Gonna start investing in stock. Any tips for a newbie?

[logicallefty]

What online brokers do you guys use and trust with your money? I've used Etrade for about 8 years but they are $9.99 a trade. I know there are others that are cheaper.

 

[Bible_Belt]

I've used Etrade for about 8 years but they are $9.99 a trade. I know there are others that are cheaper.

No man, you only think it's ten bucks. The online brokers like e-trade sell their orders to other firms. If you put in an order to buy at $20, you don't get to pay 20 until the stock is actually trading at 19.95 or so. They don't have to report that charge to you, either, even though they make a lot more money that way than from getting ten bucks from you. Oh, if a stock is really moving....you're not getting filled if you are on the wrong side, like trying to sell something that is plummeting. No one will buy your order until they know they are making a spread on it.

You need a direct access broker. You'll also need to pay for your own data feed, like metastock, if you want to look at charts and real time prices.

I E is the most popular, at least the last time I was involved in such things:
https://www.interactivebrokers.com/en/home.php

Also check out http://www.elitetrader.com They have broker reviews. You might also like http://www.siliconinvestor.com and http://www.hardrightedge.com/

 

[Tenacity]

Today's stock market isn't what it used to be. The stock market used to be about the fundamentals of the company in particular, where you would pick stable, growing companies with good earnings now and what you predicted to be good earnings going into the future. You would buy for the long term and look at cashing in on the stock price appreciation (because of the growth of the company, more people would be looking to get in on it) and then the dividend distribution.

Today's stock market is about 20% "fundamentals" and 80% BULLSHYT that has nothing to do with said fundamentals, these things include but ARE NOT limited to things such as global central banker influence, globalization period, and other things that have NOTHING to do with the fundamentals of the companies you are buying.

I personally am not participating in the stock market as I don't even understand WTF it is anymore. Nobody can predict what the stock market is going to do and I'm the type of investor that needs to make FORECASTS on where my money will grow to (before inflation) within 10 years. As a result, I ONLY invest (passively) in fixed income investments. Your fixed income investments will include things such as:

- Individual Bonds

- Long Term CDs

- P2P Loans

- Annuities

Understand that not even a BOND FUND is good, because you have the said trading aspect occurring within the bond portfolio. I'm the type of guy that likes to buy the product, hold it until maturity, collect my interest payments along the way, and then get my principal back at maturity.

Obviously inflation is something you can't predict, which is what "stock market boys" like to always throw up in fixed income investors' faces. But the FLAW in that argument is that with the fixed income investment, I know what my initial rate of return before inflation will be....whereas the stock market boys have no fvcking CLUE what their rate of return before inflation will be, if they have a damn rate of return at all.

For some 10 - 20 year periods, Long Term CDs have BEATEN the initial rate of return of the Stock Market. I kid you not. I broke this down on the City Data Investing Forums (which is FULL of stock market boys) and it pissed everybody off because they are sold on the "stock market is everything" bullshyt that the financial advising world has programmed us to believe.

 

[Tenacity]

Bonds can (and do) lose money i.e. Enron. "Fixed income stocks" lose money too. The perception (by Wall Street) is that these products are "safe", but they're not. You may not lose as much, but there's enough potential risk to lose everything.

Also, when the rate of inflation goes up, the value of bonds goes down.

Long-term CDs I don't recommend. They won't beat inflation and the bank will penalize you for early withdrawal. I recommend liquid cash be kept in a savings or checking account. 6 months-1 yr's monthly salary...just in case I lose my job, break my leg, or there's another terrorist attack.

Espi,

You make some good points but I wanted to elaborate on a couple of things.

- The concept of bonds "losing money" is only based on the trading aspect. If you buy individual bonds and hold until maturity, you are going to be paid the interest payments as scheduled and then receive the principal payment back at the end of the term....assuming the issuer didn't file bankruptcy.

- The trading aspects of securities is when you get into all of these issues, which is going to be the issue with any stock (or stock fund) you purchase as well as bond funds.

- Everybody loves to mention "inflation" when discussing fixed income investments, but nobody seems to discuss "inflation" when discussing stock market returns. If I buy a Long Term Brokered CD for 3.5% for 25 years, while I have no idea what my "after-inflation" rate of return will be, I DO know what my initial rate of return will be....which is 3.5%. When you invest in stocks, you have no idea what your initial rate of return will be nor what the "after-inflation" rate of return will be.

