Wall Street: Always Be Skeptical Of What You Read

 With the stock market exploding in popularity, you can now get an almost unlimited amount of stock opinions and recommendations from television, radio, magazines, newspapers, and the Internet. No matter what stock you may be interested in researching, you should be able to find lots of differing opinions.

But always remember, free opinions are usually worth what you pay for them. Nothing!

Take a look at the screen grab I took below of two stories, back to back on the same day about the possible future valuation of GoPro. Apparently one analyst thinks GoPro stock can go down to $15 (from about $20) and another things the stock might go all the way up to $90! Could there be two opinions that are more different than these two? Hardly.

These two headlines demonstrate the wide variety of advice you can get almost daily from the Internet and other sources when you set out to research a stock. It is up to you, the investor, to carefully navigate the waters and decide who and what you believe and why.

Unfortunately, it is often very difficult to figure out which scenario is correct and if any are correct at all. This is because analysts and other "professionals" sound so convincing. It is their job to sound like they absolutely know which direction a stock is going to go and the reasons they give usually sound plausible.

But honestly, many stock market pundits are not much more than glorified salesman trying to drum up sales. That is why you should always be skeptical of everything you read and hear whether it be on TV or the Internet. Don't get too enamored with any one analyst or TV personality because in the end, it is your money you are buying stocks with and not theirs. They are in the business of creating hype and sales in an industry that is always looking for new blood.

Anyone Will Soon Be Able To Invest In Startups And That Is BAD News!

One thing everyday investors can't do right now is get in on the ground floor of new startups. They also can't get the IPO prices that all the bigwigs get before the companies stock actually opens on that first day of trading on an exchange. Most investors are relegated to buying stocks only when they open up for general trading, often when the first price available is much higher than the insiders got.

But with a new recent ruling from the SEC, opportunities to invest in some startups may soon be available to everyone early on in a companies history. It will sort of be a Kickstarter for startups and honestly, that might be a bad thing for investors who don't understand the risks.

Kickstarter started out as a site where you could go to fund cool new products that needed money to get off the ground. Usually helping them fund their product meant that you were promised the item when and if it was ever finished. But over time the site has had to deal with a lot of fraud, projects that never got off the ground, products that were inferior to what was promised, and a whole lot of other things.

The bottom line is that if you decide to back a Kickstarter project, you should fully be prepared to get nothing back for your money. And that will be the inherent risk anyone takes when investing in a startup as allowed by this new SEC ruling.

Think about this: most people have a hard enough time learning how to manage their portfolios and beat the markets that are full of established companies with long track records and extensive product portfolios. How on earth will investors be able to correctly evaluate new startups where information is limited and there is no history to base any decision on?

Crowdfunding has taken off in recent years and it looks like it is spreading to the investment world. For many, it will mean taking shots and hoping for a miracle. It will also mean that you will open yourself up to potential fraud and other shenanigans. It just seems to me like another way to play the lottery and that many investors will think of it that way. I think this one will fall under the category of "investing for dummies"

Did You Panic And Sell Your Stocks?

We are not out of the woods yet but the stock market has bounced back from its lows two months ago. Things were admittedly scary from the middle of August to the end of September. A solid five weeks of high volatility with the strong bias to the downside - enough to make an investor of any experience level sick.

It is times like that where you really have to dig deep and make some decisions. Are you a long term investor who trusts that the market will bounce back with time. If so, do you have the conviction to wait things out? Or are you losing too much sleep to hang on to your stocks and feel better selling?

Many Investors Make This Mistake

Too many beginner investors have that get rich quick, make money now gleam in their eyes. They lack patience and have a very low tolerance for risk. They think/hope every stock they buy should go up right after they buy it and when that doesn't happen they get frustrated. Most importantly though, they panic easily and sell at a loss way too often.

In a market correction like we just had (are having), many of the weak investors get flushed out of their stocks. They can't take the pain of losing money and they sell, most often for a loss. To put it very bluntly, these are the people that perhaps shouldn't be in the stock market in the first place. 

That's a hard generalization to make but it is true because any time the market goes steadily up for a long period of time like it has since 2009, many people buy stocks because they think it is easy money. They hear about this or that stock in the media, from friends, or somewhere online and they get excited about stocks but they don't do any research. They never learn how the stock market works and never fully comprehend what they are doing.

Short Term Investors Often Lose And Quit

Many of the "investors" who just panicked and got flushed out of the market will quit and never come back. They will think it is too risky, that it is all rigged against them, that it is just gambling, and/or that it is way too hard for them to ever understand. They are likely frustrated and many will stay away for years or even for the rest of their life.

Now that they are gone, the market is slowly coming back. But they are out. Their losses are booked and they have lost. They never made the effort to try to understand what makes a successful stock investor as they were, undoubtedly more concerned with the short term gain they thought they could make. They never bothered to take the time and realize that stock investing is hard. There is a lifetime of profits out there for those who are a little less short sited. 

