Calling all savvy investors (and the not so savvy if you want)

[theslug]

So I've decided I'm ready to start investing. I would have been a rich man had I invested in Bank of America, which I had my eye on, which was at 16 a share and now a week later at 34 a share. A minor set back, but infuriating none the less. Anyways, I know as a beginner to the investing arena you shouldn't buy single stocks and instead should go with all this other crap like ETF's and what not but i'm a hard ass and I'm ready to make real money.

 

The only problem is, I need a broker. Most of the places I've been to like E*trade and Fidelity have high transaction fees and are ridiculously hard to follow with all this crazy nonsense trying to confuzzle the average joe from making an honest dime. So far the best one I could find is FirstTrade. The thing I'm worried about is are these a holes going to commission my hard earned exploitation of the current market failings? I mean they get a transaction fee but will they take a percentage of my sells too? I haven't seen anything like that on their websites so I don't know. Also this stuff is done through a bank account correct, and if so does that mean I can just transfer money at the click of a button, and also will this mean transfer fees?

 

Also any other tips besides "be diversified" would be much appreciated.

[Gorgon]

First advice on online stock trading : Seek ye not advice on random fora.

 

 

This is indeed the time to make a fortune, or lose it.

Edited October 5, 2008 by Gorgon

[theslug]

I know what I want to invest in and I understand enough about the actual market to invest semi-competently but I don't know anything about the middle man aka online brokers.

[Aram]

Send me all your money. I'll make sure it gets to the right people.

[Moatilliatta]

Send me all your money. I'll make sure it gets to whores and crack dealers.

There.

[Gorth]

This is indeed the time to make a fortune, or lose it.

 

First advice on online stock trading : Seek ye not advice on random fora.

 

Never really had much trust in stock markets. I always felt that I might as well gamble in casino.

[Cycloneman]

Send me all your money. I'll make sure it gets to whores and crack dealers.

There.

Way to ruin the joke.

[Gorth]

I suppose people can't be funny all the time. That was indeed a failed attempt.

[Atreides]

I'd say I'm more of a top-down investor looking at the macro economy for general trends then looking into particular stocks. My personal opinion's the market's very over-reactionary especially in the short-term.

 

I wanted to buy AIG at USD2 but then it went up the next day after the govt lent them USD81 b. Subsequently after the news of the bailout plan and stuff it's hovering around USD4 but it reached USD5.50 at one point in the space of like 2-3 days.

 

I'd recommend talking with people who know their stuff. Look at it this way - you wouldn't put lots of money down on investments that you don't know much of or a game which you don't know how to play so the stock market shouldn't be different.

 

However it's my opinion that the market's close to bottoming out. It may still go down but if you look at an investing horizon of 5 years or more there's value in the market. Also, if you're into stocks look at the long-term since stocks have wide variance in return, especially in the short term. It's over the long-term that they're expected to show higher yield overall.

[Walsingham]

I've only once been tempted to go on the stock market because I find commercial investors behave like diahorettic sheep. Dashing about making a fuss and crapping everywhere. You can be as smart as you like about which companies will do well and then the moron majority yank the rug from under you. Several of the recent closures seem particularly symptomatic.

 

If you insist of doing some investing I'd recommend you learn at the feet of a relative or two first. This has the added advantage of fostering family ties.

[Gfted1]

@theslug: Ive used AmeriTrade in the past and they do not charge a commission nor a money transfer fee (though your bank may). The only cost of doing business with them is the one time per transaction fee for stock purchases/sales, which is fixed regardless of the size of the transaction.

[theslug]

Yeah I'm kind of thinking one of my picks will be Citigroup. The thing is they were supposed to purchase Wachovia and then Wells Fargo swept them up. However, that's most likely illegal since I can't imagine citigroup not making wachovia sign a contract somewhere along the way not to mention they wouldn't bring Wells Fargo to court if they didn't. Last I heard the court deal was halted or something, which is good becuase it means there is some real stuff doing down and when Wachovia comes back to citigroup their should be a decent surge and I could short sell but historically they have held at about 55 so their is definitely some long term value their. Course you're not supposed to use historical data to predict the future however that doesn't mean it can't give a relative picture of how they will do when the markets fully recover.

