For all the investors out there......

[backbreaker]

whatever wutangfinancial says I'm with, because as well all know.. Wu Tang Clan ain't nothin to Fvck with!

 

[GQ_Confidence_1]

97% of the population has no business (attempting to) buy and sell individual securities, be them bonds or stocks. Most people are far better off buying mutual funds.

Unless you're, say, a financial analyst by profession such as Clooney, ignore any advise to read any book that would have you buying individuals stocks and bonds. There are so many other better things to do with your time. The chance of an ameteur beating a vanilla index stock mutual fund(s) over a long period of time are very slim.

Also, avoid reading scam-artist books suck as any written by Kiyosaki. Right this very moment, many people are learning the hard way about the fools gold in real estate "investing" (which is much more accurately described as a job, than an investment). With mere investments, you don't actually do much of anything.

Most people need more help learning how to manage money, budget, and learning save vs. spending discipline than on how to get the highest return on their money. It kills me how people will spend so much of their day studying how to invest in stocks when they don't save enough to even make the effort worth their time! Because of my saving discipline, I don't need super high returns to have a lot of money. Saving discipline is where it's at. Your rate of return is ancillary compared to that!

I'll play devil's advocate.

I think the beauty with stocks...

-You get better over time. I dont think you're going to learn it instantly, but there's alot of books out there. There are alot of different strategies. Similar patterns repeat (this time it's different!).

-Human nature doesn't change...regardless of computers, technology, or how fast the connection is to your broker.

Warren Buffett for example talked about buying Korean stocks a few years ago, he bought Petro China a few years ago. This is when the whole world was out looking for great investments.

Of course, I dont think everyone is going to be the next Warren Buffett...anymore than they'll be the next Tiger Woods. But it doesnt mean you can't learn a better golf shot.

-I think there are good parallels to stocks in other fields. Poker for example. Good similarities.

-Its easier to buy stocks now than it ever has been. Vs 20 years ago for example. And with China, India, etc opening up. Its easier to play foreign markets.

Not to say everyone will run out and beat the market. But, there are some pluses.

But I do agree you have to use your time well, and get your priorities in line. Only after managing money, budgeting, saving, and working on other areas should you think about stocks. And even then the returns dont match all the hype surrounding stocks.

At the high end, a mutual fund or index returns 10 or 12% a year. Thats always the mantra.

Yet, invest in your communication skills. Invest in a wardrobe. Invest in sales skills....those pay off alot higher than 10 or 12%.

I belonged to Toastmasters a few years ago...$80 a year. If it helps you make, even $2,000 a more a year in more appointments, closed sales or better sales, you made 25 times your money, no risk.

 

[synergy1]

I am a beginner and always looking for more useful resources to get started. This book looks solid. You have any others?

Any suggestions on using a broker or discount brokers? if the later, what service is good for a beginner. I have enough sound technical knowledge of the markets, but need to get my feet wet and become more than an academic on the subject. I already have a few thousand in a few companies thanks to my 401k, but is hardly considered investing/ trading on any sort of intelligence choice.

thanks again, us beginners are always appreciative of people dropping some helpful advice because god knows there is enough bad advice to fill the state of Texas.

 

[GQ_Confidence_1]

Maybe others will chime in, but I think brokers highlight and advertise the wrong things for investors. Their ads scream amateur:

-Highlighting the cost per trade. Only $9.95 a trade. Or, 100 trades free. Maybe others will disagree, but if you're worried about the cost per trade, you probably shouldn't be trading. Reliability and execution are more important than small commission differences. Unless you're trading alot of shares, or are trading in and out every 5 minutes.

-Highlighting free research/free analysis. I dont think you need it. There's already more analysis and research than anyone can possibly use or comprehend.

Why not study people that are successful instead?

-Advanced charting and platforms. Again, your mind set is more important than any charting or programs you have running. Everyone always says the same thing...keep your emotions in check. Stay disciplined. Etc. The charting and platforms are all secondary to your mindset, money management, etc.

-Too ease of use focused. Like the infomercials that describe trading as 1-2-3, buy the green light. Sell on the red light. It couldn't be easier. You have to do some real work...its like learning anything else.

You wouldn't expect to learn DJ'ing in 3 easy steps.

I'd also be very wary of free investing/trading workshops (i.e. small presentations that are used to upsell you to seminars costing thousands). Or magic software. Or newsletters.

I'd also avoid going too deep into the trading/investing world and getting "programmed confusion". Where you get so deep into it, you dont know whats right anymore. The way some people do on this site...getting so deep into seduction and acronyms, they forget the basics. Or even...women are human beings! You wont think well piling stuff on.

Just a few thoughts.

 

[azanon]

-You get better over time. I dont think you're going to learn it instantly, but there's alot of books out there. There are alot of different strategies. Similar patterns repeat (this time it's different!).

If the average mutual fund manager who usually has related degrees out the wazoo, spends all day picking stocks/visiting companies, and is paid 100s of thousands of dollars to do exactly this can't beat an index stock fund (this is a true statement that's been well documented and demonstrated) covering the spread of the expense ratio, then what makes you think you (or anyone else) can?

