Am I the only one that buys stocks only to watch them go down the next couple of days? It seems that 90% of the stocks I buy go down right after I buy them. It's almost as if my buy order signals the stocks to go down! Now I am pretty sure that I must be experiencing selective memory but it does seem that way nevertheless.
If you are going to learn to invest your money in the stock market, one thing you have to be prepared for is that you will have losses. You will make bad stock picks and you will be wrong some of the time. It doesn't matter whether you are picking your own stocks or whether you are taking the advice of a professional, you will have stocks that are losers sooner or later.
The good investor will learn how to minimize those losses by getting out before too much damage is done but he also knows when to buy back in. The good investor will also be able to pick more winners than losers and learn how to negotiate the ups and downs of the market for a lifetime of smart investing.
One way you can lose money is by doing a lot of panic selling. Some investors hate to see their stocks go down and once it seems like that is the way a stock is going, they sell it. Selling isn't always bad of course, but if you are doing it all the time based purely on emotion because you are scared, you will find it very hard to make money in stocks. You should usually be buying and selling stocks based on a stock's fundamentals and the future you see that company having.
2008 was an awful year in stocks and a lot of people lost a lot of money. The same thing could be said right after 9/11 when the market went down fast because of fear and panic. Now, anyone who sold during those times when the market was plummeting did avoid further losses and that is good for some people. But if you kept your money in after 9/11 you got it all back several years later and a lot more.
The same thing will probably be said about the Dow going from 14,000 down to 7,000 in 2008: if you left all your money in you have gotten a lot of it back as of today and will most likely get all of it back, eventually. That is if you have the time to wait.
Panic selling and selling based on fear means that you are most likely afraid to buy back into the market. You are often paralyzed and your money will be out of the market too often. It is a fine line between being out of the market based on what you see happening with the economy or a stock and being out of the market just because you are scared.
When you invest in stocks, you have to be prepared to withstand some losses and be alright with the fact that your stocks may not go up the second you buy them. You also have to know that some of your picks will be bad ones. The good investor will be able to recognize the bad picks based on what is happening with the company or economy that turned the pick from a good one to a bad one.
STOCK INVESTORS SHOULD BE PREPARED TO BE WRONG
IS IT TOO LATE TO BUY APPLE (AAPL)?
Is now the time to buy Apple stock? Is it too late or should you buy some in anticipation of it going up more for Christmas? I bet thousands of stock investors are asking themselves that question right now and have been for months.
The time to buy AAPL in 2010 was about a month before the iPad came out on April 3rd. You can see in the chart below how the stock was going sideways until the beginning of March and from that point it went up fast. Some choppy waters during 4 months of uncertainty after that and then straight up again.
SUPPORT AND RESISTANCE AT 10,000 On 8/26/2010
The Dow has been going up and down all year and August has been a bad month. Today it closed below 10,000 and if you look at the chart below, you will see we have gone nowhere in over 10 years now. The Dow Jones first closed above 10,000 on March 30, 1999 and here it is August 26, 2010 and we are right back at the same place! That is a long time to have gone nowhere.
Was there support at 10,000 and have we just broken below it? Will tomorrow and the weeks ahead mean the selling will accelerate because we have closed below 10,000? And what exactly is support and resistance in the stock market anyway? These are two terms that you might need a Stock Market For Dummies book to understand.
HOW BAD ECONOMIC NEWS AFFECTS THE STOCK MARKET
As you can see, August has seen the Dow go from a high of a little over 10,700 down to just under 10,200. That's around a drop of 5% and bad news is now starting to come out about the economy more regularly.
IS THIS SUMMER 2010 RALLY REAL?
We have had a bit of a summer rally and July has been a good month for stocks. Profits have been good for many companies that announced this 2nd quarter earnings season and so the market has responded accordingly. But will this upward momentum be able to be sustained? Is this summer rally going to continue or die?
