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 FIND GOOD STOCKS TO BUY FOR DUMMIES
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
A BEGINNERS GUIDE TO STOCK DIVIDENDS
What are stock dividends? In this time of market crisis and uncertainty in 2008 – 2009, many stock experts are suggesting buying stocks with dividends and holding them until there is a recovery. One of the reasons for this is because it is difficult to find an alternative such as a high yield certificate of deposit. At least with a stock that pays a dividend, you are getting a small return with the hope that the stock will go up when things get better.
Not all stocks pay a dividend and most that do are under 1%. With some careful research though, you can find stocks that pay a higher dividend. What the stock gurus are saying is that you might find stocks that pay a reasonable dividend and buy those instead of stocks without dividends.
A company stock may pay a dividend for many reasons but the most common one is that they want to return something to their investors. Some companies, like Microsoft, may have a lot of cash and decide to give some of it to their investors in the form of a dividend. Other companies might need all their cash for research and development and not pay a dividend. Tech stocks are notorious for not paying out dividends.
No stock dividend is guaranteed safe. Any time a company gets in trouble, the first place they go the cut costs is their dividend if they have one. Therefore, even if you find a stock with a great paying dividend, you cannot buy that stock and be able to count on it. Especially now in these troubled times, stock dividends are in trouble across the board.
Some dividends are safer than others because of the financial position of the company. If a company is doing well, the dividend is probably safe and will not be reduced. Companies like to have a record of increasing their stock dividends but this is not always possible, especially in dire times like these. The stock market for beginners is now a rough place to get started but buying stocks with dividends is a good place to start. You need to do the research and find out what companies are doing all right and pay a nice healthy dividend. If you buy this type of stock, even if it goes down the dividend minimizes the losses.
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!
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.
IS NOW A GOOD TIME TO GET INTO THE STOCK MARKET?
If you are asking the question "is now the time to buy stocks" then you might also be asking "is now the time to buy real estate". Look how much both the stock market and real estate market has gone down just in the last 3 months. If you have cash right now, you are in a great position to profit.
The reason (well one of the reasons) we are in this mess in the first place is that so many people are in debt. People have been living a lie and living well above their means. Just because someone is living in a million dollar house does not mean that they have money or are rich. They could be deep in debt and on the verge of bankruptcy and you would never know it. People have been buying houses that they cannot afford and assuming that their value would go up. As long as the value of their house continued to go up they were fine because they could alway refinance.
Are you someone who is in debt? If you are then you are in trouble right now because you are not going to be able to acquire more debt to pay off your old debt. Some people keep on getting new credit cards to pay off the old credit card bills and continue to go into more and more debt. If that sounds like you then I am afraid you are part of the problem.
What if you lose or have lost your job? Many people are losing their jobs right now because of this mess and they are already in debt or have little savings. What are they going to do now with no job. With no job they can't afford to pay their mortgage and might lose their house. Since house values have gone down they don't really want to sell because they will have a "loss" from what they could have gotten a year or two ago. Maybe there will be no one willing to buy the house anyway. If they can't or don't want to sell their house to downsize and they can't get new credit to pay the mortgage, what are they going to do?
What does all this have to do with the stock market you ask? Nothing other than most people who have no savings or are in debt will not be able to take advantage of the beaten down stock market and profit from it when it explodes back up. Maybe the stock market will never "explode" but you can be sure that sometime it will start to go up again. It doesn't matter whether you are a seasoned stock proffessional or a stock market dummy or beginner, one thing is for sure, if you have no cash then you can't invest and play the game.
Is right now a good time to get into the stock market? Maybe or maybe not. Today might or might not be the bottom of the market and of course no one can see the future. One thing is for sure and that is that it is a better time to invest now than it was 3 months ago. It is always better to buy stocks when they are low than when they are high as they have more room for growth.
Right now there is a lot of fear and panic in the market. People are scared to buy stock and they are selling and over selling stocks. The stock market for beginners is a scary place and many people are scared into selling. If you can find stocks that are oversold then now is a great time to buy stock. There is no guarantee any stock will not go down further but it has to be getting somewhere near the bottom.