 

And right now, record high volatility in the market.

 

Volatility = Value (and risk)

 

But there's a hell of a lot of money to be made out there.

[Enoch]

My advice would be:

 

1) Hooray for diversification!

2) Don't pick individual stocks unless you're willing to put a lot of research time in.

3) Don't try to time the market unless you're willing to put a lot of research time in.

4) The one thing you can control in the market is the amount of fees you're paying; keep them as low as possible.

5) Fund managers rarely produce consistent returns that justify their fees.

6) Given present market conditions, don't invest any money in equities that you think you're going to need anytime in the next 5 years.

 

So where does that leave us? Research low-cost non-managed index funds, buy a little bit at first, and keep adding to your investment on a regular basis (e.g., $100 out of each paycheck or something). This will insulate you a bit from the swings of the market-- if things go down, your previous investments will lose value, but you'll also be getting a bargain on the stuff you're buying at the lower price.

[Guard Dog]

Ditto everything Enoch posted. To that I would add that right now banks that deal in mortgage securities may turn out to be a solid investment long term because I believe the real estate market has hit bottom and buyers with good credit and cash might be looking at real estate as a good opportunity. I know I'm looking at a few lots in Bartlett. Prices may drop more but I think we are getting close. I would avoid stocks of companies that specialize in consumer goods or retail outlets. Companies like that tend to take a real hit during economic downturns when people do not have a lot of extra money to spend.

[Enoch]

Oh, and let me add:

 

7) Be aware of the tax consequences. IRAs, 529 Accounts, and other devices that let you avoid or defer taxation are can make a huge difference on your eventual return on investment.

[theslug]

My advice would be:

 

1) Hooray for diversification!

2) Don't pick individual stocks unless you're willing to put a lot of research time in.

3) Don't try to time the market unless you're willing to put a lot of research time in.

4) The one thing you can control in the market is the amount of fees you're paying; keep them as low as possible.

5) Fund managers rarely produce consistent returns that justify their fees.

6) Given present market conditions, don't invest any money in equities that you think you're going to need anytime in the next 5 years.

 

So where does that leave us? Research low-cost non-managed index funds, buy a little bit at first, and keep adding to your investment on a regular basis (e.g., $100 out of each paycheck or something). This will insulate you a bit from the swings of the market-- if things go down, your previous investments will lose value, but you'll also be getting a bargain on the stuff you're buying at the lower price.

Thank you Enoch most of that I already knew but I didn't know index funds were a good idea right now. I was actually going to start in an index like you are kind of supposed to but now the market sucks so I thought they'd be dead. And yeah I thought about going to a real brokerage firm or something but if they were any good at what they did they wouldn't be working in cubicle but instead be relaxing on a beach somewhere with many a young whore and delicious margaritas. At least that's what I would do.

 

I just don't know what to do anymore. I mean I know I could open a roth ira or something and put all my ducks in there while adding money from paychecks and I'd be a millionaire ez mode but I'd also be like 60 years old and I want to be rich now and not when a million dollars isn't really worth a whole heck of a lot even though it's highly unrealistic. I just don't know. The returns from stocks will have higher earning potential especially if I started in this market for the long run but with my knowledge I'd be pigeon holed into only a few categories like banking and oil for the next couple of years since everything else is so dangerous at this present time. I'm so scared.

 

Edit: Yeah I glanced over some tax stuff but right now I'm a student and make like 600 dollars a month so the capital gains tax will be the minimum (I believe 5%) so it wouldn't hurt too bad in the short term. And while I do plan on making a decent pay check, 5 years from now when the markets have strengthened I could probably sell for a pretty penny without getting back doored by taxes. Then I could rejuvenate an IRA with a nice lump sum. And I'd only be 25.

Edited October 6, 2008 by theslug

[Walsingham]

I don't know why spending your money on blackjack, hookers, and theme parks gets such a bad press.

[Blank]

You know, because that stuff is gambling and dirty. Stock markets are clean and make sense, like buying pet diarrhetic sheep.

[Walsingham]

I collared a client of mine who specialises in market advice. He said NOT TO BUY right now. However, if you insist on buying then look for low stocks in utilities and defence.