The fact is that the economy has not gotten any better. The unemployment rate is still around 9.5% and people are out of work in all demographics. Both personal debt and the countries debt is higher than ever and President Obama keeps throwing money he doesn't have at every problem that crops up. How long can this last and not have an effect on stocks?
The world's economy isn't doing much better as we have seen problems in Greece and elsewhere. Remember, any bad news from other countries now has an immediate affect on our US markets as this is truly a world economy. Our US companies do business everywhere and if something bad happens overseas, our market will go down as well.
The November elections are also right around the corner and there is going to be a lot of media coverage everywhere about that. People are upset and Obama's policies and the economy is going to get a lot of scrutiny which will expose some of the realities that people might have momentarily forgotten. I don't think any of this is going to be good for the stock market and for bolstering people's confidence in a continued rally.
All this adds up to my belief that this summer stock rally of 2010 could be about to be over. This Stock Market For Dummies blog believes we might be in for some tough times ahead and cash might be a good place to be. The stock market may have a little more upside to it but I think we will soon see a lot of ups and downs with perhaps more down days in the immediate future.
THE CLOSING PRICE AND AFTER HOURS PRICE: WHAT IS THE DIFFERENCE?
One of the things that might be confusing about the stock market for dummies is the closing price for stocks and the after hours price.
The closing price you see in the newspapers is the 4:00 PM price of the stock which is when the market officially closes. However, there is some after hours activity that normal investors like you and I don't get involved in. Usually this activity is not very important to the price of the stock unless some big earnings announcement is made or some big important news story happens after 4:00 PM.
The New York stock exchange, with the proliferation of news and people's access to it, has become a more global entity in recent years. The Internet and ease of making trades from anywhere in the world has contributed to this. Information of all sorts is available all the time to anyone who wants it and this means some changes were made in the after hours of the stock exchange. This means that there is now after hours activity and things going on behind the scenes that "normal" investors can't get involved with unless they know how.
If you have a stock that closes at 100 and then announces great earnings, you will see the price go up on all the tickers online and maybe on television. The next morning, even though the stock closed at 100 the day before, it may open much higher and you will have to buy it at that higher number. The same goes for bad news being announced as stocks can go down in after hours too.
By looking to see if there is any activity in a stock after the market closes, one can usually determine whether anything important has happened to the stock since the close. If you see the price of a stock being quoted higher or lower in after hours by a significant amount, it can often mean they announced great earnings or made some other important announcement like a merger or new product.
The after hours price of a stock is not something you should get too caught up in or worry about in my opinion. After all, you should be buying stocks as an investment and if a small movement in a stock's price after hours is going to influence your decision, then maybe you should find a stock where you expect bigger gains.
STOCKS GO UP, DOWN, UP, DOWN
Things seem to have stalled here lately in the stock market and we are seeing it go up one day and then right back down the next. You can see what I mean by looking at the 1 month chart of the Dow below:
There are many reasons for this up and down movement but what it probably signals the most is that investors are getting a little nervous. The market has moved up very steadily for about a year now all the way from it's low last year of just under 7,000 to over 11,200 a day or two ago. When the stock market continually goes up and back down for a period of time like it has it can mean that the steam has run out of the rally and investors are really torn at what to do. When people are selling one day, buying the next, and then selling the day after, it can mean there is a lot of confused people out there and a lot of differing opinions.
You can read Jim Jubak's opinion of the matter where he likens it from the mood changing from a half full glass outlook to a glass half empty outlook. Stocks just don't keep going up forever and there is always something around the corner that can stall momentum. The financial shenanigans in Greece seem to have helped make investors very nervous in a market that was already very high.
Why do stocks go up one day and down the next? Well, as I have written about before, the market moves on people's perceptions of what is happening and what they think will happen. It is all about whether people see positive or negative things in the future and right now it looks like there is possibly more negative than positive out there.