This type of housing and stock crises does not happen everyday. Many people will lose and have already lost fortunes. But these kinds of dark times are not bad for everyone. It is in times like these that you can find great buying opportunities and make a killing. If you have the nerve to do the opposite of what everyone else is doing, in this case buy when they are selling, at some point you will start to profit. The trick is trying to determine when the bottom is near. Most people live their life looking back and saying "what if I only knew". It will happen in this 2008 market meltdown as well. At some point stocks will rise again and if you are not on board you will be left looking back and saying "what if".
This does not mean that every stock will be a good buy. Another reason we are in this mess is that companies are going bankrupt. Companies that go bankrupt or are on the verge of going bankrupt are not "good buys". The trick is finding good stocks that are too low because they have been oversold because of the stock market panic. Stocks for beginners are going to be hardpressed to choose the right ones.
It is best in times like these to find someone who knows what they are doing and is a good conservative investor. You need to find someone to bounce stock ideas off of and someone who knows the stock market environment. One of these people might be Jim Cramer and you can get a free two week sign up for his newsletter that will give you all his stock picks before he actually makes the trades. Will he guarantee every stock he picks to be a winner. No he won't and can't because no one can see the future. But he may be able to give you an idea of what stocks to be looking at to start buying.
The stock market goes up big one day and down big the next and right now is a very volitile time in the market. At some point it will be a good time to get into the stock market and it might be very close right now. On thing is for sure. It is a great time to start looking at and analyzing different stocks and start trying to figure out which ones might be undervalued. If you are not in debt and have cash on the sidelines, this buying opportunity is what you have been waiting for. Take advantage of your cash position and learn how to buy stocks for beginners to get in some stocks at a low price so you can profit in the future.
WHAT STOCKS ARE SET TO EXPLODE?
Are you trying to find stocks that are ready to explode? The stock market is way down right now and anyone who can figure out which stocks to buy today may make a nice gain. History shows that buying stocks when they are at their lows is the real way to make money in the stock market.
How do you figure out which stocks are set to explode? One way is this free offer Get free stock alerts from Jim Cramer at TheStreet.com. You can gain full access to Jim Cramer's $3 MM Personal Portfolio — and you will be emailed before he makes a trade!
Managing money is hard especially for stock market beginners. But, Jim Cramer is so committed to helping people learn that he created a charitable trust portfolio to show investors how and why he makes trades. For over 10 years Jim Cramer was a successful hedge fund manager and now he writes for RealMoney.com. Over the years he has developed a strict set of investing disciplines that have helped all kinds of people be successful through any market.
If you want to know what stocks a real pro is going to buy before he does it, this offer is for you. You can get a 14 day free trial and now is the time to sign up to see how Jim Cramer is going to take advantage of this stock market panic to make money. This is where the real stock market professionals separate themselves from the stock market for beginners. This is where the real investors make their stock market fortunes at times where the stock market is tanking. You need to know what they are buying right now that will explode later for nice double digit gains.
SHORT SELLING STOCKS FOR DUMMIES
The SEC today (September 19, 2008),banned the short selling of stock of 799 financial companies through October 2. I think they will extend the band much longer than that perhaps until after the election in an effort to make sure the market is given the best chance of being stable.
What is stock market short selling? How do you short sell a stock? Shorting a stock is the opposite of buying the stock. When you decide to short a stock you do it because you think the stock price of that stock is going to go down. What happens is this: a stock market investor who sells a stock short borrows shares from a brokerage house in order to sell those shared to another investor. Proceeds from the sale go into the shorter's account but he must buy those shares back at some point in time and return them to the lender. When you buy the shares back it is called "covering".
Short selling stocks is not a strategy stock market for beginners should use. Only investors who know what they are doing should ever attempt this because you can theoretically lose more than when you just buy a stock. When you invest in a stock, the most you can lose is what you have invested and the stock would have to go to zero for that to happen. However, when you short selling a stock, the stock could go up and up and never stop. The more it goes up the more you lose so there is no limit to how much you could lose when you short a stock.
STOCK MARKET 2008 PANIC = TIME TO BUY?
9/29/08 Update: Another big panic today with the Dow closing down 777 for its biggest one day drop EVER! There is fear absolutely everywhere!
The stock market is at a two year low right now and there has been nothing but pain this year. Yesterday the US Dow Jones went down over 500 points which was it's biggest drop since 9/11 and it has transfered over to the International markets as well.
