The newbie (Stock Market)

[Kung Fu Steve]

Wow. So I started on the fast lane to learn real estate investing and maybe some new business stuff. I moved on to internet marketing and I believe I understand that as far as I want to take it. I have started to move on to learning stocks. And holy crap. This world is beyond me. I signed up for Scottrade and I put $100 bucks in my account. I am using this money to learn about stocks and figure things out.

My question is, how in the world did you all get your start? Is there a decent way to look at stocks? Are there systems you use to evaluate a business? I have seen an increase in pharmaceuticals and communications companies. I understand the cell phone business quite a bit so I guess I have an idea if they are going to grow or not... This is a little overwhelming!

 

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[qwerety]

I'm into forex myself and barely looked at regular stocks before that. I can't help much in that sense, but I wish you luck in learning about them. Props for being open to new areas as well. I know forex stuff is taking up way too much for me to really put in a good amount of effort into another avenue.

Only things I can mention to make sure you check for any big company you may want to buy stock in is look up quarterly info as well try and get to read or participate in conference calls I think if you miss a conference call they will have a written transcript of it available for you to read. Company earnings and such and def any news on things the company is trying to get done or change. A ok way to pick certain stocks is basically paying attention to news and what may be a need later or a popular want. For instance all the living green stuff that's popular now, check out certain green type companies and see what they do and what they may have in the works. Also, try to think about things that may make up something larger that not many people would think about. Like say we had a big car boom a good company to check out may be an auto glass place.

It seems like most people here pay a lot of attention to general economic news, with due diligence that way and keeping up the attention of country and certain world news, all that's left is honing in on certain areas and checking out details of the whatever you are investing in. Depending on how long you want to hold a certain stock, you won't even have to check on it as often, just keep up with general stuff. Another thing is about diversifying in case one area just really goes down (like auto stuff) you still have stocks in other areas to help soften the blow.

Check out dividends and such for whatever as well.

So much stuff, and I didn't get much into it myself. I know someone here with more experience will answer later, but I will tell you that with proper diversification, keeping up with general economic and general news as well as specific news about what you are investing in, you are ahead of the curve of most people in stocks and it may not be as hard as you think past that point. I think one of the hardest things may be figuring out the proper time to bail.

 

[NerdSmasher]

I agree with JScott on this one, you definitely have to do your research with the markets, especially stocks. You can try jumping in, but you basically won't have any idea what you're doing, or why you're making or losing money.

If you decide to look into fundamental analysis more, you'll likely want to look into things written by or about Warren Buffett, and Benjamin Graham. Additionally, I believe the book Rule 1 Investing was based off of, essentially, their ideas, and puts it into more plain English. I'm not entirely certain, but I have used the tools on their site to evaluate companies before. (Granted, I might add, I never actually used the information; I was just curious as to what it would be.)

As for technical analysis, there are so many different indicators, oscillators, and patterns that you really just have to pick one or two, play with them, master them, then pick some more. Eventually you'll be comfortable using them to evaluate trends and predict future movement.

Besides these things, however, you also have to come up with entry and exit strategies, and have a plan for what happens when the market moves up or down (and sometimes sideways).

Though, again furthering JScott's point, why do you want to get into stocks? The main problem with the markets is that all gains are on a percentage basis, so if you're starting with $100, even if you're earning 20% per year, which would make you as good as Warren Buffett, in 10 years you'll have $619. Though, in all reality, commissions would likely eat most of that up.
Now, of course, this isn't necessarily to discourage you. It's possible to make hundreds of percent each year, depending on what you do. But, it's obviously more "risky," especially if you don't know what you're doing. And, if it were "easy," everyone would be doing it.

 

[PaulRobert]

Ah learning to invest in the stock market. One of the first lessons I have learned on my journey to the Fastlane. I started off investing in the market at age 14 and I did some of the stupidest things possible. My arrogance, ego,and fear of losing money made me do many mistakes that I could of prevented. I have learned from my mistakes and have changed my character. Lessons that I have learned from investing in stocks.-->

1.) Read and Research- Before investing even a dollar, read Bloomberg, Wall Street Journal, and any current financial news you can get your hands on. Reading daily for even a few weeks will help you find what industry to invest and the perfect timing. When looking for stocks, skim over the description of what the company does, but research the financials. Look at their cash flow, earnings, and debt. If the company's financials look promising, go for it.
Also read their News sections. Most publicly traded companies have their own website. See what the company is up to. This will also give you a good idea of what they are doing.

