Sion's How To Invest Thread [Everything you need to invest properly and much more...]

SionSion Moderator, AHH Content Producer, AHH EditorPosts: 20,420 Regulator
edited December 2011 in Strictly Business
Its been a long time coming but ppl have been hitting me up to post this for some time now. This thread is dedicated to the art of investing & will teach u HOW TO INVEST (properly). This isnt gonna be some b/s technical pseudo science - this thread is about investing. Most of the shit u see or hear about is speculating but wat im gonna show u is how to take the craft & develop the knowledge and skills to be able to obtain successful returns.

I tried to simplify this to the best of my abilities so i hope yall can comprehend the format & criteria. All of this was taken from Ben Graham's masterpiece The Intelligent Investor & his disciple Christopher H. Brown's "Little Book of Value Investing" & oversimplified where applicable. I hope u all pay attention to these principles..... because you gotta understand... millions & billions of people invest their money & most aren't successful at it but on WallStreet they pay A LOOOT of money to cats who can successfully allocate capital. The highest paid fund managers do NOT even beat the S&P500 index & get paid well... now imagine a dude who can beat the market ? This is an important trait to learn. You can read a ton of books on what stocks, bonds & other financial instruments are but it means fuck all if you can't apply it successfully.


I will be editing this thread & constantly adding to it so stay tuned....




Below are the topics I will touch on & expand upon. After reading this you should be somewhat of an amateur - and you can go pro if you read Ben Graham's The Intelligent Investor book.


Table of Contents Value Investing 101:

1 - What is Value Investing

2. What to Look for ( buy Stocks on the cheap , look past bad news - that is the time to buy )

3. How does one find a bargain ?

4. Mr.Market

5. Investing vs. Speculation


4. P/E Ratio - buying Earnings on the Cheap

5. Buy a dollar for 15 cents (same as Section 3)

6. Wall Street Jargon & Common Mistakes (IPOs, mutual funds, technical analysis/beta , trends, past performance, terrible investments/hot

stocks)


7. Start thinking Globally Now (the US only makes up for half of the total stocks in the world but elsewhere there are bargains too,

many co.s even in america have to grow internationally in order to grow at fast paces)

8. When execs start buying shares - u should too

9. Questions to ask yourself after making an investment


10. Other alternatives (Bonds, Preferred Stock, gold, real estate, index funds, ETFs, mutual funds etc.)


11. Criteria to Use & The Margin Of Safety

12. Its Not a Sprint its a Marathon - Invest for the long term (inconsistencies over the lost decade & more)

13. Discipline

14. Taxation
BodhiSneakDZAmiamivice305illedoutVulcanRavenBetaits....JOHN BPapaDoc223King Eraunojayvon32
«13456763

Replies

  • SionSion Moderator, AHH Content Producer, AHH Editor Posts: 20,420 Regulator
    edited August 2011
    1 - What is Value Investing

    Value investing is the practice of analyzing a stock (im going to say Company instead of stock) for its underlying qualities. The price of the stock is to judged by the underlying business. Value investing is very common b/c of its practicality BUT 90% of managers arent doing it properly or don't do it at all. For example, the main objective is to analyze Stocks by their businesses so lets look at say... Ford. A traditional money manager may say well Ford is a growing business b/c its main competitors have fallen & it has the opportunity to take over and invest in global territory. Now there is nothing wrong w/ this however, one thing that wasnt looked at was its price, financial statements & if it really is a value. Throughout this thread Im going to explain it to yall in a way that makes sense.

    Essentially value investing is buying something that is worth more than it is, for less. So its the true art of buying low & selling high.


    2. What to Look for ( buy Stocks on the cheap , look past bad news - that is the time to buy )

    Everybody suscribes to the idea of buying stocks when their low and then selling when their high. THing is most ppl dont even get this right. How many ppl were buying stocks in 2007-2008 when they were at excessive prices only to sell off in 2009 when everything tanked ? A very important thing with value investing is to buy reasonably priced companies when there are swings. That means u have to look past bad news. The BP oil spill was a great ACCIDENT, however ppl were quick to chastize the heads of the co. for "purposely" spilling 30 billion dollars worth of oil in the ocean only to have to pay back 38 billion dollars (Crazy I know LOL but common sense goes out the window when crisis strikes). Ppl dont think clearly when conflict hits. Now if the level headed investor had bought BP shares after the news hit the media then today they wouldve realized a 43% return just off that one stock alone (its worth much more today). Did ppl really think the largest oil co. in Europe would go bust over an oil spill ? SMH. Lets look at Goldman-Sachs... same thing here wen news about the "fraud" hit the media the stock dropped from 150$ to 128$ a share... shortly after IT TOO CAME BACK to 149-151 (this was last year & in that same year it rose back to about 161) & is currently at about 116$ after news hit about the US credit rating drop !!!! u see that ? dont be a punk u want to buy stocks on the cheap. Look past the bad news & BUY BUY BUY. Today has brought us sooo many good opportunities that most will miss out on b/c their terrified of the markets at this point. If Warren Buffett, Ken Fisher & Donald Trump know to start buying stocks in these times then that should tell u something.... NOW is the time to buy.

