Investing in the Stock Market: CAG Investors?

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gweenpea

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I was wondering if people on CAG actually do any regular investing. I read through a post from April of this year, but it wasn't what I was looking for. IE what are you guys investing in? I am not looking for stock tips. I am looking for how you pick the stocks. Do you just grab up penny stocks (less than $5), or find a good P/E ratio or P/S ratio? Or find a good business model? How about good video game companys? EA/Sony/Microsoft?

Also what are your thoughts about Index Funds. I have done a lot of research into them and they look like the best safe investment. They average 2.5% annual return better than 99% of the mutual funds out there.

So you know my investment background. I just bought a $170 K house last month, and have a few thousand to invest in the long term. I'm trying to make a better return on my money then my mortgage's interest rate 7 %.
 
With the way things have gone over the past 6 years, it's not a guarantee that index funds will get you over 7% annually. There's a good chance, but don't go into it with that expectation. Go at things like you would going to the track or a poker table: what are you willing to risk? Return expectations run a distant second. So when you're shopping around, think about risk first and make potential (and especially PAST) returns an afterthought. My wife and I have our money across a bunch of index and bond funds of varying degrees of risk that we shuffle around every couple of years, and we're comfortable with the low maintenance of funds and the risk we've taken on.

Don't screw with penny stocks. They're for traders and people who like to lose money.

Being successful with a portfolio of individually chosen stocks takes a lot of research and a willingness to buy and step away. If you try to trade it, which most people wind up doing, you will most likely lose. The best advice if you want to play with stocks is simple:
1. Research, research, research
2. Don't trade. Invest.

I traded full-time for 3 years and made and saved a lot of money doing it, and I was around a lot of guys who traded full-time and played Warren Buffett in their freetime. The biggest mistake I saw them make was applying a trading mentality to investments: they would do insufficient research and consequently lack the confidence to hold just about any investment in the face of day-to-day price swings.

The key then is to do enough research to convince yourself, no matter what happens, that you are right and that your position is sound. It's an arrogant, close-minded attitude, but you need those blinders to be able to stare down bad news and still feel good about where you have your money. A good example of the kind of people who do well juggling their own investments is the Cramer jackass on CNBC. The guy is a complete tool, but the essence of his attitude (everything he says, according to him, is final and spot-on) is what you need to make money with your investments. If you go the hobbyist fund manager route, make sure that you enjoy the research and are willing to put the time into it. If you can imagine yourself getting burnt out on the research and the charts and the conference calls, get out.

Good luck to you.
 
i just dump the max in the company's 401k since they match 10% maxing out at $2k a year. i figure i'd be lucky to make that plus the return i get from the 401K investing in individual stocks.
 
Investing in stocks have always intrigued me, my uncle(the richest guy in the family) makes most of his money in stocks, but i know very very little about it. Any pointers to get me started out? keep in mind i am only 21, so i feel it's not too late or too early to start. Are there some good classes that'll give me some background insight? How much money should i have dedicated to start off? Basically, i'm just looking for a starting point. I'm not looking at it as a get rich scheme, but rather something i'm interested in and would like to become familiar with. thanksssss.
 
I'm also interested in this...can someone recommend a good place to start reading up about some basic info on investing/trading?
 
[quote name='minqqq']Investing in stocks have always intrigued me, my uncle(the richest guy in the family) makes most of his money in stocks, but i know very very little about it. Any pointers to get me started out? keep in mind i am only 21, so i feel it's not too late or too early to start. Are there some good classes that'll give me some background insight? How much money should i have dedicated to start off? Basically, i'm just looking for a starting point. I'm not looking at it as a get rich scheme, but rather something i'm interested in and would like to become familiar with. thanksssss.[/quote]

Talk to your uncle. Intern for him if you can. The best way to learn is to experience. If he's doing really well, what's stopping you from asking him? He's family after all.
 
[quote name='jaykrue']Talk to your uncle. Intern for him if you can. The best way to learn is to experience. If he's doing really well, what's stopping you from asking him? He's family after all.[/QUOTE]

i've tried talking to him, but he's always too busy, and he lives on the other side of the country. i call him every once in a while but i get like a one sentence conversation. he's not a very big family type person, he doesn't even have a fam of his own. but i'd like to establish somewhat of a knowledge base for investing before trying to shadow an investor. i'm reading up that site mtxbass recommended, and it has some good general info that i need. i think i'll look to see if my school offers any classes that would be informative. but yea, eventually shadowing an investor would definitely be a good idea once i've familiarized myself with the topic and if i'm still willing to invest my time into it.
 
