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Do your own "research"
10/4/2011 10:40:47 AM
As I mentioned in another thread I don't know much about investing, but I'm looking at buying some stock, and I've started learning what I can about the overall process. What I'm not clear on yet is when people say "I'm buying x, y, and z, but you should do your own research and do what's best for you." What research should I be doing exactly? What should I be looking for that might suggest a company is good to buy?
Anyone willing to share examples of something you've been successful with and what made you choose it?
Anyone willing to share examples of something you've been successful with and what made you choose it?
10/4/2011 10:08:38 PM
This strategy is a passive strategy meaning mostly that it's long term and it's of the "buy and hold" school.
I have a 401k that i'm very aggressive with. I'm 31 and have about 34 years of growth potential meaning i'm long term so my strategies reflect that. I'm in growth and value large cap funds and some mid caps as well as small caps. I'm also about 35% in international equities with a smattering of bonds ~5%. That's my 401k. I look at it monthly and tweak as necessary.
For my personal stocks meaning those i've purchased through a brokerage i look for a few things. I look at P/E ratios or price to earnings. The lower the number the better. I also look at the companies financials since i'm an accountant and they mean something to me. If they look strong i'll usually invest in them. By strong i mean good amount of assets and cash and a low amount of debts and long term liabilities.
I also look for stocks paying a good dividend. I like to see about 3-6%. So lets look at a few ok?
AT&T: symbol T
T is currently priced at $28.31 per share with a P/E ratio of 8.24. That's pretty strong. They also pay a 6% dividend which is $1.72/share yearly. Not bad! but they aren't really a growth company and they have some serious issues with T-mobile so maybe not the best place to be right now. 52 week range is roughly $27 to $32 which means it has fluctuated between those 2 numbers over the course of a year. EPS or earnings per share is 3.44 which is pretty solid also. If it weren't for T-mobile i'd be all over this. It provides the potential for substantial growth and a solid dividend while reporting excellent results... also it fits in with my investment strategy which is buy and hold and pays a solid dividend.
there's a few other companies like this, verizon is a good one, GE is pretty solid, duke energy is good. There's plenty of them out there that pay really decent dividends. Frontier communications has been paying a massive dividend for a few years but i don't expect that to last but who knows...
now lets look at a company that i completely crapped on over the years and pointed at numbers that were meh and said they weren't really going anywhere even though "everyone" uses their product and they have a huge mindshare...
Apple computer
symbol: AAPL
price $372 52 wk. $280-423 P/E 15/1.... so i was looking at this stock at about $100 a share the P/E ratio sucked it was like 35/1 and i was like meh apple... this was post ipod and all their other junkets. I told myself they were overpriced blah blah... now who's the fool? I neglected to account for mindshare and just general sentiment along with groundbreaking ideas. they've done very well for themselves and basically i ignored them b/c i don't like what they've done to the computer industry and also i think mac users are hipster zombies... Was i wrong about this stock? yes... but in the long run it didn't fit with my investment strategy so i ignored it. I've had a few of those in the past; netflix at $15... said to myself huh, this is a great idea and then didn't act on it.
so that's kind of in a quick and dirty nutshell. It took me years to learn anything about the stock market and i've been burned many times but for the most part i enjoy it and i've done pretty well for myself.
if i had to give one piece of advice it would be to buy mutual funds or index funds until you know what you're doing. Individual stocks are pretty hazardous and can be a pretty mixed bag. actually mutual funds are probably the best long term strategy, lots of financial people don't even recommend individual stocks.
hope this helped. Good luck! if i can answer anymore questions for you don't hesitate to ask.
I have a 401k that i'm very aggressive with. I'm 31 and have about 34 years of growth potential meaning i'm long term so my strategies reflect that. I'm in growth and value large cap funds and some mid caps as well as small caps. I'm also about 35% in international equities with a smattering of bonds ~5%. That's my 401k. I look at it monthly and tweak as necessary.
For my personal stocks meaning those i've purchased through a brokerage i look for a few things. I look at P/E ratios or price to earnings. The lower the number the better. I also look at the companies financials since i'm an accountant and they mean something to me. If they look strong i'll usually invest in them. By strong i mean good amount of assets and cash and a low amount of debts and long term liabilities.
I also look for stocks paying a good dividend. I like to see about 3-6%. So lets look at a few ok?
AT&T: symbol T
T is currently priced at $28.31 per share with a P/E ratio of 8.24. That's pretty strong. They also pay a 6% dividend which is $1.72/share yearly. Not bad! but they aren't really a growth company and they have some serious issues with T-mobile so maybe not the best place to be right now. 52 week range is roughly $27 to $32 which means it has fluctuated between those 2 numbers over the course of a year. EPS or earnings per share is 3.44 which is pretty solid also. If it weren't for T-mobile i'd be all over this. It provides the potential for substantial growth and a solid dividend while reporting excellent results... also it fits in with my investment strategy which is buy and hold and pays a solid dividend.
there's a few other companies like this, verizon is a good one, GE is pretty solid, duke energy is good. There's plenty of them out there that pay really decent dividends. Frontier communications has been paying a massive dividend for a few years but i don't expect that to last but who knows...
now lets look at a company that i completely crapped on over the years and pointed at numbers that were meh and said they weren't really going anywhere even though "everyone" uses their product and they have a huge mindshare...