Investors Love Tech IPO's - Here Is A List Of Potential Offerings For 2016

One thing is for sure now days and that is that tech IPO's are hot and get a lot of media coverage. There is something about technology companies that take hold of investor's imaginations and make them see the future as being extremely bright....often a lot brighter than the reality.

How else do you explain Amazon, Tesla, Netflix, and a host of other tech companies that have valuations bordering on stupidity? Look at the astounding hype Alibaba received leading up to its IPO and then look at the stock's price today. BABA opened for trading on day 1 at $92.70 and sits at $75.06 as I write this. Definitely NOT a good investment so far!

Some other recent (within the last few years) tech IPO's include LinkedIn, Facebook, Twitter, Box, GoPro, and FitBit. Many of these stocks started off strong but have come down measurably from their highs. If the market hits a much anticipated correction, I fear what may happen to stocks like these with their inflated P/E ratios.

It seems fair to say that future technology IPO's in 2015 and 2016 will continue to garner more than their share of hype and interest, just because that seems to be what captures investor's imaginations. Potential IPO's coming in the months ahead include Spotify, Airbnb, Snapchat, Pinterest, Uber, and maybe even Xiaomi in a year or two. Here is a list of potential IPO's from the tech world that you will want to keep your eye on if that is what you like to invest in.

Investing In Mutual Funds May Not Be The Best Idea

Conventional wisdom has often taught that mutual funds are the best place for investors to put their money. It doesn't matter whether you are a beginner just getting started or someone who has been investing for years, the thinking is that you will do better when a "professional" manages your money.  This is because mutual fund managers study the stocks for a living and you, the common investor, surely don't have the time or the knowledge to do that.

But new research shows that fund managers aren't that great after all. Many, if not most of them can't even beat the market averages and when you add to that the fees they charge, it becomes clear that mutual funds should be bought with extreme caution. Perhaps, if individual stock picking isn't your thing, you should dollar cost average into an ETF that mirrors one of the major averages.

I have long avoided mutual funds because to me they seem as hard to pick as individual stocks. The proliferation of funds, all holding 20 or more stocks within them, make differentiating the good ones from the bad ones extremely difficult. At least for me.

Exchange traded funds have boomed in recent years and replaced the popularity of mutual funds for many investors who like the lower fees and the fact that you can trade them just like stocks. Additionally, in many cases it is easier to understand exactly what you are investing in because you can pick ETF's that encompass just certain industries, averages, or other things like high paying dividend stocks. If you want to invest in one specific area of the market, there is probably an ETF for that.

Mutual funds will probably be around for many years and the industry itself will fight tooth and nail to keep them alive. Wall Street will always try to convince you that the professionals know more than you do and that you should trust your saving with them. Commissions are what fund managers feast on and they don't want to lose your money.

But maybe you should think seriously about whether mutual funds are the right place to put your money. Those fees add up quickly and you should closely monitor the performance of your fund(s). Warren Buffet has said many times that just putting your money in an ETF that tracks the market is the best place for most investors. Whether young or old, beginner or experienced, rich or poor, it might be time to reevaluate your investment strategies.

Millennials Are Being Taught To Trade Stocks Rather Than Buy And Hold

It used to be that buy and hold was king. Now that stock investing strategy is pretty much dead, if the powers that be have any say in it.

Take a look at sites like GetBucks.com, Kapitall.com, and Invstr.com and you will see what the younger generations are being sold. Those sites are teaching young investors to trade stocks on their phones and trying to get them excited about the thrill and rush of being in the stock market game. You can start with a free account and free virtual dollars in each of them but clearly, the hope is to get you to load up real dollars and trade for real.

The stock market and investing in stocks isn't a game but increasingly the industry wants you to view it as such. The deep discount brokers, CNBC, Bloomberg TV, and all the other heavyweight industry titans hope to get you excited about trading stocks. Buying and holding is boring and extremely "hands off". The only way to be "hands on" with your investments is to buy and sell on at least a relatively frequent basis. That what they want you to believe.

Have you watch Cramer lately on CNBC? Now thats the biggest hype guy out there. For the last 3 months or so he has repeatedly stressed that with AAPL you need to buy and hold that stock and NOT trade it. Stressing the "buy and hold" is apparently so different than what you would do with other stocks that he needs to continually make a big deal of it.

In today's society, so many people are addicted to their device screens and this is especially true for 20 to 40 year olds. Instant gratification is what everyone craves and demands. That is why trading stocks is so popular. You get in, you get out, and you see a result right away. EXCITING!

Buy and hold? Thats old school now and not the way its done anymore. Its too bad because in my life I have made most of my money by buying good companies and holding on for a year or more. I take those dividends and put them away for retirement or use them to buy more stock. Buy and hold isn't dead with me but to new investors they might never have a chance to even understand that is even an option.

CNBC Is Losing Popularity And That Is A Good Thing

CNBC for a long time now has been the most popular network for investors looking to get non stop coverage of the stock markets. They have the fancy sets and the pretty anchors who make the network look like it is right out of Hollywood, not Wall Street. They parade a constant stream of guest analysts before the cameras who are more than willing to give their opinions and stock picks while giving their firms some free publicity.