There is no doubt that this stock market panic is the real thing as company after company comes in with low earings or warnings about slowdowns and lower earnings to come. As I right this, the market has come back a little as it was down over 130 but is now up 50 points or so.
If you sell now in September 2008 you will be part of the panic and contributing to it. You will probably be getting the lowest price for your stock as many stocks are at a 52 week low. However, if you don't sell, things might get worse and you may lose more money. It seems selling could be wrong and holding could be wrong. Alas, these are difficult times for stock market beginners and veterans alike.
If you look at the 2008 Dow Jones stock market chart below, you will see that everytime there appears to be an upturn, it ends up heading back down to a lower point. Yesterday's drop was all out panic as people just wanted out. Some people have bigger balls than others and then some people may be smarter than others too. We will only know in the future when we get there.
Is it time to be buying right now in the midst of this panic? This is where the pro's seperate themselves from the stock market dummies and beginners. The pro's have a plan and they have lots of information as well. That doesn't mean that the professionals will be correct whatever they do, but it does mean that they have a better chance of understanding the market and the sentiment of investors.
For stock market dummies and the average stock market investor, it is extremely difficult to see and understand when the stock market might be approaching its low point. A panic in the stock market is often a good time to pick up a few stocks at an oversold low price and the professionals are good at that because they have the fundamentals in front of them and can more easily estimate a companies true worth. If in a stock market panic sell off a company gets oversold by frightened investors, the hedge fund managers and stock traders may be the ones buying the stock.
Again, there is no way to tell the future and today may have been the stock market low point or it may come sometime in the coming weeks or months. There is still panic in the air and another bad company story may be right around the corner to send the stock market lower. However, we do know that at some point there will be a turn around in the stock market. It may not reverse on a dime and head right back up, but it will turn around in some fashion. At some point we will have all wished we had started buying stocks rather than sitting on our hands and doing nothing. Is that time now? Is it time to start looking for stocks to buy rather than stocks to sell?
IS IT TIME TO BUY THE STOCK MARKET?
There are many different theories on when is the right time to buy into a stock market that seems to just keep going down. Right now, it seems the bad news just keeps on coming and there is no end to the falling stock market.
This is a difficult time for any investor and especially for stock market beginners. Is now the right time to jump in? Should we wait? Should be just keep our money safe in our bank account? Or maybe this is the turning point that will change the stock market forever.
In the 1970's and early 1980's there was a very long period where the stock market did nothing at all. Could we be seeing the beginning of something like that? No one knows, of course, but if history repeats itself then it is still not time to jump back into the stock market.
History has shown that the proper time to jump back in is when the market keeps going down for a protracted period (as is happening now) and then there is a period of one day to several days where it gets REALLY bad. This is something about the stock market for beginners that they would not know or understand.
Yes the stock market has had an awful year and yes it has had some bad days, but it has yet to have a day or two where the market seems to fall off a cliff. I am waiting for that day or two where everybody and their brother are selling every stock all day long. I am waiting for those several days when it seems like the end of the world is coming and that there is no possibility of anything ever recovering. When there is a serious panic in the streets, that is when I will start buying this stock market. That is when the bottom is near and the turn around will happen.
STOCK DIVERSIFICATION FOR BEGINNERS
Over the past several decades, people on Wall Street have preached the virtues of stock diversification, drilling it into the minds of every investor within earshot. Even stock market beginners or dummies have heard about diversification. Everyone from the CEO to the delivery boy knows that you shouldn't keep all your eggs in one basket - but there's much more to it than that. You shouldn't go on financial tips alone...you need to diversify and study your options.
The concept of "don't put all your eggs in one basket" is a wise one for those who are unable or unwilling to evaluate the attractiveness of investment opportunities. But as it happens, excessive diversification presents a serious hurdle to wealth building.
There undoubtedly is less risk in holding a concentrated portfolio of well researched investments than holding so many stocks your returns are bound to be nothing more than average. The ideal portfolio size, depending on your net wealth, may be between 5 and 20 stocks. It is better to have a smaller group of well researched and understood stocks than it is to have a sizable laundry list of all the popular companies. For it is much easier to find 5 exceptional opportunities than 25.
HOW TO AVERAGE DOWN FOR DUMMIES
This stock market for dummies lesson is about averaging down.