The Obama administration has this country in more debt than most people realize and that could become very troublesome down the line. If foreign investors start pulling out of America and don't buy up our ever increasing debt, where will that leave us? No stock market can withstand something like that.
This Stock Market For Dummies blog wonders whether it might be time to start selling a stock or two just in case? Maybe it is time to move some money out of stocks and put it into something safer for a while? The problem is that once you sell and get out it is very difficult to figure out when to buy back in again. However, maybe some safety is a good direction to go right now?
ARE PENNY STOCKS FOR DUMMIES?
8/11/2010 Update: While I think penny stocks are risky, they continue to be of interest to many investors. I have found this Penny Stocks VIP newsletter that is 100% FREE to sign up for. All you have to do is enter your email and then click on the "confirm email" link when they email you. You will then be set up to receive their free VIP newsletter.
For years, people have been fascinated with penny stocks and the idea of making money by investing in them. One reason is that because they are so low in price, anyone can afford them. But are penny stocks a real investment opportunity you should be looking at or is it one you should never get involved with?
There are many definitions of what constitutes a penny stock. Some people consider every stock that is under $3.00 to be one while others make the cutoff at $1.00. No matter what you deem to be a "penny stock" the important thing is that it costs very little for a reason.
Some people believe that all stocks start out as penny stocks and grow from there. They might get this ideas because of the stats on some stocks which include all the different times a stock has split. Big stocks like Microsoft may have split so many times that after that has been factored in, it looks like the stock was originally offered for just pennies or a few dollars. Seasoned investors know, however, that Microsft and other high fliers like it were never offered for such low prices and the opening cost was much higher. The adjusted stock price is something you should understand before you make incorrect conclusions.
There are several things that make penny stocks much riskier than other higher priced stocks. One of the things is that in most cases, stocks that only cost pennies or a dollar or two are that way for a reason. When you get down to such low valuations, there is usually a reason why they don't cost more and that reason is never a good one. This makes most penny stocks very risky to buy but they continue to get interest from beginners and certain sectors of the market because of the "potential" upside.
Something that is the case with many penny stocks is a lack of history and information. They are often listed on "pink sheets" and anything there is not required to file with the SEC. This means you will be buying penny stocks without the usual scrutinization and regulation that is associated with regular stocks on the NYSE and Nasdaq. Of course even with regulation, things can go very wrong with any stock you buy as evidenced in recent years by stocks such as Enron that have gone bankrupt and lost investors millions. However, buying penny stocks can mean taking an unnecessary risk on something you know very little about. That is truly the stock market for dummies you might say.
Another problem with buying penny stocks for beginners is that with any stock priced so low, there is a lack of liquidity. This means that you may have trouble selling your stock because there are not enough buyers. Penny stocks are something that you should really understand before you get into them and you should only do it with money you have to lose. Too often, young investors who don't have much money choose to take shots at penny stocks just because they are cheap and they hope to find the next Dell or Google and end up losing their money.
STOCK INVESTING IN 2010 - GREEN LIGHT AHEAD?
This is the last post of 2009 for this stock market for dummies blog and we have seen a very good year for anyone who bought stock this year. After a horrendous 2008, the market bounced back to settle in at over 10,000 once again. Will there be more good things to come next year?
As the job situation and economy is really not much better than it was a year ago, one has to wonder whether stocks have gotten ahead of themselves a bit. When and if people start to realize they are paying higher taxes, the unemployment rate is still around 10%, and the prospects for a quick turn around under Obama isn't happening, it seems the stock market may slow down and even turn back around.
Having gone up so much in 2009, it might be a good thing to become a cautious investor in 2010 just to be safe. The stock market moves on perception and if the public perception of our economy turns real negative again, the stock market will head right back down. Obama healthcare and all the other taxpayers money he has used for bailouts and pet projects cannot be making the situation any better.
