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. 

HOW BAD ECONOMIC NEWS AFFECTS THE STOCK MARKET

The stock market is greatly influenced by the general economy and I have always stated that on this blog.

Following up on my last post about is this summer rally real?, we are now seeing that August hasn't been a good month for stocks. I am writing this on 8/20/2010 and as of mid morning the Dow Jones chart for August looks like this:

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.

Just today there was this MSNBC article about more an increasing number of people are having to take hardship money out of their 401K's. That money comes with a 10% penalty and taxes have to be paid on it so anyone that does this REALLY needs the money and is desperate. This is a big indication of just how bad it is out there and how many people are in big trouble financially.

Also just yesterday, the market went down because of a bad jobs report. More jobs were lost in July then economists had predicted and companies look to be pulling back their hiring. I have talked about how I think we are in for bad times ahead as I think all the debt and foolish stimulus bill shenanigans are starting to catch up with us. I think the real unemployment numbers are MUCH HIGHER than the "official numbers" and I think things are going to get worse.

Now, the stock market CAN go up in troubled times but that is rare. The politicians can spin all day long about how things are about to get better or things are really not as bad as they seem but I don't believe them. I THINK THINGS ARE MUCH WORSE THAN THEY SEEM and we are going to be seeing that soon.

It the bad economy news stories continue to come out day after day and week after week, it is going to seriously stop average people from wanting to buy stocks. That will make the market go down and that is where I think it is headed. Reality sooner or later has to catch up with us and the stock market is going to act accordingly which means it is going to go down.

Let's hope I'm wrong but that is the way I see it.

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 BUY STOCKS FOR BEGINNERS AND DUMMIES

Get Started Buying Stocks By Opening A Broker Account

In order to buy stocks you will need to open up an online account with a discount broker. It is easy to do and if you have signed up to almost anything online, you can figure out how to open a stock 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).

History has shown that stocks are the best place to invest your money. By that I mean that the stock market has given investors the highest return of any other investment vehicle when investing over a long period of time. Even though there have been bad years in the stock market, anyone who has stayed invested through the good times and bad should have done quite well.

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?