If a stock you have invested in falls in price you have a few options...
You can panic and sell out, hold onto your investment waiting for the stock to rebound, or buy more stock at the now lower prices. The latter is a strategy known as "Averaging Down" because it will bring the average price of your investment down.
It works like this: you buy 100 shares at $100 a share, the price falls to $80 a share and you then buy another 1000 shares which brings your average cost down to $90.
Is this a good strategy?...
It's a bad strategy if the price has dropped because the fundamentals of the company have changed to a significant degree and the stock is now unattractively priced or it was simply a bad investment in the first place.
But if your initial investment was based on sound research and understanding of the company and the fundamentals of the company haven't significantly changed for the worse then it is the best strategy to take. Because if it was good at $100 it's great at $90.
Inbox Stocks - Is This Another Scam?
WHAT CAN YOU EXPECT WITH INBOX STOCKS? I AM GOING TO FIND OUT, AS I DO THIS INBOX STOCKS REVIEW OF THE FREE OFFER. I've just signed up at Inbox Stocks for an interesting free trial offer. You'll be able to type in your name and email address and then, for the next 4 weeks after, you'll receive one free stock pick per week. You can watch along to see if this guy and his service is worth the cost. You will be able to watch live, each week, as his actual stock picks almost double. (he says)
He also claims that his stocks can often rise over 100% within a matter of days. He claims that you can take advantage of a pattern everyday within the first 45 minutes of the stock market's open. This only works for OTC stocks (over the counter).
If you are looking for information about stocks for beginners this might not be great for you as it might be too advanced. Also, this could be a scam but it is free to sign up so I am going to give it a try. Again, that's Inbox Stocks if you want to give it a try. I like stuff that is for free and maybe it will at least give me an investing idea or two.
6/20/2008 UPDATE
Here is what has happened so far. I signed up by just giving my name and email and then I immediately got the following letter sent to my email:
"Recently when you read my website (InboxStocks.com) and you decided to subscribe to my newsletter - You took a chance.
I admire that... And... I intend to do everything within my power to make this the best investment you will ever make.
My newsletter is a labor of love. I slave over it like you wouldn't believe.
I want my newsletter to be... by far... the most valuable penny stock investment publication in the entire world.
And so far, I've delivered one penny stock pick per week and have achieved an average 84.795 gain.
This has allowed my subscribers to almost double any money they invest... each and every week!
You should receive your first stock pick, within the next 7days or so... And so that you're ready to take advantage of it, I'll explain the process:
The night before the stock pick, you'll receive what I calla "warning email". This is usually sent at the time the market closes and will explain a little about the pick.
The next morning, roughly 20 minutes prior to the market opening, you'll receive the stock pick.
The "stock pick" always lists vital information, such as the stocks ticker and corporate website at the top of the email.
... The pick however will also be a full report on the reasons I chose the stock, and a background on the company."
That is most of the first letter I got and I am now awaiting the first stock pick. I will never reveal what the stock pick is (that would not be fair as you should do the Inbox Stocks free sign up to get it) but I will tell you what transpires and give you my opinion of the service. I will update this when I have more news.
6/23/08 Update
I got an email this morning from Inbox Stocks but no stock picks yet. The email explained a little about Dave's thoughts on investing but nothing of any real substance.
6/29/08
I have had no further emails for Inbox Stocks. I'm still waiting for the first pick. It's a good thing the sign up is free because not much is going on so far.
7/12/08
Unfortunately, I was on vacation when David released his first stock pick. He released it on Monday morning and claims it was at .36 then. HOWEVER, the stock he picked did not open at .36 but at .48! It did briefly hit .61 and if you had sold it at that instant you would have made a nice gain. However, the stock closed the week at .49 for a total gain for the week of ONE CENT.
This looks to be something that you have to stay glued to your computer for and perhaps sell the instant you have a gain you are happy with. This is definitely not long term value investing. His new email says a new pick will be out next week so I will update then.
8/4/08
The next stock has just been emailed to me and guess what? It is the SAME stock as he picked last time in July. That's right, the same stock as I guess it has since gone back down to it's prior level and now it is David's pick again!
Is The Stock Market Gambling?
