my pay going to 401k, $200 of each paycheck going to savings/Roth IRA. I'll have to finish my degree and get a better job before I can contribute more, but I don't know that I personally would look to invest in the stock market (aside from the retirement funds mentioned) until I accumulate more wealth, so I would say the same to you. When you do that, you get involved in more elaborate tax issues. Maybe more experienced investors would recommend differently, though.

[LoZoccolo]

11. The best way to start is promise yourself not to jump in for a set time period.

One of the more valuable lessons to learn is when to sit out. The great trader Jesse Livermore said "There is time to go short, time to go long, and time to go fishing."

Spend a set amount of time studying, say a year, before you do anything. It will teach you the skill of waiting and watching for a good opportunity, rather than trying to force one.

There are also a bunch of books you could read in the meantime, and I've found that my local library generally has a lot of them:

Market Wizards, The New Market Wizards, and Stock Market Wizards by Jack D. Schwager; these give a lot of insight into the thinking process from many different perspectives, and I'd recommend reading them early on in your program to give you a sense that there are many different ways to approach and that the way you think and your discipline plays a large part in your success

Reminisces of a Stock Operator by Edwin Lefèvre

Technical Analysis of the Financial Markets: A Comprehensive Guide to Trading Methods and Applications by John J. Murphy; this one is kind-of basic, but it's a good start to learning technical analysis

Technical Analysis of Stock Trends by Robert D. Edwards and John Magee; I have only read a little of this but it seems to be more advanced than the John J. Murphy book

Try to avoid anyone selling easy answers or a complete package for trying to get rich (I learned that the hard way trying to do the CAN SLIM method that Investors Business Daily promotes). Any move you make should make sense to you and stand up to your own scrutiny first. Also, get several different perspectives; mine tends to be skewed toward technical analysis, but you may find with your own talents, risk profile, schedule, or even personality, that a different approach will bring you more success.

[slipslidingaway]

28. I agree with you...

now that is really strange :)

[KharmaTrain]

12. Meet With Financial Planners

They're worth every penny...especially one that doubles as a tax preparer. These people do investing 24/7...on many different levels. They'll help you learn about what type of investor you are...conservative, aggressive...and what your short and long term goals are. I started with the person I work with in my 20's...when I had next to nothing and he's helped me build a strong, secure portfolio.

If you're just looking to "play the ponies"...I'd DIY...do it yourself. Learn the terms, learn the system and study it. Figure out how to read a stock chart and research it through Oscar and other reports. Unless you know the person, I take the "free" advice from anal-ists as a sales pitch.

Good luck...

[Yupster]

45. If a financial advisor doubles as a tax preparer, then

he doesn't do investing 24/7. He probably does tax preparation work the vast majority of his time and does investing as a side business.

[peacetheonlyway]

14. Put $100 aside NOW every month

and start investing NOW if you can.

you might make stock mistake picks but if you diversify, it won't matter.


don't wait to discipline yourself to save money into your investment account.

as a college Student I DON"T recommenda financial planner.

they often charge $500 just to get going and you can use that money to invest.

don't wait.

there is a great book called the COMING ECONOMIC COLLAPSE that really outlines all the areas to put your investment money when the dollar is weak, oil climbs to $200 a barrell and the rich guys are buying foreclosed housing and land.

like most investment strategies, times of depression are huge opportunities to buy for folks smart enough to take a long term vision of any market.

[BadgerLaw2010]

15. Low cost mutual funds and DRIP's. Only trade individual stocks once you have serious experience.

Buying and selling stocks over less than several year time horizons requires significant understanding of market fundamentals, company balance sheets, portfolio allocation and risk managment.

Basically, if you look at something and don't understand what a number means or how it works, learn before you even think about doing it. Ditto an industry. And even then, you need to spread your money around in a diversified portfolio in case of a fiasco like this credit market mess.

Day trading, penny stocks, pink sheets, options other than covered calls, small cap stocks, overseas markets and all currency and derivatives trading should never been done by novices. Or done period, depending on the stupidity involved in a given product.

[DFW]

16. I'd listen to those who seem to know what they're doing and have experience

I have been led astray by "solid" investment houses, and done
well with my own instinct. One of the biggest ironies of the last
few years was the Tom Noe "Coingate" in Ohio. He started investing
in rare coins in 1998, and if he had stuck to just that, and picked
the right rare coins, he would have tripled the money of the people
that had trusted him, and been a hero instead of sitting in jail--
possibly singlehandedly changing the course of history, since Ohio
was such an important State for us in 2006. I know something about coins,
and bought a piece for $1,600 when I was in college in 1973 that I was sure
had a long term future. I sold it in 2004 for $150,000 and traded it
for gold coins (tax-free as a like-kind trade: you pay the tax on the
gain when you sell), as I didn't like the medium term prospects of the
dollar. Sure enough, the dollar went straight to hell, and gold nearly
doubled. But once something like gold doubles, it's a long shot it will
double again. I liked my odds 3 years ago, not so now.