    If bad news strikes whether its in the economy or scandal or whatever BE OBJECTIVE look at the companies financial report (the balance sheet & income statement) & let that tell the story. A profitable co. like BP will remain profitable in the long term they might miss a quarter or year b/c of the scandal or w/e but they will make that money back & more in the future b/c they are that dayum nice. The Balance Sheet & Income statement aren't hard to read either. With a balance sheet just take the total assets & subtract it by the total liabilities & thats what ur left with. If the liabilities are too excessive that means ur company is over-leveraged or has too much debt.

    A general rule of thumb is that u should have double in assets versus liabilities or a ratio of 2 to 1.

    Here's a sample of a balance sheet


    SampleBalanceStart16-3.png


    Its not hard to read - you just want to make sure the total assets are much higher than total liabilities (also u should look to see how much cash the business has versus how much short & long term debt the business has. A business with lots of cash to pay short term debt immediately is good. Cuz if things get hard it has the liquid cash on hand to pay it all off.
    If your using the example then make sure the cash is higher than current borrowings & long term liabilities but more so current borrowings.

    Also I made mention of "WORKING CAPITAL" - if you look at the balance sheet example all that is is Current Assets subtracted from Current Liabilities. The result of that will tell you how much the company has on hand to expand its business. If your lucky you can find companies whose market cap is less than the amount of working capital a firm has on hand. That's another way to find a bargain too.

    PLEASE READ PART 3 because theres more to just buying a co. when it tanks, theres a proper way to do it to really spot a diamond in the rough or a cheap company.
    PapaDoc223
  • SionSion Moderator, AHH Content Producer, AHH Editor Posts: 20,420 Regulator
    edited August 2011
    3. How does one find a bargain, how do I judge if the co. will survive the controversy ? - look at book value, discrepencies in balance sheet to market price, working capital, criteria


    More often than not I get hit up on the PMs from ppl asking me "yo Sion ? how do I find a bargain ? what do I look at when im looking at stocks ? is it price to book (book value) , P/E ratio (price to earnings ratio) , is it the trend , or is it the trading volume ??" I often laugh at how much ppl like to complicate investing & surprise surprise u dont have to look at all those things or track them. I mean u can but the MOST IMPORTANT thing to look at is the book value. That is the indicator of how much the stock really is worth. The book value or P/B (price to book) is calculated after all the total assets & total liabilities are deducted and all is left is the Equity (exactly the same way u find ur net worth by subtracting your liabilities by your assets). The equity is then divided by the total number of shares (or market cap) to give u a per share amount of the book value. Now there may be some confusion b/c then one would ask "ok so wats the market cap then ?" -- the market cap is HOW MUCH THE STOCK IS SELLING FOR. u see u have to understand - the stock market is not a game its merely a place where corporations & individuals sell businessses to raise cash - thats it. The market capitalization (market cap) is how much the stock is priced to sell & the daily fluctuations are how much ppl are selling them for. Book value is to be contrasted to the market cap, if the market cap is selling below the book value then u have a bargain. Why is it a bargain ? b/c if the price of the stock is selling for less than the companies net worth (book value) then ur buying it for less than it is worth - which is a bargain.


    When controversy strikes & u want to gauge a company u want to look at the balance sheet (peep picture example above) - the financial statements. & its not complex (sites like bloomberg, the tmx, google finance & reuters simplify it tremendously), u want to look at total liabilites to total assets, the total liabilities should NEVER exceed the total assets otherwise ur co. is in debt. Typically u should find co.s whose current assets exceed current liabilities by at least double (which is common btw) and co.s who have NO deficits in earnings. Earnings are important its how much ur co. is making if a co.'s stock price is growing but earnings are still in the red get away from that - its only a matter of time b4 the ignorant public gets burned. Look at it like how a businessman looks at things - does.


    There's also other areas to look at too... sometimes you can find companies selling close to the amount of cash or less on their balance sheets, you can even find some selling for less than the amount of money they make in annual profits, less than revenue or less than their working capital and not just the equity.


    Let's use an example... in the next post....
  • SionSion Moderator, AHH Content Producer, AHH Editor Posts: 20,420 Regulator
    edited August 2011
    Gafisa SA (GFA). Gafisa is a brazilian homebuilder. The develop land divisions, residential buildings & provide construction services. But lets look at the financial statements.... from the front we can see that it has a dividend yield of about 3% (or 3.028) and has a price to book value (P/B ratio) of 0.847 meaning its selling at 84 cents on the dollar a 16% discount from its actual value - in other words a bargain.

    Gafisabookvalue.jpg

    Can you see the 2 areas I circled ? Ok look at the "Market Cap" & then look at this pic below:

    Gafisanetworth.jpg


    In that pic I highlight the Total Equity - that's the net worth of the business we're looking at. The Market Cap is what it's selling for. & in the first pic above where I highlight Price-to-Book Value (or in other words P/B) thats what the ratio is when you put Market Cap versus Total Equity. You want a P/B typically below 1.00 & not higher than 1.5 or 1.6. In general, 1.5 or 1.6 is reasonable anything higher can be deemed expensive.


