Discussion in 'Stock Market Education' started by jfrack, Dec 17, 2015.
Hi all, I've been looking into investing, but I don't know where to start. Any advice?
I'd read "The Intelligent Investor" by Benjamin Graham before you start. Also books by William O'Neill such as "How to Make Money in Stocks", along with Peter Lynch.
Think longterm. Diversify. Work to minimize risk. Invest mainly on fundamentals. Dollar cost averaging into your investment account with a small amount of cash to be invested every payday works well. Keep emotions in check - too little fear and too much greed and ego have broken many. And too much fear can also be a hindrance and cause one to make bad decisions.
An IRA/Roth IRA (and/or contributing to a work plan such as a 401k) would be a good idea to defer or eliminate taxes on capital appreciation from earned income. Try to put as much $ as you are able to in such tax-advantaged plans, up to the maximum you are allowed to contribute.
If you eventually find you're not particularly suited to the practice of picking your own individual investments, an index fund is a cheap way to get diversification across a large number of better companies in various sectors and industries.
One additional minor point. For those stocks purchased through dollar cost averaging, opt to automatically reinvest dividends. The compounding adds up over time. Good luck.
My nephew who used to be a stock broker always advises newcomers to be prudent in their investment. His preference is to be slow and steady with the potential earnings so blue chip stocks are the best investment. However, you should know if the blue chip company is performing well otherwise you might get the surprise of your life. So the best is to have a broker. Huh, that may sound a biased advice coming from a broker.
Thank you everyone for the advice I will be sure the heed it well!
Yeah, you definitely want to reinvest dividends!
You'll find a stock screener to be a very valuable tool.
You can learn a fair amount of general knowledge by watching the financial news on the tv - CNBC, Bloomberg, Fox Biz, etc... But you definitely DON'T want to take everything you hear as gospel to be acted upon. Most of the babbling done by the commentators throughout the day is just useless banter. And many guests who come on will have opinions that differ from one another greatly. You'll often find that even 2 people from the same large firm will have two different opinions on a particular subject.
I personally DO pay more attention when the odd occasion arises that a big billionaire investor or very successful longtime money manager makes an appearance on tv.
If you happen to have at least 6 figures (or come into such a lump sum in the future) you'd probably want to consider consulting with a professional advisor at a major firm. If you're starting out with just a few grand or a few hundred, it's generally better to open up an account with a discount brokerage, and either go with an index fund, or perhaps a couple of top diversified mutual fund managers, or else consider starting the journey to figuring enough out to pick at least a handful of good investments out for yourself.
Your age, time horizon, individual risk tolerance, liquidity needs, specific goals, and amounts of money you have will be important considerations.
If you do have the time and temperament to learn to invest for yourself, it's really not all that complicated. You just have to keep in mind that the values of investments all fluctuate at least a little (some definitely more than others), and that any individual stock or bond you buy COULD possibly become worthless at some point. I'd generally avoid riskier activities such as day trading and "penny stocks".
There are a lot of good websites out there that issue daily bulletins concerning all aspects of the stock market. I won't mention any here by name as I write for some of them, but a quick google search should suffice.
Once you're signed up and receiving information and opinions, don't be too eager to start investing. Get a feel for how people analyse the markets, and see if there are any trends or patterns that emerge from that. Everyone approaches what is essentially the same thing in a myriad of different ways. Some work well, some not so well. But by giving it some time, and keeping track yourself, you should get a better feel for what you're about to do.
That said, you could just find a hedge fund you like the look of and let the professionals take care of things. There are benefits to this, but also certain drawbacks. Once you begin reading around you might see what I mean. Good luck.
First, determine why you're interested in investing. Is it just because you've heard others mention the stock market, and/or other types of investments, and you think it's a good idea? Or, do you have a financial plan and realise that you need to invest for a required level of return (also understanding the risks) in order to reach your financial goals? I hope it's the latter, but if not then I'd recommend you develop your financial plan first.
Ok, now armed with your financial plan, the next step is to determine your investment criteria - your checklist of investment "must-haves" before you will part with your hard earned-money. A checklist helps you refine the list of opportunities (funnels down the big list of options), helps you find the potential nuggets to spend your time on with further evaluation, and helps take emotions out of the investment decision.
Being a Value Investor - I would recommend you explore this methodology. There's heaps of info (not just on Value Investing) on our website, but also one book I highly recommend is Charles Mizrahi's "Getting Started in Value Investing". A really simple book to read, that I'm sure after reading you'll say "that all makes sense"!
Before choosing of stock, conduct through fundamental and technical analysis. Always try to pick up the stocks that are undervalued and oversold. Please always make investments for the long term. Also, try to ensure diversification of the fund by investing across different types of stocks.
Best of Luck.
How much do you need yo get started with an index fund? Does it require some degree of maintenance or can the investment be left without having to worry about it too much?
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