[quote name='minqqq']i'll look to see if my school offers any classes that would be informative[/QUOTE]

yup, that's what I'd recommend. most colleges and universities will have basic or advanced investment fundamentals.
 
I've bought a couple thousand shares in (don't laugh) Phantom (aka PHEI on the index). Having actually seen and tried their lapboard, I can see them becoming a pretty successful niche company come October. Plus, I bought pretty low, and I have be wavering between 10%-25% profit in the last few weeks, and I only see it going up. Well, the tips I always got were to buy a good amount in penny stocks, take a risk here and there, and only use as much money that you aren't afraid to lose. Good luck!
 
[quote name='minqqq']i've tried talking to him, but he's always too busy, and he lives on the other side of the country. i call him every once in a while but i get like a one sentence conversation. he's not a very big family type person, he doesn't even have a fam of his own. but i'd like to establish somewhat of a knowledge base for investing before trying to shadow an investor. i'm reading up that site mtxbass recommended, and it has some good general info that i need. i think i'll look to see if my school offers any classes that would be informative. but yea, eventually shadowing an investor would definitely be a good idea once i've familiarized myself with the topic and if i'm still willing to invest my time into it.[/quote]

That's really sad that he's not willing to help out a family member. I will admit though, I understand where he's coming from. If he's anything like me, he'll field calls from a different relative at least 2 times a day for a little advice. None of my cousins have kids who are old enough to learn the intricacies of investing but I wouldn't hesitate to mentor them when they got old enough.

Anyway, establishing a knowledge base is nice & all but you'll be able to get that from shadowing anyway. I myself didn't know about real estate until my parents helped me buy a place during college & had to learn about it as I went. If your uncle won't help, try & find another mentor, someone locally available, maybe a finance professor or a friend's dad who works as a financial planner.
 
[quote name='jaykrue']That's really sad that he's not willing to help out a family member. I will admit though, I understand where he's coming from. If he's anything like me, he'll field calls from a different relative at least 2 times a day for a little advice. None of my cousins have kids who are old enough to learn the intricacies of investing but I wouldn't hesitate to mentor them when they got old enough.

Anyway, establishing a knowledge base is nice & all but you'll be able to get that from shadowing anyway. I myself didn't know about real estate until my parents helped me buy a place during college & had to learn about it as I went. If your uncle won't help, try & find another mentor, someone locally available, maybe a finance professor or a friend's dad who works as a financial planner.[/QUOTE]

finding a mentor i'd be comfortable with would be sweet, but it's hard cause i'm always traveling back and forth between PA and IL. however, i was driving in my old neighborhood today and i saw a little sign that said something about mentoring real estate investors or something with a phone number... maybe it's a sign? figuratively.

edit: i just realized you live in chicago, i plan on moving out to the city soon. jaykrue be my mentor! haha, kidding. half kidding.. =D
 
Please don't post stock tips here. Tips that end up on CAG are probably a decade out of date anyway.

I have been doing a lot of internet research. http://www.fool.com/ is a good site.

I wouldn't take a course in investing. One thing that keeps popping up is keeping your costs of investing done (before taking an expensive class go to the library and check out some books, go look on the internet, and try to "sit in" on a class to make sure it is worth the money)

I was thinking why can't CAG be the knowledge base mentioned by jaykrue. If you learn something about investing describe it here for CAG to discuss.
 
Retirement Investing

TRADITIONAL vs ROTH IRA

Trad - Interest is taxed when the money is withdrawn during retirement
Withdrawals can start without penalty after 59 1/2
You must withdraw starting age 70 1/2 (can't add anymore money
ROTH - Interest is TAX FREE if you meet certain requirements
Withdrawals can start without penalty after 59 1/2
Can still put money into accounts past 70 1/2
either- You can contribute $4000 a year under 50 or $5000 if you are over 50

Obviously those ages will change based on the government. Does anyone know why you would want a traditional ROTH. To me it looks like a no win situation.

Of course these are retirement accounts so withdrawing before 59 1/2 will get you big penalties.
 
Well, I have been investing for about 15 years. Notice, I didn't say "successfully" investing. It seems that whenever I buy individual stock, I lose money - and that was during the hot 90s.

I tried the "buy what you know" philosophy.

I bought Spectrum Holobyte (renamed Microprose) when Civ 2 came out - great game - has to be a great company right? Well I paid $6 a share for it and it eventually went through a 1 for 5 reverse split and being bought by Atari (?) for $6 a share - so I lost about 80%.