The Christmas sales numbers aren't out yet but I have a feeling they will be average at best. Will be see another rash of companies declaring bankruptcy after those numbers come out like we have seen in years past? Christmas is such a big percentage of the retailer's year that a bad Christmas is enough to send many of them into bankurptcy in this economy.
The stock market gave a lot back last year of what it took the last two years but that doesn't mean the same will happen in 2010. You have to be smart with your money and not have too much of it in any one place. Those that have all their money in stocks are gambling to an extent and for them it truly is the stock market for dummies.
STOCK PICKING FOR DUMMIES (AND SMART PEOPLE TOO!)
Picking the right stocks is a challenge for any level of investor. It is almost made more difficult by the abundance of "professional analysts" that freely give their opinions on radio, television, the Internet, and magazine. Anywhere you look, you can find free stock tips and suggestions which make the stock market for dummies a difficult place to navigate.
So, where does one go for stock picks they can trust? There are two places and they are both free. The first is Morningstar and you can sign up for a free membership or a free 14 day trial to their premium membership. Obviously, you will be getting more with the Premium membership, but you don't have to sign up for that and can go with just the totally free one if you like. Either way, you will be getting stock news, stock analysis, and stock picks all for free.
Morningstar has been around since 1984 and they have put together one of the most comprehensive stock market sites on the Internet. They have more than 6 million registered users and they are often ranked with the best investing sites on the web. I like them because they have Pat Dorsey who makes stock recommendations that are always conservative in nature. He makes suggestions and analysis that I know has been well thought out and can be trusted based on his past record.
The second stock picking for dummies resource is Jubak Picks. Jim Jubak has just gone out on his own after writing for 12 years for MSN Money and his new site is much of the same but just more of it. He is another conservative stock picker who has consistently beaten the market year after year and his site is totally free. All his buys and sell are well explained for investors of any level and his picks are documented for anyone to see.
Learning the stock market is hard, especially if you have little time to keep up with the market and individual stocks. These two investment websites will at least give you a starting point and some interesting stock tips to learn. There are so many stocks out there that one has to have some sort of sifter that identifies companies that might be worth a look. The fact that both of these sites are free makes them that much better.
HOW TO FIND GOOD STOCKS TO BUY FOR DUMMIES
One of the most difficult things any stock market dummy or veteran has to do is to find good stocks to buy. Figuring out how to buy stocks for beginners is relatively easy and something you only have to learn once. Figuring out what stocks to buy, on the other hand, is a decision that has to be made over and over for the rest of your life.
There is no shortage of opinions on TV business shows and magazines from the stock gurus. Jim Cramer and his type on TV always have a list of stocks they say you should buy. In my experience, their choices are no better than the ones I can make myself by throwing a dart at a dart board. For instance, how many stock gurus warned us to pull all our money out of stocks when the Dow was in the 14,000's? Some experts might have been cautious but no one saw anything as bad as what really happened.
So, where can you find trusted opinions of what stocks to buy? One good choice seems to be Morningstar. Morningstar is one of the most respected names in independent investment research and opinion, as well as the recognized leader in stock and mutual fund analysis. Their mission is to create great investing products to help people reach their financial goals.
Consistently ranked among the best investment sites on the web, Morningstar offers a wide range of online portfolio management tools, financial data, unbiased stock and fund analysis, video commentary, and more.
There is one reason above all others that I like Morningstar. Pat Dorsey is a stock analyst who both writes and does video analysis of the stocks he deems worth investing in. As a conservative investor, I like to listen to those experts who are not afraid to say they do not like a stock's potential and that they recommend not investing in it. Pat Dorsey is someone who often says "no" to a stock and many of his picks are conservative in nature. By contrast, many of his colleagues seem to be positive about almost everything which really provides no value to any stock market beginner trying to come up with some good stock picks.
Morningstar and Pat Dorsey is one source that should be considered when putting together a list of best stocks to buy right now. Their website is comprehensive and will provide good value to both stock market beginners and stock market veterans alike. Of course, when you are trying to find stocks to buy you should do as much research on your own as possible and get several opinions as well.