This is a question people just starting out in the stock market may ask. The stock market for dummies could seem like gambling when you pick your first losing stock. So, what is the difference is between gambling and the stock market.
Sometimes it may seem that you can lose just as easily at the stock market as you can at the blackjack table. Ask anyone who has lost money in Enron how they felt after their stock went to zero. You can lose big on a stock but rarely do companies go bankrupt and the stock go to zero.
The difference between pure gambling and buying stocks of companies is that you are betting on the future of the company and you have a track record you can research. If you are invested in many stocks, you might say that you are invested in the future of the country. If something terrible happens to the country, like a natural disaster or a terrorist attack, stocks will go down. If the country flourishes and good times prevail, the stock market will most likely go up. By investing in the stock market you might say that you are betting on our future.
Gambling in a casino is a whole different scenario. There is no casino game that the player has an edge. Just take a look at how big Las Vegas has become to be sure that the house always has the advantage. You might be able to beat the house now and again but over the long run you will lose.
When you buy a stock and it immediately goes down, it might sometimes feel like you are gambling but that is mostly out of frustration. If you do your homework and pick your stocks carefully, you should be able to make money long term in the stock market. The stock market for beginners is a much better place to be "betting" your money than the casinos.
Stock Prices and Perceived Value
One of the hardest concepts of the stock market for dummies to grasp is what determines the value of a stock. When you buy a stock, you are buying a part of a company. However, that stock price can go up and down drastically sometimes for almost no reason which in turn means the value of the company is going up and down as well.
Lets say you bought some shares of the stock Garmin in the last six months. If you were unlucky and bought it at its high, you might have paid as much as $125.00 and change. Unfortunately if you look at the stock price today, you will see that the price is down to around $43.00. That is a decline of almost two thirds! Wow! This also means that the value of the company went down two thirds as well.
What happened? How can a company be worth only 33% of what it was just5 months ago? Is the company really in that much trouble? Did a hurricane destroy a factory or two? Well, in Garmin's case it is all because the perceived value of the company went down. GPS devices have been very hot for the last 3 years or so and the stock went up steadily because of the perception that Garmin was the industry leader and would sell a lot of units.
Suddenly, with the economy on the downturn and people not spending as much as they did for expendable items, the perception is that Garmin will not sell as many units in the coming years. The company is still doing well right now but everyone believes that things will change. Thus, just because people THINK things might change, the stock goes down and so does the value of the company. The perceived value of the company has gone down.
Stocks can shoot up for the opposite reason when people think a company is in the sweet spot and has a product or technology that will do very well in the future. In that case, the company stock may go through the roof even though they have few sales at this very moment.
Stock prices go up and down daily on what stock market investors perceive the value to be and not necessarily what the company is really worth. It is difficult to fathom this sometimes because you have to change the way you think about investing in stocks. This is another thing that shows that the stock market for beginners is a complicated beast to learn.
Stocks For Dummies
The stock market for beginners is easy to get started now that most brokers are online. First you will need to open a stock account and you can easily do that online much like you do anything online nowdays. Once you give them all your information you will need to "fund" your account. That means you will need to put money in it. You generally have two options and the most popular is to write a check and send it in to them. This will usually take about 10 business days before you will see the money show up in your online stockmarket account and be able to trade. The second option is to physically take a check in to the companie's office if they have one in the major city that is nearest you.
Once you have money in your account you are ready to buy a stock which is called trading. The stock market for dummies can be a bit overwhelming at first with all the terminology that is thrown around and it takes some time to learn it. Buying a stock is actually quite easy and most online companies will have a tutorial section to help you out. This tutorial section should help you learn how to buy and sell stocks.
A great place to learn and get information about individual stocks is the ValueLine report which you can find at most any public library. This report comes out every month and will give you analysis of many of the stocks you see daily going by your television stock ticker. This ValueLine report will give any stock market beginner some detailed analysis of every stock that is easy to understand. It has stock charts and detailed reasons why it thinks a stock is a good investment or not.
If you are a stock market for beginner then you need to start slowly and try to understand things one at a time. It is exciting when the stock market goes up and you make money but it is not so fun when your stocks go down. It is often better to buy stocks when they are low so that they have room to go up and make you money. In a down market like 2008 it might be a good time to learn how to buy stocks and start investing in the stock market.