2.) Staying away from Blue Chips- IMHO blue chip stocks like Coca Cola and McDonald's are some of the slowest stocks to invest in. Too many 401Ks and others are invested in these stocks. When the price does go up it's only a few cents a day, except when earnings come out or news that the economy is getting better and the recession is finally over. (What a bunch of .......)

3.) Look for IPO's and industries that are looking bright in the future. (Going Green, hydroelectric)- just to name a few.

4.) Don't let your emotions take control, because once you lose control of yourself, you loose control of your nerves and correct decision making. Invest with confidence and don't be afraid to take risks. Just take educated risks.

Good Luck!
Lamboman

 

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[Kung Fu Steve]

Well I appreciate all the feedback.

To answer the question about me jumping around in investments is really because I love to learn. I have my business that is doing well so I need to focus on that. But I am really obsessed with learning so when I first started in the Fastlane I learned about SFH real estate, then Larger Rental Commercial real estate, then learning about franchises, then learning about internet businesses, it's not necessarily that I am just all over the place because my business takes up most of my time and if all goes like it is now I will have several locations over the next couple years, as well as hopefully owning the buildings they are in :fastlane:.

That being said, something that has always confused me and scares me a little is the stock market. I don't understand it so I'd like to play with my measley hundred bucks and see what I can do with it. Looking at businesses and predicting what they will do fascinates me. Are there any ways you guys invest in stocks? I will do my research on the different types of ways to invest in stocks, in the mean time what do you do first? Do you see something that sparks your interest? (news article, etc.) and then research the company and then invest? Do you research companies and follow their news and then invest?

Curiousity is really got me right now!

 

[Walley]

Why not try with fake money. I think with investopedia.com you can create a free account and play with fake money.

 

[NerdSmasher]

Actually, Walley has a good point, you can go to sites such as UpDown.com and create a virtual portfolio. You can learn a lot of the basics by investing like this; such as how to enter a limit order, and what that means. And, the reason I suggest UpDown is because you can earn money if your portfolio does well =) (Not much... but, still.)

As for what to do first... well, there are about a million different ways to pick stocks (999,000 of which only worked in the 90's tech bubble...) anything from throwing darts at a board of them, to listening to the news. From there, it's all about research. Of course, most people start with things they know, such as Wal Mart, or Microsoft. Look at how they're doing, then perhaps their competitors (Target, or Apple, in this case.) See who's doing the best, and perhaps invest in them.
Of course, that would be fundamental investing. Technically, you would look to see who's doing what price-wise, and see if it's a good time to buy at all. If not, you would wait until it is, or look at a new stock.

Eventually, what you will end up with is a list of stocks that you either like fundamentally, or that you simply watch for technical patterns on. (Or, a combination of both, which would probably be ideal - but could be quite difficult.)

As for entry and exit strategy, which is pretty much the most important part of investing, I can't really say, as I have so many thoughts on this; and it's all situational. I'm still working on getting a single set of rules on this, and even then, the best I can do is a set of rules for a specific trade I made. It's quite complicated (Thus, in my opinion, fun. Though, upsetting when things go poorly.)

 

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[unicon]

You want to learn about the stock market on the cheap?

Go to the casino and learn everything you can about the game of craps.

Learn to bet the postitive side and negative side (Do's and Don'ts).

Learn to hedge your bets and understand odds.

Start with a $200 pool and make $3 bets as a standard.

Try to stay on the table as long as you can before losing your pool.

Ask yourself why you make each bet and develop a system with the above framework.

This will be the best teacher of your emotions, and your loss of control.

This is a cheap price for emotional education and the technical speed of winning and losing on individual bets.

If you learn the game you will come to a system which you can communicate here!!

The system should reach some universal conclusions. What are they??

Answer the above questions while not getting addicted and you will discover very important lessons.

The first lesson you will learn is that answering the above will take alot of work, physically and mentally at the table. This will not be fun.