HOW TO CHOOSE A DISCOUNT STOCK BROKER
One of the things that is very confusing for stock market beginners is how to choose an online discount stock broker. If you go to Google and search for them, there are dozens that come up. If you watch the television business news, you will see many of them advertise. How can you possibly know which one is right for you?
There are subtle differences between these discount stock brokers but for the beginner, most of these differences are not important. It is unlikely that you will ever need some of the services and differences that they offer, at least not for a while. Stock market beginners need to keep things simple which means finding an online broker that has a good, clean, easy to understand and navigate website as well as competitive prices.
You will be protected equally by law no matter which online stock broker you choose. Your accounts will be guaranteed up to $250,000.00 (just up from $100,000.00) and everything else that is basic will be virtually the same. You may find differences in prices as some offer trades as low as $4.95 while others may charge $9.95 or $12.95. Just because one online stock broker is cheaper doesn't mean it is any less reputable than another that charges more.
One thing to look out for is hidden fees. Stock market dummies as well as seasoned traders always need to read the fine print. Hidden fees and miscellaneous charges are tactics used by some of the discount stock brokers to raise their bottom line. Other differences may include things like being able to write checks from your account, short trading, and free trades if your order is not executed within a certain time period.
A big difference between each online discount stock broker is the website layout. Each company will of course use it's own software and some are more easy to understand and navigate than others. For instance, I love the E*Trade website as it is so easy to find your way around and find the information you need. The H&R Block website, on the other hand, seems archaic compared to E*Trade's and I always get irritated when I go on it as it will not allow me to easily find certain things. Unfortunately, you may not be able to fully test the website of a prospective stock broker before you open an account.
There is no right or wrong way of how to choose a discount stock broker. If you are a stock market beginner you will probably want to start with one of the better known ones who fall on this list:
TD Ameritrade
E*Trade
Scottrade
Charles Schwab
Zecco
First Trade
T. Rowe Price
ShareBuilder
Options Xpress
CAPITAL GAINS TAX IS GOING UP WITH BARACK OBAMA
Stock Market beginners may wonder what capital gains taxes are and why Barack Obama is going to raise them. First of all, capital gains taxes are those that must be paid on any stock you sell for a profit. If you buy a stock and are fortunate to sell it at a later date for more than you bought it, you will have to pay capital gains taxes.
Capital gains taxes are at a different rate (usually higher) than other taxes because politicians in Washington can get away with it. Politicians on both sides want your money and they will tax you on anything they can. Unfortunately, not that many people own stocks or have enough money to own stocks and that is why there is no outcry from the common man about capital gains taxes. If everyone owned stocks and had to pay that tax when they made money, it would be much harder for sneaky and dishonest politicians to raise the capital gains tax.
Barack Obama has made it very clear that he will raise capital gains taxes. Like every Democrat, he wants your money and he has no sympathy for anyone who works hard and has money to invest. His belief is that if you have money to buy stocks with, you must have too much money. Barack Obama is going to raise taxes on capital gains and then in the next sentence will tell you that your taxes are not going up.
Barack Obama and all politicians are liars. He has said that he will not raise taxes on anyone who makes over $150,000.00 per year and yet he has made it clear that he will raise capital gains taxes. He hopes that you are not listening carefully and are a stock market dummy and too stupid to understand that by raising the capital gains tax, he is raising EVERYONES tax who owns stock. Everyone in America who owns stock and now pay more tax than before Barak Obama was elected. Geez, we are not all stupid dummies you know, Barack.
HOW TO BUY AND SELL STOCKS FOR BEGINNERS
If you want to learn how to buy and sell stocks for beginners, there is a lot to learn. Actually, the buying and selling part is not to hard but deciding what to buy and when to sell it is the hard part.