Then when Boston Beer company (makers of Sam Adams beer) went public they offered some shares directly to the public. My wife and I both signed up and got 33 shares each (the max amount 1 person could get) for $15 each. When the stock was placed, they actually went for $20 per share... so I'm thinking great - I'm getting it for $5 cheaper than the pros. Ended up selling them for $7.50 per share. Of course since I sold it its now worth $31.

If you have limited money I would stick to a low cost index fund (Vanguard is known for their index funds).

For stock or mutual funds, I use www.morningstar.com.

I usually look for larger companies that pay a decent dividend. My recent duds have been Whole Foods, EBAY and UPS. My recent hits are Bank of America, Exxon and Abbott Labs.

And don't worry about the day to day flucuations of the stock market. Over a longish period of time, the stock market beats most other investments. Just make sure you don't need the money for 10 years. Also, dollar cost averaging is a good idea in a volatile market - put in the same $ amount at regular intervals. You will buy more share when the price is cheap and less when it's expensive.
 
[quote name='gweenpea']Retirement Investing

TRADITIONAL vs ROTH IRA

Trad - Interest is taxed when the money is withdrawn during retirement
Withdrawals can start without penalty after 59 1/2
You must withdraw starting age 70 1/2 (can't add anymore money
ROTH - Interest is TAX FREE if you meet certain requirements
Withdrawals can start without penalty after 59 1/2
Can still put money into accounts past 70 1/2
either- You can contribute $4000 a year under 50 or $5000 if you are over 50

Obviously those ages will change based on the government. Does anyone know why you would want a traditional ROTH. To me it looks like a no win situation.

Of course these are retirement accounts so withdrawing before 59 1/2 will get you big penalties.[/QUOTE]

If you qualify (based upon income) the money you put into a traditional IRA can be deducted from your taxable income - thereby saving you taxes on that money. So the money originally put in is tax free. Roth IRA are also only available based upon income thresholds.
 
[quote name='gweenpea']
Of course these are retirement accounts so withdrawing before 59 1/2 will get you big penalties.[/QUOTE]

I believe you can borrow against your ROTH, as long as the money is paid back within a certain period of time (6 months I think? Not sure), and you also have to pay yourself interest on the $$ you borrowed.
 
I highly recommend picking up both Buffett: The Making of an American Capitalist and The Essays of Warren Buffett. Both books helped to shape the trading style I adopt today.

I tend to search for solid companies that I believe are either a)undervalued or b)oversold. Many times, these two go hand-in-hand. I started investing in the late 90s with Pepsi, buying shares at $70 ($35 now if adjusted for the split). The company had solid cash flows and growth, produced products that I used in my daily life, and seemed poised for continued growth. I invested a great deal more in the company in mid 2002 (at $40/share) when their stock price dropped drastically because I believed that their underlying fundamentals still held. The stock is trading above $63 today. Combined with their regular dividend and the spinoff of YUM restaurants, my return has been great.

I also have a Roth IRA with 5 stocks in it currently. I try to apply Buffett's methodology when I search for what to buy, and I have been successful thus far at it, with a 13.6% return over the past 1 1/2 years (when I finally invested a great deal of money).

The key is to educate yourself first with the different investment options you have, how to analyze these options, and to find the cheapest way to do so (i.e. minimize broker fees). I would read some investment books, then figure out what investment vehicle you would like to adopt (I highly recommend the Roth IRA), then decide where you want to invest your money (mutual funds, stocks, money markets, etc.). No one strategy fits everyone, so you'll have to find what works best for you.
 
I hate it when people complain about broker commissions making actively trading stocks or ETFs a sucker's game....what a bunch of bullocks (love that word). It all matters on how much money you are investing. If you have a 30K portfolio it is not going to get killed if you make 2-4 trades a month @ 7 dollars per trade (Scottrade). If you are talking a portfolio that only has a few grand then yes it becomes a sucker's game. The reason with 30K you can turn a quick profit therefore commissions aren't important.
However, here is my advice. If you don't know much about stocks or are scared of individual stocks just stick with index ETFs like "SPY" and "DIA". These ETFs track the the SP500 and the DOW respectively.
 
[quote name='jeffreyjrose']I highly recommend picking up both Buffett: The Making of an American Capitalist and The Essays of Warren Buffett. Both books helped to shape the trading style I adopt today.

I tend to search for solid companies that I believe are either a)undervalued or b)oversold. Many times, these two go hand-in-hand. I started investing in the late 90s with Pepsi, buying shares at $70 ($35 now if adjusted for the split). The company had solid cash flows and growth, produced products that I used in my daily life, and seemed poised for continued growth. I invested a great deal more in the company in mid 2002 (at $40/share) when their stock price dropped drastically because I believed that their underlying fundamentals still held. The stock is trading above $63 today. Combined with their regular dividend and the spinoff of YUM restaurants, my return has been great.