I know little about stocks except that Apple has done well recently, and
Warren Buffet's Berkshire Hathaway has remained solid. Anything over that,
you had better listen to people who know way more than I do about stocks.
Rare coins can be very rewarding, but are more risky, and are ONLY for those
who know what they're doing. Do NOT go to some coin "adviser" who will steer
you to the "right" coins, which he just happens to have laying around.

As for gold and oil, well people will always need oil for the forseeable
future, but it's a gamble because no one REALLY knows how much there is left,
or what new fields may yet be discovered. Gold is a traditional inflation hedge,
bad news in a recession (though liquid), and while nice and shiny to hold in
your hand, it pays no interest, you can't eat it, it won't make your car run
or heat your house, so remember that if you consider it.

[edhopper]

17. 12 Timeless Rules of Investing

1. An attempt at making a quick buck often leads to losing much of that buck.
• The people who suffer the worst losses are those who over-reach.
• If the investment sounds too good to be true, it is.
• The best hot tip I’ve found is “there is no such thing as a hot tip.”

2. Don’t let a small loss become large.
• Don't keep losing money just to “prove you are right.”
• Never throw good money after bad (don't buy more of a loser).
• When all you're left with is hope, get out.

3. Cut your losers; let your winners ride.
• Avoid limited-upside, unlimited-downside investments.
• Don't fall in love with your investment; it won't fall in love with you.

4. A rising tide raises all ships, and vice versa. So assess the tide, not the ships.
• Fighting the prevailing “trend” is generally a recipe for disaster.
• Stocks will fall more than you think and rise higher than you can imagine.
• In the short run, values don’t matter.

5. When a stock hits a new high, it's not time to sell . . . something is going right.
• When a stock hits a new low, it’s not time to buy . . . something is going wrong.

6. Buy and hold doesn't ALWAYS work.
• If stocks don't seem cheap, stand aside.

7. Bear markets begin in good times. Bull markets begin in bad times.

8. If you don't understand the investment, don't buy it.
• Don’t be wooed. Either make an effort to understand it or say “no thanks.”
• You can’t know everything, so don’t stray far from what you know.

9. Buy value, and sell hysteria.
• Paying less than the underlying asset’s value is a proven successful strategy.
• Buying overvalued stocks has proven to underperform the market.
• Neglected sectors often offer good values.
• The “popular” sectors are often overvalued.

10. Investing in what's popular never ends up making you any money.
• Avoid popular stocks, fad industries and new ventures.
• Buy an investment when it has few friends.

11. When it's time to act, don't hesitate.
• Once you’re in, be patient and don't be rattled by fluctuations.
• Stick with your plan . . . but when you make a mistake, don’t hesitate.
• Learn more from your bad moves than your good ones.

12. Expert investors care about risk; novice investors shop for returns.
• If you focus on the risks, the returns will eventually come for you.
• If you focus on the returns, the risks will eventually come for you.
* This is VERY important, always think about the risk, not the return.

[high density]

21. Some good points, but also questionable ones for novice investors

Not to mention the contradictory points which leave me confused about the overall advice given here. Point six tells me to wait for stocks to "seem cheap" but point five says that something is wrong when stocks are cheap... So what is it?

Buy and hold is a more successful long term strategy than trying to time the market. People who try to "buy low, sell high" end up doing about the opposite and would have better long term returns had they just sit back and let the market do its thing. I'm sure it's even more true when capital gains taxes come into consideration. That is of course assuming the market is continues its upward trend as it has in the last century. We can't control or probably even detect whether the stock market "seems cheap" or not. If you keep waiting until it "seems cheap" then you've likely just lost money because the market has gone up while your money was sitting in some money market fund earning 4.5% APY. If you're still concerned about the value of equities then dollar cost average your purchases by spreading them throughout the year instead of using one lump sum.

Point 10 continues on this market timing mantra. It's probably impossible for a novice speculator (or even many expert ones) to determine what is popular, what isn't, and what current losers have the potential to be potential to be winners. The closest I'd ever get to this personally would be to buy an actively managed mutual fund, but I still greatly prefer the idea of low cost indexing. (Point 4 is an argument for indexing and makes the most sense to me.)