Apple computer
symbol: AAPL
price $372 52 wk. $280-423 P/E 15/1.... so i was looking at this stock at about $100 a share the P/E ratio sucked it was like 35/1 and i was like meh apple... this was post ipod and all their other junkets. I told myself they were overpriced blah blah... now who's the fool? I neglected to account for mindshare and just general sentiment along with groundbreaking ideas. they've done very well for themselves and basically i ignored them b/c i don't like what they've done to the computer industry and also i think mac users are hipster zombies... Was i wrong about this stock? yes... but in the long run it didn't fit with my investment strategy so i ignored it. I've had a few of those in the past; netflix at $15... said to myself huh, this is a great idea and then didn't act on it.
so that's kind of in a quick and dirty nutshell. It took me years to learn anything about the stock market and i've been burned many times but for the most part i enjoy it and i've done pretty well for myself.
if i had to give one piece of advice it would be to buy mutual funds or index funds until you know what you're doing. Individual stocks are pretty hazardous and can be a pretty mixed bag. actually mutual funds are probably the best long term strategy, lots of financial people don't even recommend individual stocks.
hope this helped. Good luck! if i can answer anymore questions for you don't hesitate to ask.
10/5/2011 8:46:21 PM
You'll never have access to the information you need to make your own research really valuable. Any source you use will provide old news. By the time you hear about it, the moves have been made by the big boys with the connections.
As a reformed stockbroker, I strongly advise you to avoid buying individual stocks. You’re much better off going with no-load mutual funds. Even then, picking the right ones isn’t easy.
You want to avoid, at all costs, taking investment advice from someone who’ll make a commission if you follow their advice. Brokers are salesmen first and when there’s a conflict between putting you in an investment that’ll make money for you or putting you into something that’ll make more money for him (and that’s always the choice, trust me on that), your financial wellbeing won’t be his priority. Brokers are always looking for new clients because they’ve burned the old ones. Gotta make that boat payment!!
There are several excellent newsletters out there that give good recommendations without requiring you to follow their recommendations. I’ve done very well with Don Dion’s Fidelity Independent Advisor. I’ve never lost money on anything that he’s rated “Strong Buy”.
I advise you to get into aggressive growth funds (including international and specialty funds) and stay there. They’ll lose big-time in a recession, but they always come back and you’ll make more in the long run. You’ve got time. Don’t panic.
Not long ago, I lost $40,000+ in one year. It was scary, but I’ve gotten used to it. The next year I made it all back plus $130,000. My wife and I are retired and go to Europe every year for a couple of weeks, always 1st class. We always make more while we’re gone than the trip costs. We just got back from France and Italy. When our plane went wheels-up out of Venice, the trip was paid for.
Stay aggressive. No bonds, no CDs, none of that stuff. Since we've retired, we've moved into some more stable instruments to protect the principle and reduce capitol gains in non-qualified accounts. Most of our qualified money is still in aggressive funds. It's scary these days, but the market always comes back.
Right now, we’re holding mostly Fidelity funds because we get such good advice from Don Dion’s Fidelity Independent Advisor newsletter. As I said. we’ve never lost money on any fund that he’s rated “strong buy”. 800-548-3797.
As a reformed stockbroker, I strongly advise you to avoid buying individual stocks. You’re much better off going with no-load mutual funds. Even then, picking the right ones isn’t easy.
You want to avoid, at all costs, taking investment advice from someone who’ll make a commission if you follow their advice. Brokers are salesmen first and when there’s a conflict between putting you in an investment that’ll make money for you or putting you into something that’ll make more money for him (and that’s always the choice, trust me on that), your financial wellbeing won’t be his priority. Brokers are always looking for new clients because they’ve burned the old ones. Gotta make that boat payment!!
There are several excellent newsletters out there that give good recommendations without requiring you to follow their recommendations. I’ve done very well with Don Dion’s Fidelity Independent Advisor. I’ve never lost money on anything that he’s rated “Strong Buy”.
I advise you to get into aggressive growth funds (including international and specialty funds) and stay there. They’ll lose big-time in a recession, but they always come back and you’ll make more in the long run. You’ve got time. Don’t panic.
Not long ago, I lost $40,000+ in one year. It was scary, but I’ve gotten used to it. The next year I made it all back plus $130,000. My wife and I are retired and go to Europe every year for a couple of weeks, always 1st class. We always make more while we’re gone than the trip costs. We just got back from France and Italy. When our plane went wheels-up out of Venice, the trip was paid for.