I also have a Roth IRA with 5 stocks in it currently. I try to apply Buffett's methodology when I search for what to buy, and I have been successful thus far at it, with a 13.6% return over the past 1 1/2 years (when I finally invested a great deal of money).

The key is to educate yourself first with the different investment options you have, how to analyze these options, and to find the cheapest way to do so (i.e. minimize broker fees). I would read some investment books, then figure out what investment vehicle you would like to adopt (I highly recommend the Roth IRA), then decide where you want to invest your money (mutual funds, stocks, money markets, etc.). No one strategy fits everyone, so you'll have to find what works best for you.[/quote]

PLEASE money markets and CDs are NOOOOOOOOOTTTTTTT investments.

NO RISK=NOT AN INVESTMENT :drool:

PS. THERE IS RISK IN REAL ESTATE THERFORE ITS AN INVESTMENT. DITTO WITH STOCKS, MUTUAL FUNDS, and ETFs.
 
[quote name='dberuvides']If you have a 30K portfolio it is not going to get killed if you make 2-4 trades a month @ 7 dollars per trade (Scottrade). If you are talking a portfolio that only has a few grand then yes it becomes a sucker's game. The reason with 30K you can turn a quick profit therefore commissions aren't important.[/QUOTE]
The danger is not the commissions, it is the trade itself. While the poster in this quote may have had success with this, in the most general sense this practice will burn you.

Scottrade is the beginning of the end for a lot of people. Toward the end of my day trading career, I was very much in favor of hobbyist tools like Scottrade, eTrade, Ameritrade, etc., as they increased my access to suckers with money. If you're going to invest, do it with patience. That doesn't mean you shouldn't reevaluate your position, it just means that you should resist the temptation to reshuffle on a weekly basis. (Human nature can't resist picking at the fluctuations in pricing, and I guarantee that "2-4 trades a month" will quickly become 4 or more per month.)
 
[quote name='gaelan']i just dump the max in the company's 401k since they match 10% maxing out at $2k a year. i figure i'd be lucky to make that plus the return i get from the 401K investing in individual stocks.[/quote]


^ good idea. My company maxes it out at 4% match, but no cap for the year.
 
[quote name='dberuvides']PLEASE money markets and CDs are NOOOOOOOOOTTTTTTT investments.

NO RISK=NOT AN INVESTMENT :drool:

PS. THERE IS RISK IN REAL ESTATE THERFORE ITS AN INVESTMENT. DITTO WITH STOCKS, MUTUAL FUNDS, and ETFs.[/quote]

WOW! Way to overreact buddy! You're right, money markets and CDs are not investments; however, a) I did not mention CDs in my post, and b) one will rarely invest 100% of the funds they have in a trading account, thus my mention of the money market account (where you'll keep your leftover funds). The OP asked how to decide what stocks to pick, so I tried to provide advice tailored to that question (i.e. some books to read, methods to adopt, etc.) He also mentioned that he just bought a house and only has a few thousand to invest, which is why I recommended that he find the cheapest way to do so (i.e. minimize commissions). Your comments in this thread: http://www.cheapassgamer.com/forums/showthread.php?t=100163&highlight=roth, were much more constructive. Time to swing by the pharmacy for some more meds?
 
[quote name='jeffreyjrose']WOW! Way to overreact buddy! You're right, money markets and CDs are not investments; however, a) I did not mention CDs in my post, and b) one will rarely invest 100% of the funds they have in a trading account, thus my mention of the money market account (where you'll keep your leftover funds). The OP asked how to decide what stocks to pick, so I tried to provide advice tailored to that question (i.e. some books to read, methods to adopt, etc.) He also mentioned that he just bought a house and only has a few thousand to invest, which is why I recommended that he find the cheapest way to do so (i.e. minimize commissions). Your comments in this thread: http://www.cheapassgamer.com/forums/showthread.php?t=100163&highlight=roth, were much more constructive. Time to swing by the pharmacy for some more meds?[/quote].

Its not your comments. ITS SOCIETY. I'm sick and tired of people calling CD and Money Markets.....investments. When I worked at a bank I used to have tons of people call CD and money market investments and let me tell you I had to bite my tongue several of those times. I tell you what stay-at-home moms loved to call CD and money markets investments at the bank I worked at. These same people if you ever asked them about investing in stocks, ETFs and mutual funds they would look at you like if you grew a second head. Risk adverse winnies like most women.
 
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