This is all linked in with point 12 and having the proper mix of stocks and bonds for your risk tolerance and investment horizon, so you can sit by as the stock market fluctuates without losing sleep at night. If you need to use the money in 10 years then having it fully exposed in the stock market is not a good idea.

I definitely agree with the point about not buying overcomplicated products. For instance many annuities fall under this category which are basically things which are sold, not bought. They do nothing but pad the pockets of salespeople and insurance companies.

[edhopper]

25. Let's see

Point five doesn't say when stocks seem cheap, it's says when they hit new lows, there's a big difference.
Point six says buy and hold doesn't ALWAYS work. In other words, your stock won't always go up no matter when you buy and sometimes you should sell a stock and not just hold forever.

Again, point six doesn't say not to buy and hold, just don't make a religion out of it. The word ALWAYS, all caps, is the tip off.

Point ten says nothing about timing the market, it's about avoiding fads. Like tech stocks or home builders.

I got this list from my financial mgr. It's how we invest. When looking at a mutual fund, we look at the past returns, but more importantly, we look at how it did when everything went down. We pick a fund that went down less over one that had really good, but maybe not repeatable, gains.

It's about risk not reward.

I would also emphasize that a novice should have a trustworthy adviser and not do it themselves.

[high density]

31. In all likelihood it's impossible to determine when "always" applies and when it doesn't

So that's why that point doesn't make sense; either buy and hold works or it doesn't. http://network.nationalpost.com/np/blogs/wealthyboomer/archive/2007/12/06/chasing-performance-hurts-load-mutual-fund-investors-study-finds.aspx">Studies show that buy and hold works. Go ahead and put a portion of your funds aside for speculation if you want, but that should be for fun, not for long term capital appreciation.

I think advisers are generally not that useful. Most of them are in it to earn commissions on fund sales instead of worrying about a client's long term prospects. There are some fee-only advisers that are decent but you probably have to hunt for those. You definitely won't find them when you walk into a branch of one of those big firms you see with the warm and fuzzy ads on TV.

[edhopper]

38. Agreed about off the street

But if you talk with family and friends you might find an adviser who is worthwhile.

[riderinthestorm]

20. Bookmarking for a later, more thorough read. Lots of info here. nt

[Ravy]

22. First, get a dartboard, then a copy of WSJ.... nt

[dantyrant]

23. About gold-

Hey Bullet, in a similar situation to you - just starting to get more active in managing my money.

One thing to note about gold is that it doesn't pay a dividend, of course- there's no interest income either. Gold is seen as a hedge, a place to put money when the value of paper is uncertain. This doesn't mean it's a bad investment -- there's some reason to think that gold may continue to skyrocket in the next couple of years, but it could also go back down to 600/oz.

One suggestion I'd have is to look at foreign markets as well as American markets. Investing in a foreign ETF can give quite good returns.

[mudesi]

26. Microsoft, ICICI bank, Comcast, Toyota

Microsoft is going to double in a few years. ICICI bank is growing, Comcast is probably way undervalued right now, and Toyota, in my opinion, makes a better car than Honda, and has had a nice little pull back in price recently.

And government Bonds, just in case there is a recession, and because interest rates are going down.

You should also probably put a little bit of money into a diversified basket of highly speculative resource based stocks. (Start up exploration companies, for example).

[high density]

32. ICICI bank??

Investing in an Indian bank is probably not a great idea for a novice investor.

[mudesi]

33. Why not?

The Indian economy is booming, and they're expanding worldwide. It also doesn't hurt to have some worldwide diversification. That's why I included a Japanese company as well.

[Zynx]

35. Same idea, but different region is Banco Itau.

You can invest in that through stockbny.com in a Dividend Reinvestment Plan.

[slipslidingaway]

27. In addition to the books mentioned by LoZoccolo the book

"How to Make Money In Stocks" by William O'Neil was helpful to me. Also the Edwards and Magee book is excellent and worth the investment IMO.


And I agree what was said here...

"The best way to start is promise yourself not to jump in for a set time period.

Edited on Sat Dec-15-07 07:43 PM by LoZoccolo

One of the more valuable lessons to learn is when to sit out. The great trader Jesse Livermore said "There is time to go short, time to go long, and time to go fishing."

Spend a set amount of time studying, say a year, before you do anything. It will teach you the skill of waiting and watching for a good opportunity, rather than trying to force one..."