With that being said, I just do not like today's stock market because again...it's not based on the fundamentals of the companies you are buying anymore. Way too much Central Banker influence. The Central Bankers go to 0% or NEGATIVE (like Japan) and this causes the stock market to rally. I'm just not interested in playing that game. I love the fixed income side because I know exactly what I'm going to get before inflation kicks in....I have absolutely NO IDEA what I'm going to get with stocks.

* BTW, Long Term CDs are beating inflation right now and have "just about" always beat inflation throughout the years. Long Term CDs are those that are 5 years and greater, the places to find them today are through Internet Banks and Brokers. I mention that Long Term CDs have "just about" always beat inflation at all times, but understand the stock market has failed to beat inflation over extended periods of time as well.

 

[Bible_Belt]

The theory that the stock market cannot ever be predicted with enough accuracy to be profitable is called Random Walk. That's what they teach at college, because textbooks about markets are written by people who have never traded. My girlfriend took a college course about stock investing. The professor was an avid Random Walker. He went on and on about how the market was impossible to predict. To demonstrate, he had everyone sign up for the stock simulator at a web site called walstreetsurvivor.com - which is quite good, by the way, everyone involved in the market should "paper trade" with fake money first.

It was a summer course, so they only had about a month. I picked most of her stocks for her; I even let her pick a couple. When the little competition was over, everyone in the class was up or down about 2%. She was up 10%. The professor asked her what she did, and she rattled off what she remembered me saying, using phrases like "consolidation following a 52-week high," and the professor was clueless. He didn't even know what the words meant.

I made a living for years predicting that randomness; doing what college professors say is impossible. I always had a chip on my shoulder toward Random Walkers, because their premise is that I don't exist.

Markets have never been truly about fundamentals. If they were, every company would trade at book value, and there would be no need for a market. Introducing fear and greed into the pricing is what makes market value different from book value. Every market has always been about fear and greed; that's what drives everything. The best book about trading ever written talks about that idea; it's so old that its copyright has expired, and you can read it for free here: http://www.trading-naked.com/library/jesse_livermore.pdf

 

[synergy1]

A month wouldn't be enough time to really get much out of a class for trading stocks in my mind. And while I do believe in randomness of the market, it is in the short term. In the long term , I believe the market ultimately recognizes value or trouble.

For this class I would have picked stocks with upward trending earnings and stock prices who either had a positive earnings report recently and or was not going to release a quarterly earnings statement within that month long period. That way if the stock was trending up, it would probably continue to do so for a few weeks without a shock to the earnings or anything like that...

 

[Tictac]

The theory that the stock market cannot ever be predicted with enough accuracy to be profitable is called Random Walk. That's what they teach at college, because textbooks about markets are written by people who have never traded. My girlfriend took a college course about stock investing. The professor was an avid Random Walker. He went on and on about how the market was impossible to predict. To demonstrate, he had everyone sign up for the stock simulator at a web site called walstreetsurvivor.com - which is quite good, by the way, everyone involved in the market should "paper trade" with fake money first.

It was a summer course, so they only had about a month. I picked most of her stocks for her; I even let her pick a couple. When the little competition was over, everyone in the class was up or down about 2%. She was up 10%. The professor asked her what she did, and she rattled off what she remembered me saying, using phrases like "consolidation following a 52-week high," and the professor was clueless. He didn't even know what the words meant.

I made a living for years predicting that randomness; doing what college professors say is impossible. I always had a chip on my shoulder toward Random Walkers, because their premise is that I don't exist.

Markets have never been truly about fundamentals. If they were, every company would trade at book value, and there would be no need for a market. Introducing fear and greed into the pricing is what makes market value different from book value. Every market has always been about fear and greed; that's what drives everything. The best book about trading ever written talks about that idea; it's so old that its copyright has expired, and you can read it for free here: http://www.trading-naked.com/library/jesse_livermore.pdf

If you do it for a week or a month, either fundamental or technical analysis or dart throwing can look like a winner. When you can beat the un-levered S&P 500 index or even the Vanguard S&P 500 index fund for ten years including your trading costs and tax liability, get back to me. I'll stake you.

 

[yuppee]

William Oneal claims to have made a bundle with his system. But I notice that he also publishes a newspaper (the investor's Biz daily) and wrote a book about it, which have to provide a lot of money. If you made so much money with your system, why bother with all of that? altho some people DO love to teach and do carry on long after they could just kick back on what they've made. So his doing those things, too, is not necessarily an indictment, just a warning-flag that might be pertinent.

