Getting into the stock market - the important questions

[Metrix1234]

I know that some people feel that the returns offered in the stock market are less than spectacular right now. I personally think the stock market can still offer the kind of returns people are looking for. I was hoping on getting some feedback on a few questions I thought would be important to all investors.

1. What is the minimum amount of money needed to (properly) invest in the stock market?
2. What required returns are you personally looking for when you invest?
3. What financial information do you look into when you do your "due diligence" picking your stocks?
4. What do you feel is the appropriate amount of stocks needed to have a balanced and diverse portfolio?

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[GlobalWealth]

I was hoping on getting some feedback on a few questions I thought would be important to all investors.

Seriously?

There are scores of books written about these topics.

Are you doing a college homework assignment and just looking for an easy answer?

You are basically asking readers to write you a book.

 

[Rickson9]

1. What is the minimum amount of money needed to (properly) invest in the stock market?
2. What required returns are you personally looking for when you invest?
3. What financial information do you look into when you do your "due diligence" picking your stocks?
4. What do you feel is the appropriate amount of stocks needed to have a balanced and diverse portfolio?

1. I started with a $3000 grubstake. 'Properly investing' in the market isn't related to the amount invested. You can be a fantastic investor with $1000 and a terrible investor with $10M.

2. I wanted to beat the S&P500 (index) or there was no point to invest myself.

3. Form 4 (INSIDERS ownership), Morningstar (10 years consistent increasing profitability, no debt), cheap on P/E and P/B basis.

4. For me, 6 stocks. No more.

Best regards.

 

[Bozigian]

You could also add.

When do companies pay dividends for stock ownership?

I can imagine how much Buffet gets in dividend money from all the shares he has

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[Rickson9]

You could also add.

When do companies pay dividends for stock ownership?

I can imagine how much Buffet gets in dividend money from all the shares he has

Ideally a business should pay out a dividend when they can no longer earn a decent rate of return from investing it in ongoing operations.

Speaking for myself, dividends are not wanted nor do I look for them when deciding to invest. Everybody has different goals.

Best regards.

 

[Bozigian]

So I figure investing in a stock just because of a high dividend yield percentage is a no no

 

[Rickson9]

So I figure investing in a stock just because of a high dividend yield percentage is a no no

Nothing is a no-no. It all depends on the individual, their personality and their goals. I can speak only for myself and I don't focus on dividends.

Best regards.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[MJ DeMarco]

3. Form 4 (INSIDERS ownership),

Have you looked into 13-D filings? They give you the inside look to invest alongside millionaires and billionaires and is considered "smart" money.

 

[Jonleehacker]

This book can give you a decent overview to get you started:

Amazon.com: Rule #1: The Simple Strategy for Successful Investing in Only 15 Minutes a Week! (9780307336132): Phil Town: Books

Otherwise I agree with Global Wealth Let me google that for you

 

[Metrix1234]

Seriously?

There are scores of books written about these topics.

Are you doing a college homework assignment and just looking for an easy answer?

You are basically asking readers to write you a book.

Honestly, I have no ulterior motive other than being interested in what people on the forum have to say. You can read a book and gain some valuable knowledge, but even that is just someone else's perspective.

Im on my way through Mj's book and one quote near the beginning that I like is, "If you want to keep getting what your getting, keep doing what your doing." I think this is dead-on in the world today. I also think that Fastlaners think outside of the box a little more than most and might be getting different results with what they are doing.

I'll give my thoughts on the four questions:

1. I think you can get your feet wet with around 5k but in order to diversify like you should be doing, you need more like 10k-20k.
2. I agree with Rickson here that a good goal would be to beat the S&P index - which I think most active investors can do.
3. I like to look at EBITDA, PEG, and EPS metrics. I also think its important to compare these numbers to direct competitors. If you go to the company website, or here you can check the different SEC filings. I think some of the important ones are the 10-k and 10-q statements. In the filings you can search for acquisitions, look at the balance and income statements, see pending lawsuits, as well we see the high market share investors.
4. I think in order to be diversified you should have between 10-20 different stocks.

 

Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

[dday97]

All of this depends on your goals. Investing or trading? For income or aggressive portfolio? Are you a hold 'n hope or are you active? To me, if you can't make at least 15% then you're in the wrong sandbox, unless you have a load of cash and just want a monthly income out of the deal.

 

[RideHD]

There is some smart advice here.

1) I absolutely agree that you should start with what you have; there is no magic figure.
2) Spot-on comments by others here about dividends. Like much in this world, "it depends".
3) I consider "smart money" to be the institutional investors, i.e. mutual funds, banks, insurance companies, etc. I do indeed try to follow or even lead that money if possible.
4) It doesn't matter how many shares of a particular stock you own. Beginners all seem to want to buy penny stocks so that they can have a lot of shares. Its all about the stock, and you shouldn't be scared to buy an expensive stock if it is a great candidate!
5) I consider myself diversified with 12-15 positions. I don't like having more than 15 ever - too hard to follow. I have 10 open positions now with some on close watch due to the choppy market. I shoot for an average of 7% of my portfolio per position. I never put more than 10% per position and never less than 3%; that keeps returns meaningful per position yet never outright devastating on the other hand. I try to make sure I invest across industries/sectors but that is a secondary concern.
6) I follow a modified version of the William O'Neil and his IBD's CANSLIM model of investing. I say modified because I have adapted to my own style and tolerances with good success. It is 70% fundamental and 30% technical, as they like to say. Sell rules are 100% technical. Institutional investor sponsorship of a stock is measured through volume, and I find it a reliable indicator.
7) I had what I consider to be a good year last year -- I made 32% overall on my money. I realistically shoot for 20% per year, as that will double my money about every 3 years. That is a worthy goal!

I hope my contribution is helpful! We should all be investing and, most importantly, in a way that lets you sleep well at night. Investing/trading should be fun and hopefully profitable - not the cause of ulcers!

Cheers, Jamie