I attended a free class on stock investing. I don't consider myself an expert but always looking to learn. The person who gave the presentation had been investing for over 20 years. He showed a list of stocks he invested in and there must have been 8-10 pages worth of stocks he currently was invested in or was watching. I'll go over some of the methods and tools he used since he didn't have an idea where the experience level of the group who attended. Some of this may be pretty basic.
He started off explaining the rule of 72. The rule of 72 explains how long it would take for an investment to double using a fixed interest rate. He compared the lowest investment of saving/checking accounts (.03%) to saving bonds (1.25%) to CDs (1.5%), to mutual funds (6%), to stocks (11%) and ended at commodities (70%). Items in paratheses are an average rate of return.
For a longer descrpition go here or google rule of 72:
What is the 'rule of 72'?
stock take over - the price of the stock that is being taken over will increase substantially
stock merger - the price of the stock may increase but not as much
He recommended watching the nightly business report which comes on at 5 PM CST. They cover a few minutes on what happend in the market. He has found a quick way to cathc up on the market.
He has made the most of his money from some people's favorite hobbies, tobacco, alcohol and credit cards. He said most people want to literally kill themselves smoking or drinking, or running up heir credit cards and he could reap the benefits by investing in various stocks. The presenter didn't have a credit card balance and made sure he paid everything during the billing cycle.
Invest in DRIPS Invest in a company directly without having to go through a brokerage account. There are plenty of well known companies on DRIPS.
He explained stock splits and used PG as an example. Everytime he bought more shares he sold that same amount when the stock doubled. This way he still got his money back while still continuing to get dividends and investing in the stock. He also explained 2 for 1 and 3 for 1 when a stock split. A stock splits when the company believes the price of their stock has gone too high for people to afford to purchase. When the stock splits the share owner maintains the stock but at a lower price and receives an additional share of the stock. No real value is lost when this happens. In addition the dividend would also decrease.
Do you need an emergency fund? He flat out said "No". Most people have a credit card and if they have no current expenses (bills), a person would most likely use their credit card if they had to attend a funeral, buy a plane ticket, etc.
He explained load vs no load funds. These are easy for people who don't want to get involved with an investment and track the stocks they buy. He went on to compare a mutual fund to a stock investment over a ten year period. He used PG as an example. With a mutual fund you paid an amount year after year and after ten years that could add up to $1000. With a stock investment, he only paid $10 that first year and that was it.
Buy low and sell high.
Start a brokerage account. Even if you want to use it for fun. There are several available. He recommended etrade for beginners and he used ameriprise.
He mentioned sweep accounts. Sweep accounts automatically transfer money that exceed or fall a certain level into a higher interest earning investment option at the close of each business day. Commonly, the excess cash is swept into money market funds (investopedia). I've never heard of this until today.
Provide any additional comments since I'm just sharing what I learned today.
Tom
He started off explaining the rule of 72. The rule of 72 explains how long it would take for an investment to double using a fixed interest rate. He compared the lowest investment of saving/checking accounts (.03%) to saving bonds (1.25%) to CDs (1.5%), to mutual funds (6%), to stocks (11%) and ended at commodities (70%). Items in paratheses are an average rate of return.
For a longer descrpition go here or google rule of 72:
What is the 'rule of 72'?
stock take over - the price of the stock that is being taken over will increase substantially
stock merger - the price of the stock may increase but not as much
He recommended watching the nightly business report which comes on at 5 PM CST. They cover a few minutes on what happend in the market. He has found a quick way to cathc up on the market.
He has made the most of his money from some people's favorite hobbies, tobacco, alcohol and credit cards. He said most people want to literally kill themselves smoking or drinking, or running up heir credit cards and he could reap the benefits by investing in various stocks. The presenter didn't have a credit card balance and made sure he paid everything during the billing cycle.
Invest in DRIPS Invest in a company directly without having to go through a brokerage account. There are plenty of well known companies on DRIPS.
He explained stock splits and used PG as an example. Everytime he bought more shares he sold that same amount when the stock doubled. This way he still got his money back while still continuing to get dividends and investing in the stock. He also explained 2 for 1 and 3 for 1 when a stock split. A stock splits when the company believes the price of their stock has gone too high for people to afford to purchase. When the stock splits the share owner maintains the stock but at a lower price and receives an additional share of the stock. No real value is lost when this happens. In addition the dividend would also decrease.
Do you need an emergency fund? He flat out said "No". Most people have a credit card and if they have no current expenses (bills), a person would most likely use their credit card if they had to attend a funeral, buy a plane ticket, etc.
He explained load vs no load funds. These are easy for people who don't want to get involved with an investment and track the stocks they buy. He went on to compare a mutual fund to a stock investment over a ten year period. He used PG as an example. With a mutual fund you paid an amount year after year and after ten years that could add up to $1000. With a stock investment, he only paid $10 that first year and that was it.
Buy low and sell high.
Start a brokerage account. Even if you want to use it for fun. There are several available. He recommended etrade for beginners and he used ameriprise.
He mentioned sweep accounts. Sweep accounts automatically transfer money that exceed or fall a certain level into a higher interest earning investment option at the close of each business day. Commonly, the excess cash is swept into money market funds (investopedia). I've never heard of this until today.
Provide any additional comments since I'm just sharing what I learned today.
Tom
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