 

[Bible_Belt]

It was more like three years, not ten, but then the day trading industry disappeared. Computer trading took over, and most intraday movement is now "faded" by the computers. They sell into what goes up and buy what dips, because they don't have emotions like people. Back when it was all the emotional humans, stocks would make huge intraday runs. That was the easy money for day traders that fueled the industry.

Believe it or not, you're actually onto something with IBD. I think he does something like put 52-week highs in bold in the stock quotes. That's a little thing, but it encourages the simple idea of buying stocks because they go up. It's buy high, sell higher. Whatever you think you can learn from a company's fundamentals, it's already factored into the stock price. We have the most efficient market in the world. You're not going to discover anything that everyone else doesn't already know.

 

[logicallefty]

Today's stock market is about 20% "fundamentals" and 80% BULLSHYT that has nothing to do with said fundamentals,

I think this statement is applicable to a lot of aspects of people, the world, and life these days. Stock market, justice system, work, etc, etc, etc. Feminism, corruption, propaganda, scams, etc., etc., etc. The world is flooded with people who are dishonest, lazy, incompetent, non fact minded, etc. When the world is stable and relatively "ok", these people are able to blend in and hide better better and have the negativity they push out to the world be absorbed by the people who do positive things. When the world on a downward turn, these people have less opportunity to blend in and have their lack of contribution to the world go unnoticed.. I think in the case of what we are setting today, things are moving towards being even more extreme as to where these people are actually starting to take over. As I have said before, I encourage all of you to do a little research on sociopaths. These are the kind of people really killing the world. And its not that everyone is a sociopath, but many, many, many people have at least some sociopathic tendencies. And the more said tendencies they have, the further from them we need to try and get. We good people are slowly becoming the ones who need to blend in and hide as best we can so we don't have to cross paths with any more of these people with sociopathic tendencies as necessary.

 

[Tenacity]

The theory that the stock market cannot ever be predicted with enough accuracy to be profitable is called Random Walk. That's what they teach at college, because textbooks about markets are written by people who have never traded. ............
Markets have never been truly about fundamentals. If they were, every company would trade at book value, and there would be no need for a market. Introducing fear and greed into the pricing is what makes market value different from book value. Every market has always been about fear and greed; that's what drives everything.

My question to you is this (maybe you can answer it because NO financial adviser has been able to)...

As a 32 year old male, I'm told that I'm stupid for not having 80% of my passive retirement monies in the stock market right now based on a 100 year old chart that they pull out. You can use something like the money chimp calculator and from 1916 - 2016, the CAGR of the S&P is 10% before inflation.

So based on this PREVIOUS performance, I'm supposed to "expect" this same 10% CAGR going forward over the next 33 years which is the amount of time I have remaining until age 65 at retirement. But every fund has the statement at the bottom that previous performance does not guarantee future performance, thus, using this 100 year old chart means jack shyt in regards to what 2016 - 2046 will be like.

My question is this. If I went to Vanguard right now to diversify a "portion" of my current fixed income portfolio into the S&P Index Fund which I would buy for $187, what analysis can you show me that this fund is going to go up in price to $200? To $250? To $300? To $400? To $500? And how long would it take to get there? THAT'S the information that I need, which will allow me to forecast my return on investment over time, which might again take 10 years, 20 years, 30 years, or even 40 years.

I never get the answers to my fvcking question. All I get is theoretical Wallstreet jargon about buy and hold, how the stock market will "always" beat out everything else (without any fvcking explanation as to how), how you can't time the market, and how I need to just stop over-thinking it and diversify into a balanced fund of stocks, bonds and cash equivalents.

I'm not investing in SHYT that I don't fvcking understand. And I'm not investing a penny (literally a penny) in the fvcking S&P index fund until I can figure out how buying in at $187 today, I'm going to grow to $200, to $300, to $400, to $500, etc. within the next 10 - 30 years. That's what I want to know.......

 

[Bible_Belt]

Nobody knows the future. Me saying I can make money trading is not the same as knowing the future. Here's another mind-blowing fact - successful traders are usually wrong more times than they are right. I would typically lose money on two out of three trades. But that's mostly because of using "stop losses." That means you ditch the trade when you are down a certain amount and take a small loss before it turns into a big loss. How did I make money if most of my trades were losers? Simple. The winners were big ones, that more than made up for my losses.