But recently it seems, CNBC's popularity has been declining and I have to say that that is very good news. That is because I think watching that network day after day is a total waste of time that will hurt your ability to think clearly and make the best stock decisions you can.

One thing that CNBC does is give the viewer the impression that you've got to be an active trader to be a good investor. You have to be making moves all the time, buying the good stocks and selling the bad ones out of your portfolio. Just sitting and doing nothing is boring and the industry makes more money when you are active and paying fees and commissions.

CNBC is a constant barrage of information that is overwhelming when you watch it for any length of time. It makes you want to get on your computer and push the "buy" and "sell" buttons just because this or that pundit told you he/she thinks that is the right move.

Investors of most levels are too easily swayed into buying stocks just because they see someone on television recommending them. Analyzing a company and trying to figure out the future prospects of a stock is difficult and beyond the ability of many investors. Thus they watch CNBC and do as they are told by the so called "experts" who most often have no skin in the game.

I suggest you turn off CNBC or severely limit your time watching it. Instead spend that time reading all you can about the economy and thinking about what industries will have a strong future in the coming years. Learn what companies are the leaders in those industries and find out all you can about those companies. Pay keen attention to what people are wearing, doing, eating, and how they are spending their time. Try to identify the companies that are growing or will grow as they satisfy future customer demands. Those are the stocks that you might think about buying.

Or you can just put your money every month into index funds which have been proven to outperform most professional money managers. The important thing is though, to stay away from frequent trading based on what you see the "pros" recommending on CNBC.

WHERE TO GET GOOD STOCK MARKET INFORMATION

If you are a beginner just getting interested in the stock market, you need a good place to go to get quality information all in one spot. And preferably it should be free!

That is what you have with Morningstar.com which is a website where you can sign up for free and get just about all the news stories and stock information you would ever need as a beginner. They also have a premium account for about $15 a month which has a lot of added features but there is no real need for that if you are someone who is just starting out.

The Morningstar company has been around since 1984 and it is one of the all purpose investments firms on the Internet that provides a wide array of services. They are well known for their stock analysis (which you only get with the Premium account), but with the free account you get all sorts of useful things that will help you get on your feet and on your way to understanding the market.

All Your Financial News In One Place!

Morningstar is great for the stock news they put out and that is why signing up for free seems to be a no-brainer. Rather than scouring the Net everyday for your stock and business news, now you can get it all in one place. My favorite is the section they have every week which takes you directly to their most popular articles which sometimes includes videos.

If you are saving for retirement (you should be!) then Morningstar has frequent news and reports on how to better do that. Saving and growing your money in today's world is big challenge and harder than ever with interest rates so low. Having access to reliable and trustworthy news from Morningstar is great to have and most of that information is available with the free account.

Other Morninstar Features

Are you interested in tracking some of your favorite stocks? You can do that for free by creating your own portfolio and that gives you access to all the latest news for each of those stocks.

Are you a social person who wants to talk and read about what other members are saying? They have a large, active forum that comes with the fee membership where you can connect with other like minded investors.

Do you want to know what the Morningstar analysts are saying about your stocks or industries? There is an absolute ton of analysis available on the site but most of it comes with the Premium membership.

Is Morningstar Good For Beginners?

Yes it is because with all the dubious websites on the Internet today, you can rest assured that Morningstar is a reputable one. It is a great site for beginners who want to begin learning how to buy stocks. The news and information you get there will help you understand what is going on in the market and be your daily learning center. Even if you never pay mre for a Premium account, the easy access to all sorts of business and stock news will help you reduce that learning curve.

Of course Morningstar is also great for established investors as well who want stock analysis from one of the leading online investment websites.

DON'T GET FOOLED BY THESE INTELLIGENT SOUNDING (but mostly meaningless) STOCK PHRASES

One of the things that makes it hard for beginners to get started buying stocks is the intimidation factor. Just watch an hour of CNBC and you will hear all sorts of stock market terminology bandied about by anchors and guests all wearing fancy suits who sound educated and extremely knowledgable.

Its enough to stop a beginner in their tracks and make them give up before they ever get started.

Some of the fancy verbiage you will hear time and time again but may wonder what it really means. It all sounds intelligent (and even seems to make sense) until you really break it down and analyze it. These "sayings"/fancy words include:

1) "The easy money has already been made"
2) A stock is "overbought" or "oversold"
3) "You should buy on weakness"
4) "The market is in a bottoming process"
5) "There is a lot of cash on the sidelines"
6) "We are constructive on the market"
7) "Cautiously optimistic"
8) "Its a stock pickers market"
9) "Stocks are down on profit taking"
10) "We are taking a wait and see approach"

You can find more silly stock phrases in this very well written article that also explains why they are so meaningless. These phrases / words are used to make the analyst sound smart without having him/her commit to any real opinion.

The stock market has its own language and those in the industry who are out there on all the different media are good at using it to convince you, the homegrown average investor, that they are smarter than you are.  In many cases they may be (about the stock market) as it is their job but I hate the fact that they often use such meaningless jargon while trying to make themselves look more "in the know" than they really are.