Stay aggressive. No bonds, no CDs, none of that stuff. Since we've retired, we've moved into some more stable instruments to protect the principle and reduce capitol gains in non-qualified accounts. Most of our qualified money is still in aggressive funds. It's scary these days, but the market always comes back.
Right now, we’re holding mostly Fidelity funds because we get such good advice from Don Dion’s Fidelity Independent Advisor newsletter. As I said. we’ve never lost money on any fund that he’s rated “strong buy”. 800-548-3797.
10/7/2011 10:21:48 AM
Thanks for the info guys, good suggestions. After reading about these topics all week I don't think I have enough I can risk in stocks at this point, but I certainly feel like I know a lot more. I do have a 403b from my previous employer I've been procrastinating rolling it into an IRA so I'm going to get that done and go from there. I make twice as much money at my current employer, but they don't have a retirement plan. Assuming I max out my contribution to the IRA every year what are my options for the rest of my money, just stocks and mutual funds?
10/7/2011 2:05:59 PM
Stay aggressive. No bonds, no CDs, none of that stuff. Since we've retired, we've moved into some more stable instruments to protect the principle and reduce capitol gains in non-qualified accounts. Most of our qualified money is still in aggressive funds. It's scary these days, but the market always comes back.
This is obviously untrue and is terrible advice. The Nikkei is down ~80% from where it was 22 years ago. Iceland is down ~95% from it's '07 peak. Peru dropped 95% from 1940 - 1980. The NASDAQ is still down by more than 50% from it's high in April of 2000. The market will probably come back, but 1) it may not, and 2) it might, but not in the time frame you need it to. When the DJIA fell in 1929, it didn't get back to even until 1953. It looks benign on a 100 year chart, but if you were counting on that money for retirement during that time, it would have felt a lot different.
Most investors have a fundamental misunderstanding of risk. You hear people say things like, "if you take more risk, you'll earn a higher return in the long run." But if that were true, you wouldn't really be taking more risk - in fact, it would be just the opposite. The truth is, when you take more risk, you may have gained the potential for higher return, but you've also taken on the potential for a far worse return. Most people learn this the hard way.
The foundation of portfolio management is risk management. Doing research on stocks will not help you. Unless you have access to insider information, any data you have is freely accessible to every other investor on the planet that has an internet connection. There is no edge to be gained. Before embarking on your investing career, you would be well served by asking yourself a few questions:
1) Will I be right 100% of the time? (the answer is no)
2) When I am wrong, what will that look like? (predefine when to throw in the towel)
3) How much money am I willing to lose when I'm wrong? (losing 10% of your money might be OK in isolation, but what if you're wrong 5 or 6 times in a row?)
Ideally, you want to leave your upside unconstrained, but protect yourself on the downside. It's OK to be wrong. It's not OK to allow being wrong to cripple you financially. Predefine your exit, manage your exposure and stay disciplined. Doing this well is actually harder than it looks. The 1982 - 2000 bull market made everyone feel like a genius, but that type of tailwind is not normal. In real life you don't just get paid for being patient and ignoring risk. Good luck.
10/7/2011 7:21:27 PM
The Nikkie? Iceland? Peru? Gee, I was under the impression the OP lived in the USA.
Look, it’s easy to make bad investments. That’s why I recommended the source I did. If you invest in crappy aggressive mutual funds, you’ll get hammered. What’s that tell you?
Using the strategy I outlined, my wife and I went from flat broke and $22,000 in debt (family illness) to very comfortably retired with a large, paid-for house on a lake, two very nice paid-for cars, zero debt and a net worth approaching $900,000 in 14 years.
How you doin’?
Look, it’s easy to make bad investments. That’s why I recommended the source I did. If you invest in crappy aggressive mutual funds, you’ll get hammered. What’s that tell you?
Using the strategy I outlined, my wife and I went from flat broke and $22,000 in debt (family illness) to very comfortably retired with a large, paid-for house on a lake, two very nice paid-for cars, zero debt and a net worth approaching $900,000 in 14 years.
How you doin’?
10/7/2011 7:44:02 PM
The Nikkie? Iceland? Peru? Gee, I was under the impression the OP lived in the USA.
Is there something about the broader US market that makes it immune from what has happened across markets all over the world for hundreds of years (including the US)? Insisting that nothing bad will happen if you just stick your head in the sand is not always a winning strategy, although it can work if your timing happens to be right. Congrats on your success, by the way. It is incredibly rare to come across someone on the internet that claims to have made a bunch of money by just subscribing to a newsletter, so - well done!
10/7/2011 8:35:31 PM
It is incredibly rare to come across someone on the internet that claims to have made a bunch of money by just subscribing to a newsletter.
It's so rare that I don't recall ever seeing such a claim.