I had a client once who was probably the worst trader I ever knew. He pissed away about $50k in one year, because he would never listen to anyone trying to help him. We ran a computer analysis program of his trades. It turns out he was profitable in 90% of them. But the other 10% were huge losses that killed him. He was letting every losing trade ride in the hopes that it would come back. And usually it did, but he still lost everything, because that is the wrong way to trade. I'm grateful I learned with OPM, where they don't let you do stupid sh!t like that.

If you're asking me where the market is going to be years from now, I have no idea. No one does. If I were managing my own account, I wouldn't care. When you own the strongest stocks in the market, and you sell short the weakest, it really doesn't matter what the overall market does.

Another thing about mutual and hedge funds, those guys are huge. They have to take huge positions when they take a position. Let's say I pick out a medium-volume small cap stock that I want to buy. My position might be 1,000 shares. No one cares about my measly thousand shares. But if Hot Shot Hedge Fund wants to take a position, he might have to buy 500,000 shares. That's the type of buy order that moves the market. He'll have to hide his hand and accumulate slowly, and he'll still push the stock up just from his volume. Then if it goes down, he'll be left holding the bag with no one to sell to. Those same Hot Shot fund managers who make 10% a year for the fund might easily make 100% return on a small account of their own. It's much easier to get a high percentage return on a smaller amount of money.

 

[Tictac]

I'm not investing in SHYT that I don't fvcking understand. And I'm not investing a penny (literally a penny) in the fvcking S&P index fund until I can figure out how buying in at $187 today, I'm going to grow to $200, to $300, to $400, to $500, etc. within the next 10 - 30 years. That's what I want t

If history is any guide (one day, it won't be) stock indices will gain you higher returns over any period five years or longer than any other type of financial asset including real estate. That is just a fact.

If you want to know the future before you invest, you will keep your money 'safe' and not even matching inflation.

 

[l_e_g_e_n_d]

But every fund has the statement at the bottom that previous performance does not guarantee future performance, thus, using this 100 year old chart means jack shyt in regards to what 2016 - 2046 will be like.

The fund disclaimer is for litigious prevention and compliance with federal law.

You want a sound strategy: Pick ten big board stocks with market caps over 100 billion that pay dividends of 3-4%+ annually: e.g., GE, K, INTC, IBM, PG. Hold until retirement. Reinvest compounded dividends into increasing your positions. That's it. No fund, indice, or money manager will produce better returns over the long term than what I just outlined.

 

[Tenacity]

If history is any guide (one day, it won't be) stock indices will gain you higher returns over any period five years or longer than any other type of financial asset including real estate. That is just a fact.

If you want to know the future before you invest, you will keep your money 'safe' and not even matching inflation.

- In regards to the 5 year period minimum, that's not true and I can show you a variety of 5 to 10 year periods where stocks had a lower return (before inflation and taxes) than Long Term CDs and Bonds.

- In general, the rule is that stocks usually beat everything else "passively" when you get to 15 years and above.

- I love how you did exactly what I just ranted against. When you want to steer people away from investing in fixed income investments, you talk about "inflation", but when discussing investing in the stock market, the topic of inflation never comes up. Here's a newsflash, I can show you many 5 to 10 year periods when the stock market had negative returns before inflation, which means when inflation was added in the "real return" was even worse. But nobody wants to discuss that because quite frankly, Wallstreet has done a VERY GOOD job programming the minds of people in this country to think that the stock market is the be all-end all of passive investments.

It's not. Nobody on this forum can tell me what the S&P will do from 2016 - 2046. The stock market is full of BS, central banker influence, globalization influence, and a bunch of other shyt that has nothing to do with what you are "taught" about stock investing as an long term equity position holder.

I'm not telling anybody not to follow the traditional "advice" of the financial management industry of diversification through stocks, bonds, and cash, all I'm saying is people need to start doing their own individual research and wake up to the crap we are being sold as "gospel".

The fund disclaimer is for litigious prevention and compliance with federal law.

You want a sound strategy: Pick ten big board stocks with market caps over 100 billion that pay dividends of 3-4%+ annually: e.g., GE, K, INTC, IBM, PG. Hold until retirement. Reinvest compounded dividends into increasing your positions. That's it. No fund, indice, or money manager will produce better returns over the long term than what I just outlined.