In short, can you beat an index fund? Here's how to tell: find a random number generator on the net, set it to a range of 1 to 100, and roll it. if you hit exactly 100, then maybe you can. ~80% of fund managers cant do it; how much higher is this percentage for the average joe doing it in his/her spare time????

Wanna get rich? Focus more on how you can make more money in your occupation, or trade. Once you make the money, find something autopilot-like to protect and grow it; again, like index funds. "Day-trading" or simply buying and selling stocks yourself for any holding time period is about as legitimate an occupation as gambling in Las Vegas.

 

[Ingeniarius]

My thing: I don't think of "just" buying the stock, but I buy the value behind the stock: The company. If the company has a good business model, brands or other things (possibly technology is the broadest sense) and a consistent profit, then you are buying value. The trick is to find a company that offers its value for less than what its worth, and these are called under-valued companies. Over time, other people will be aware of the company, and then the stock will rise. You have to be prepared to hold the stock for a long time however, as this might take a few years.

 

[GQ_Confidence_1]

If the average mutual fund manager who usually has related degrees out the wazoo, spends all day picking stocks/visiting companies, and is paid 100s of thousands of dollars to do exactly this can't beat an index stock fund (this is a true statement that's been well documented and demonstrated) covering the spread of the expense ratio, then what makes you think you (or anyone else) can?

In short, can you beat an index fund? Here's how to tell: find a random number generator on the net, set it to a range of 1 to 100, and roll it. if you hit exactly 100, then maybe you can. ~80% of fund managers cant do it; how much higher is this percentage for the average joe doing it in his/her spare time????

Wanna get rich? Focus more on how you can make more money in your occupation, or trade. Once you make the money, find something autopilot-like to protect and grow it; again, like index funds. "Day-trading" or simply buying and selling stocks yourself for any holding time period is about as legitimate an occupation as gambling in Las Vegas.

I think mutual fund managers are in a different game than the average investor.

1. I think they've very susceptible to trends, crowd folly, following whatever is hot. Look at tech mutual funds when DELL, INTC, and CSCO were going up everyday in the "new economy".

2. Very susceptible to thinking, "it's different this time." Look at the real estate bust and how many "pro's" thought it would go on forever. Totally contrary to common sense.

3. Mutual funds have alot of money to invest (hundreds of millions or billions), their universe of potential stocks is much smaller than the average man on the street. Just because they don't buy it, doesnt mean its a bad investment or that it cant go up.

Options and other investments that you can buy, etc. Or they have artifical rules...can't buy stocks under a certain $ amount, or capitalization. Or diversification rules.

4. I think most try to do too many things. Like Cramer on tv, when he tries to predict interest rates, oil, the economy, what the FED will do, and hundreds of other companies.

Contrary to other investors that only play when they think they have an edge.

5. There are also differences in personality, keeping emotions in check, discipline. Its like poker, there are alot of players, some are good, some are average. Some flame out.

6. Or some mutual funds chase whatever is hot and sexy. "Value investing" is boring (i.e. Warren Buffett). Or with Jim Rogers, commodities are considered "boring". You see it in interviews.

 

[Bible_Belt]

In short, can you beat an index fund? Here's how to tell: find a random number generator on the net, set it to a range of 1 to 100, and roll it. if you hit exactly 100, then maybe you can. ~80% of fund managers cant do it; how much higher is this percentage for the average joe doing it in his/her spare time????

You have described random walk theory, the idea that it is impossible to predict the markets. The academic world still teaches that theory, but traders laugh at it. If the market could not be beaten, then there would be no George Soros or Warren Buffett. Random walk theory says that they have done the impossible.

Wanna get rich? Focus more on how you can make more money in your occupation, or trade. Once you make the money, find something autopilot-like to protect and grow it; again, like index funds.

For almost everyone that is true, I agree.

"Day-trading" or simply buying and selling stocks yourself for any holding time period is about as legitimate an occupation as gambling in Las Vegas.

Although they are in the vast minority, there are still profitable day traders and swing traders in the markets. It is a very legitimate occupation. The financial markets benefit from all participants - the more people, the better. Every trader adds liquidity and lowers the transaction costs of everyone else.

 

[synergy1]

I saw that stupid stock tips thread and wanted to bring this thread back to page 1. I have read buffetology and thought it was great. With a background in economics, it gives one a simple way to intrinsically value a company and give one enough to pull the trigger. Its also nice to understand the mechanics of how buffet made his fortune; essentially his return was based on the price he paid. What made him genius was picking out the right companies and buying them at a huge discount, than cashing in years later.

What are stock tips? they are trying to predict the future based upon stock price alone. After reading a book like buffetology, one can understand the mechanics about how a companies actual value increases..and its based upon more than a hot tip about management. this OTC pump and dump **** is a free lunch, and a few laypeople are falling for it. Please don't. Put in the time required before you purchase a security. Heck, Graham himself recommends that most people who don't have the time should stay away from buying securities like stocks and bonds.

Do the leg work!