Buying and selling stocks for dummies is sort of like gambling. In fact, many people have lost way more in the stock market than they have at the Blackjack table. With this stock market sell off and panic of 2008, people have lost trillions of dollars combined. Retirement accounts and savings have nearly been cut in half in some cases. The baby boomers are in big trouble right now because they are all set to retire soon and now many of them are facing a situation where they may not be able to retire. It is very sad, really.
I mentioned this because learning how to buy stocks and sell stocks for beginners is not a guarantee that you will make money. You must understand that before you learn how to invest your money in the stock market. In fact, you should never have money in stocks that you cannot afford to lose. If you are saving money to buy a house, you might be inclined to invest it in stocks in hopes that it will go up faster. But it can go down fast too as we have just seen these last two months and so that kind of money should NOT be in stocks.
If you have money you know you will need soon, you should put it in a bank CD or government T-bills. That way you know the money will be there when you need it. Yes, the interest on that money may not be much right now but it is guaranteed. And guaranteed is a good thing because no investment in stocks is ever guaranteed. If you were to invest your money that you need in stocks and they were to go down, you might feel like a dummy. Be smart and put the money you absolutely need in safe investment vehicles where you cannot lose it.
So, this all comes back to how to buy and sell stocks for beginners. It is not hard as all you need is an online stock account with any of the brokers. You can see their ads all over the Internet so pick one as there is really no big difference. They will all say they are the best and maybe some are a little better in some ways than others but they pretty much all offer the same things. You can go with one of the cheapest online trading sites or a slightly more expensive one. Eitehr way, your money will be guaranteed with each of them up to $250,000 (this is in case the broker you choose goes bankrupt and not the stocks you choose to buy through them). Each of them have different online software so the main difference would be there: how easy their site is to navigate and understand.
Once you sign up to your online broker you need to send them money. Usually this is done by a paper check. Send them your money by writing a check and when they receive it you will see it in your account and you are ready to go. You can then buy any stock you want when the market is open by pushing a few buttons.
Likewise, you can sell any stock while the market is open with a push of a few computer buttons as well. Technically, it is very easy to learn how to buy stocks for beginners or anyone online. The hard part is learning how to choose what stocks you want to buy and then deciding when to sell them. It may take years or maybe even a lifetime to understand the fundamentals of stocks and how to choose the best stocks for your goals. Good luck!
WHERE DO YOU GET A FREE REAL TIME DESKTOP STOCK TICKER?
All the business TV's shows have a stock ticker but it is always 20 minutes delayed. If you go online to MSN, AOL, or any other popular service the stock quotes and stock ticker are also delayed. Even if you sign up and open an account with a major broker, the quotes you get online are 20 minutes delayed.
Where do you find a downloadable application that will put a real time free desktop stock ticker on your computer? Stock tickers are very cool looking and to have one on your computer desktop would be very handy, especially now with the stock market being so volitile. There can be 100 to 200 point swings in just minutes and stocks go up and down like yo-yo's. Being able to get real time quotes is very important right now and without them you feel more and more like a stock market dummy than ever before.
With all the major brockerage account services you have to sign up, deposit money, and then make a special request to get real time quotes. It is a pain to have to do all that but real time quotes are a necessity in panic market. Having a free real time stock ticker on your desktop would make things a whole lot easier. In order for it to work you would have to, of course, be constantly connected to the Internet but most computers are now days.
If you look online for a free real time desktop stock ticker all you can find is something like the picture below. Not only is that not real time but it is not really a ticker. I am talking about a stock ticker like you see on TV that goes across the screen in real time. This kind of ticker is always up to date and gives you stock quotes that are accurate to the second. There is almost anything imaginable on the Internet and I find it hard to believe that one can't find such a free stock ticker for thier desktop. If you know where to find one, please leave a comment and let us know where it can be found.
WHAT IS YOUR INVESTMENT RISK TOLERANCE IN STOCKS?