If I were going to diversify into the trading market, I would not attempt to beat the S&P. Most actively traded mutual funds do not beat the S&P index, I would do the following if I were going to diversify into the trading market:

- I would put a portion here: https://personal.vanguard.com/us/funds/snapshot?FundId=0040&FundIntExt=INT

- I would put a portion here: https://personal.vanguard.com/us/funds/snapshot?FundId=0969&FundIntExt=INT

- I would put a portion here: https://personal.vanguard.com/us/funds/snapshot?FundId=0113&FundIntExt=INT

- I would put a portion here: https://personal.vanguard.com/us/funds/snapshot?FundId=0084&FundIntExt=INT

- I would put a portion here: https://personal.vanguard.com/us/funds/snapshot?FundId=1231&FundIntExt=INT

- The remaining portion would be placed in Long Term CDs with the rest being placed in a high yield savings account to assist with emergencies.

The amounts allocated to the 5 funds and the CDs, will depend upon my risk tolerance at the time as well as my age. In terms of the side savings account, I usually keep a small amount there because if push comes to shove, I can always use my 0% interest for 18 - 24 month credit lines for emergencies.

 

[l_e_g_e_n_d]

Tenacity, your Vanguard citations pay no dividend, and thus pale in comparison to a diversity of stocks that represent the market that do pay high dividends which are reinvested to buy more stock.

You always have the Vanguard dividend fund, but that fund invests into stocks with dividends between 1 and 2% per annum. My recommendation is 100 bil+ market cap, big board stocks that pay dividends of 3-4%+ per annum.

A diversity of stocks (with caps 100 bil+) fluctuate year-to year, but over the long-term will appreciate. During short-term periods and fluctuations, they pay high dividends. These dividends are reinvested to buy more stock, which pay dividends and will eventually appreciate. There is no better long-term strategy than what I outlined in Post 38. I challenge anyone to create a stronger long-term strategy.

 

[Tenacity]

Tenacity, your Vanguard citations pay no dividend, and thus pale in comparison to a diversity of stocks that represent the market that do pay high dividends which are reinvested to buy more stock.

You always have the Vanguard dividend fund, but that fund invests into stocks with dividends between 1 and 2% per annum. My recommendation is 100 bil+ market cap, big board stocks that pay dividends of 3-4%+ per annum.

A diversity of stocks (with caps 100 bil+) fluctuate year-to year, but over the long-term will appreciate. During short-term periods and fluctuations, they pay high dividends. These dividends are reinvested to buy more stock, which pay dividends and will eventually appreciate. There is no better long-term strategy than what I outlined in Post 38. I challenge anyone to create a stronger long-term strategy.

But they might or might not pay dividends Legend, you aren't guaranteed those dividends all of the time. I personally wouldn't be trying to beat the market like that unless I'm some active inside trader with access to information, networks, and computer systems that give me a significant advantage in the market.

 

[Tictac]

If inflation is kicking the stock market in the ass, you can be sure that your bonds are getting beat up even worse. Yes you will get your stated yield less your buy/sell costs and whatever premium/discount you paid and tax liability for the bond and that's it.

Enjoy!

 

[Tenacity]

If inflation is kicking the stock market in the ass, you can be sure that your bonds are getting beat up even worse.

- If inflation averages 2% a year over a 10 year period

- If my bonds/fixed income averages 5% a year over a 10 year period

- And if the stock market averages a -5% a year over a 10 year period

Did the bonds/fixed income come out ahead, or did the stock market? After inflation, the bonds got a "real" return of 3% per year and the stocks got a "real" return of -7%.

BTW, there are periods where the above example happened. Usually with stocks, you need to hold them at least 15 - 20 years to complete a full-fledged boom/bust/boom/bust cycle.

 

[Tictac]

- If inflation averages 2% a year over a 10 year period

- If my bonds/fixed income averages 5% a year over a 10 year period

- And if the stock market averages a -5% a year over a 10 year period

Did the bonds/fixed income come out ahead, or did the stock market? After inflation, the bonds got a "real" return of 3% per year and the stocks got a "real" return of -7%.

BTW, there are periods where the above example happened. Usually with stocks, you need to hold them at least 15 - 20 years to complete a full-fledged boom/bust/boom/bust cycle.

If.

I thought that you wanted not to get involved in predicting the future?