Then just use common sense and since you mentioned gold some people were discussing gold in 1999 and 2000. Which is a better buy stocks at a 20 year high or gold at a 20 year low?

http://stockcharts.com/charts/historical/djiagold1980.html


Also within the past month or so there have been more articles in the mainstream press about the collapse of the dollar while in reality it has been falling for years. When an idea becomes popular it should signal a caution sign.

http://stockcharts.com/h-sc/ui?s=$USD


Become familiar with the big market picture/trend first as most stocks will follow the larger trend.
Read the column "The Big Picture" in Investor's Business Daily when you are at the bookstore.

[PCIntern]

29. safest and easiest way to double your money is to

fold it and put it in your pocket.

Jokes aside...if you hire a 'financial planner', ask him/her what THEIR net worth is...if they're so fricking smart, they'll be worth a lot. Chances are, they're just 'retired' life insurance salespeople who failed at their last scam...that is, Whole Life.

[Bullet1987]

30. Great advice in this thread guys...thanks...

I have it bookmarked and I'll check out some of those books too. I have a LOT of work to do!

[slipslidingaway]

34. Dow Jones Industrial Average (1900 - 2007 Monthly)

http://stockcharts.com/charts/historical/djia1900.html

Other historical charts
http://stockcharts.com/charts/historical/


When you look at the 100+ year chart of the Dow imagine being 20 years old and purchasing stocks in the late 1920's and how long it took to get back to your purchase price, still not much of a problem if you held bought and held the stocks.

Then imagine being 50 years old, with even more money to invest, and purchasing stocks in the same years. If you were lucky you may have sold them 10 years later for a price near what you bought them for or 20 years later again near your purchase price.

Then look at the period between 1965 and almost 1985, the market went sideways for almost 20 years with no appreciable gains, except maybe for dividends.

It all depends on the general trend, your age, the amount of money to be invested.

Initially you might want to start with ETF's until you have more money and are comfortable picking an individual stock, BUT again these will follow the general market trend so be prepared for ups and downs and remember the market recently had a near 5 year run from the 2002 low.

http://www.investopedia.com/terms/e/etf.asp

And that 2002 low was the day the Congress voted to go to war with Iraq! Funny thing :)

Good luck!


And Presidential cycles
http://www.contraryinvestor.com/2007archives/mojuly07.htm

[zagging]

36. First off, don't listen to Cramer

Read up on him. Nobody knows where he's coming from except his very well heeled friends, and I would guess they're in on the gig before anyone else.

My advice: Pick a subject you like or know something about, study the companies in that sector, pick a few stocks and track them for a while. Six months minimum. Read all the message boards and goole EDGAR for the SEC filings on the companies you're interested in. Read it, digest it and try to learn the importance of the filings. Read up on stock manipulation, and definitely learn how options affect the market.

In this time, you should be able to learn how and why the price per share is affected by press releases, sec filings, and institutional investors. If Cramer mentions your stock, you'll also see how a simple word can blow the top off, or the bottom out of, your issue.

A few rules:

1 Don't get emotionally involved.
2 It's a bare assed gamble. Only gamble what you can afford to lose.
3 Set your sell price on the up and down sides before you get in, and get out if you strike that price.
4 You're not the captain. Don't go down with the ship.

[zagging]

37. Benjamin Graham: The Intelligent Investor

Originally written about 60 years ago, but all the principles still apply and it's been updated. A must for beginners.

http://www.amazon.com/Intelligent-Investor-Book-Practical-Counsel/dp/0060155477

[Dorian Gray]

39. I would do dollar cost averaging

into a total market mutual fund so you are well diversified.

(So, that means if you have $2500, instead of putting it all in at once, put $200 into the fund every month. That way, if it goes down, you don't get hit as hard.)

[Horse with no Name]

40. Gold isn't safe?

But the stock market is?:crazy:

[Mutineer]

41. If your company offers a 401(k) option

take it. Contribute up to the amount that your company will match (if they match). My company matchs up to 5 so that's free money for the 5% they kick in to match my 5. You can't turn that down. Then put the rest in a Roth IRA. Ideally you should be saving 20% of your money per month in a retirement account. Research is readily available on Mutual Fund performance for the last quarter, year, last 5 years. You want a mix of mutual funds in your portfolio. Avoid real estate mutual funds like the plague. Overseas mutuals are good now.

[B Calm]

44. Go see a financial advisor like Dean Witter..

[Yupster]

46. Best advice on the thread

I wouldn't mention a specific company, but most advisors offer free consultations. Talk to a few and pick one you're comfortable with.

Worst advice would be to pick stocks because people on an internet chat site recommended them.