Before you run out and buy stock in this bear market, you had better know what your risk tolerance is. There are a lot of stock market beginners that are now suddenly interested in the stock market due to this panic sell off and it being in the news everyday. This has prompted many people who have never invested in stocks to suddenly be interested in how to buy stocks.
What is risk tolerance for dummies and how does it pertain to you? When you buy a stock you need to know why you are buying the stock, what you are hoping it will do, and just how low you are willing to let it go before you decide to sell. Now, of course, everyone hopes the stocks they buy will go up and they will never be faced with the grim decision of when to sell a loser. But in this market right now, most of us are faced with steep losses.
Risk tolerance is your ability to stand pain: in this case financial pain. Every one of us invests for different reasons and with a different time horizon. For instance, if you are in your 20's you have a lot longer time horizon to ride a bad market out than someone in their 70's. In fact, someone in their 70's might not want to be invested in stocks at all because they will not be working and may need the money any day or year.
Additionally, not every one has the same inner strength and the ability to take financial losses. Some of us have a very low risk tolerance meaning if their stocks go down they lose sleep, worry a lot, and let it affect their every day life. If this sounds like it may be you, then you as a stock market beginner needs to know that when you buy stocks, you can lose everything. It may be hard for you to see your hard earned money become much less while you sit and watch. In this panic market right now especially, this is a very probable result at least in the short term.
On the other hand, if you feel you have a strong stomach and can take the day to day ups and downs of this volitile market, then perhaps you have a higher risk tolerance. It is important to note for any stock market beginner or dummy that it might seem easier said than done to sit and watch your money go down. If you have never invested before and are wanting only now to learn how to buy stock and invest because of what you see going on, you might think you have a high risk tolerance but when you actually do it you might find otherwise. Sitting on the sidelines it is easy to say you have a strong stomach for losses but when you actually buy stock you might find it is not as easy to watch your stock investments go down.
WHAT STOCKS TO BUY WHEN THE MARKET IS LOW
The stock market is going up and down now like a yo-yo on an hourly basis. Right now is not the time to buy stocks as everything is just too uncertain. The way things are right now, the market can easily go up or down 500 or more points any day and that is just too risky to be buying stocks.
Around October 23rd is when the financial and insurance companies are going to know for sure how much of the Lehman brothers 400 billion they are individually going to be responsible for. At that time, there will be a little more certainty and a rally might be in sight. The market often rallies at the end of October as well so that looks like the time with the best chance to get a rally.
What stocks do you buy if a rally occurs and do you hold them long or short term? Unfortunately, if we get a 20% or so bounce there are going to be a lot of sellers as there are many people right now that would gladly sell many of their stocks right now for 20% more than they are worth. So short term might be the way to go.
But as for what stocks to buy when the market is low is anybody's call. Maybe you should look at some of the stock picker ads and find out what the experts are saying. Whatever they say, they could be wrong or they could be right.
HOW TO FIND HOT STOCKS FOR DUMMIES
How do you find hot stocks? Or do you even try? The problem with the stock market is that everyone has an opinion. There are several channels on cable TV now that are devoted just to business and they continually have segments on where they interview analysts. These stock analysts always have their hot stock picks, tips, and market predictions and they can sound so very convincing. Stock market beginners will easily get sucked in with all this positivity.
Many times when you watch FOX Business or MS NBC, the stock gurus are asked about a list of stocks. It seems that very rarely do these "experts" say that you should sell a stock or not buy it. If you listen to these guys on a daily basis you will get the impression that the stock market is always just about ready to soar. Of course there are exceptions and not every analyst is that way but in my opinion most of them are usually positive in their stock market predictions.
Why are these stock experts, hedge fund managers, and guest hosts always so positive about stocks and the stock market? It is like they are pitchmen for the Dow and NASDAQ and trying to sell a product. In their case the product is the stock market and they want you to get involved and start buying stocks. If they can continually paint stocks in a positive light then there will be more business for them from all the stock market dummies.
If you are a beginner and want to learn how to buy stocks and how the stock market works, perhaps it is best not to listen to these financial shows that tout theirs stock tips of the day and hot stocks ready to soar. If you listen to these stock gurus all the time, you may get the idea that it is easy to make money in stocks. If you pick the right stocks and have good market timing it is, but not many can do that and especially someone who is in the stock market for beginners.
HOW TO BUY STOCKS FOR BEGINNERS AND DUMMIES
Get Started Buying Stocks By Opening A Broker Account
TradeKing (now Ally Invest) offers very low trading fees of just $4.95 per trade and they get great reviews year after year from customers and financial publications. Why pay double the fees (like many other brokers charge) when you can get the same safety and stock trading experience with TradeKing?
However, there are many other brokers you can choose from and I have listed 8 others that you might also consider. Each of these charges between $5 and $10 per trade and they are all reliable and safe:
1) TradeKing (low $4.95 per trade)
2) Scottrade
3) Fidelity
4) TD Ameritrade
5) tradeMONSTER
6) E*Trade
7) Merrill Edge
8) OptionsHouse
9) Charles Schwab
How To Pick A Stock To Buy
Once you open your stock account, you need to put money in the account. You can do this by sending a check or by transferring money online from your bank. Either way is okay and the only drawback of the check is that it will take longer.
When the money makes it into your account you can then start buying stocks!
The question is though, which stock or stocks should you buy first?
Unfortunately THAT is the question that only you can answer. It is your money and you must be prepared to make the decisions on how to invest it. You can listen to the stock analysts and pundits but remember, they are only giving their opinion. Listening to them can result in you losing money.
It is best if you start slowly and NEVER put all your money in one stock. Ideally you should have no more than 5% of your money in any one stock but that may be hard to do right away. Your goal should be to find solid companies in different industries to invest in which will effectively reduce your risk to any one business sector.
Stick With It And Keep Investing
It is important that everyone learn how to buy stocks and participate in the market so that they will be able to get bigger returns than they could through investing in CD's and things that only give you simple interest (which is near 0% right now).
Most anyone can figure out how invest in stocks. It certainly doesn't take a degree or any specialized training to figure out how. The media might make it sound harder than it is but in reality, all it takes is a commitment to learn over the many weeks, months, and years of your investing career.
HOW TO HANDLE BIG STOCK MARKET LOSSES
Right now, anyone who is in the stock market might be sitting on some big losses. In fact. probably almost everyone who owns individual stocks or is in mutual funds has huge losses right now in 2008. This is a big barrier for stock market beginners and dummies and it makes them wonder whether the stock market is worth learning. If you have all your money in an IRA then you will have the same big losses but at least you wont have to mess around with your taxes yet.
There is a $3000 maximum loss that you can declare every year on your taxes for stocks. $3000 is hardly anything in today's economy and so most people are going to have to carry over their losses for many years to come. What a pain in the ass....thanks, you slimey polititions in Washington.
Everyday lately I sign on to my computer to see how much I lost that day. It used to be how much I made, then it went to maybe I made money or maybe I lost, and now it is always how much I lost everyday in stocks. Huge stock market losses are enough to make people sick and it is hard to put everything into perspective.
How do you deal with losing a months pay in one day in the stock market? Depending how much money you have in the stock market, there may be days where you lose way more than a day's pay. Everyone is always trying to find the hot stock and there are always stock market gurus and analysts who will sell you their "hot stocks of the day". When the market is down big like it is now though, there aren't a whole lot of super hot stocks. Everyone is losing money.
In order to deal with huge losses in stocks, one really has to learn how to compartmentalize things. The stock market is the stock market, work is work, your family is your family, life is life, etc. They are not related. Also a little recession humor goes a long way to with helping out your disposition. If you are properly diversified then these big stock market losses will not effect you as much. Everyone needs to learn how to diversify, especially stock market beginners.