    Bank of America is the most standard example of a cheap stock on sale... it sells at 0.365x book value or at a 64.5% discount. This is a company that is a bargain.

    bankofamericabookvalue.jpg



    Overall, you might be thinking "what is the significance in buying below the dollar/a business at less than book value ?" - in the case of say... if ur company were to go bankrupt or on sale tomorrow the creditors would liquidate the business & ud get the difference. Also its a very simple premise that ur merely paying less for a lot more of something valuable. This is why guys like Warren Buffett, Charlie Munger, Prem Watsa, Ken Fisher, Jarislowsky & others don't lose money. They are covered on all fronts, they buy the business at a lower price than its worth & if it goes bust they still walk with a fortune. The difference b/w the price and net worth is also called The Margin Of Safety which we will get into later on....


    THIS IS HOW YOU BUY LOW - AND WHEN THAT SHIT SHOOTS THROUGH THE ROOF & RISES TO A LEVEL YOU'RE SATISFIED WITH YOU SELL IT.


    *** At most you don't want to pay more than 1.5x book value unless the business has other factors going for it like in the case of GE for example where even though its at 1.8x books it still sells for less than the working capital it uses to expand its business. I'll explain GE later on I just have to find a way to break it down in a way where it won't go over your head.
  • SionSion Moderator, AHH Content Producer, AHH Editor Posts: 20,420 Regulator
    edited August 2011
    4. Mr.Market (Market Fluctuations)

    The market is never always efficient forget that mess market efficiency shit they taught u in school (we know this given all the stock dips & rises that affect the prices as well as other factors). There are swings that do occur over the duration of a time these market fluctuations can provide great opportunity for those who want to profit by buying low & selling high. Heres a good analogy that Ben Graham uses in his book. Mr.Market [btw Mr.Market = The Stock Market & its behavior to rise & fall at times), Mr.Market is sort of a manic depressive person. Sometimes when hes over-enthusiastic he sells stocks at high prices and sometimes when hes depressed he sells stocks at bargains. U now as an investor are a buyer... u want to catch him in these swings. The best thing about investing is that its sorta like baseball except u can pick which balls to swing for - u have time.

    When Mr.Market is depressed u want to buy his stocks & when he comes back to ur house over-enthusiastic u want to sell him stocks (or hold them forever whichever u prefer). This is how the stock market functions as well, when ppl are optimistic they buy like crazy, when their pessimistic they sell like theres no tomorrow. With the criteria I've outlined if u can weed thru the bullshit & u know how to read a bargain then u too can profit like crazy off of stocks. It is VERY easy to do good (as in a B grade if this were school lol) on the stock market. Getting excellent results is another discipline.

    Watch from 0:58 ongoing Warren Buffett sums it up perfectly.....


    Don't fuck this up.... cuz I know there's people on here thinking they can catch these 'swings' & profit each time & do it from time to time. Listen - as tempting as it sounds you need to discipline yourself to HOLD. It's almost always a mistake to sell a very good company you bought at a bargain immediately & in the short term its impossible to tell what will happen next (the CEOs of the companies themselves couldn't even tell you). BUT in the long term - say 5-7 years you can tell for the most part that a great company with a past history of good returns that has great management & terrific earning power will continue to maintain that & even grow it. Another thing you also have to consider is TAXES. Taxes & costs associated with rapid fire selling will accumulate &l kill your returns over the long term (or make them much less than they should be).

    Invest for the long term & you won't lose, besides a lot of the times when a good company drops (like say 2008 when we saw the Dow plunge some 400-500+ points) it came right back in late 2009. Had you have bought say US Bancorp, or Walmart or something a month before they plunged & waited till late 2009 you would have realized a pretty large return on your investment. Most people who get emotional & sell immediately, lose & never regain. They're the ones who follow the pack & sell with the rest of Wallstreet. Just remember every time you sell there's always someone on the other side who is buying to benefit..... For those who sold their stocks last Monday when the Dow dropped b/c the U.S. Credit Rating was dropped they sold those businesses at some 30-50% cheaper than they were..... in time when the U.S. crawls out of its problem a lot of ppl who bought are gonna see huge profits.....
  • SionSion Moderator, AHH Content Producer, AHH Editor Posts: 20,420 Regulator
    edited August 2011
    5. Investing vs. Speculation

    Another hard thing for ppl to comprehend is Investing vs. Speculation - there is a difference & sometimes its not so obvious. Let me outline what investing is - investing is when u thoroughly make a decision that is adequately researched, rests on fact, or proven numbers/research,has low risk & will generate a return on investment. Speculation now is basically "guesstimating", its wen one doesnt research a co. & chooses to invest in it based on factors he cant prove or is based on nothing. also be weary of trading volumes typically.


    Heres an example of investing:

    "i will invest in ABC Oil b/c it sells at a discount to its book value, its management is conservative, the co. has prospered thru tough times, has unveiled new plans to trim debt & increase cashflow by doing so and has a solid track record of growth in earnings & dividends. My investment is low risk b/c I bought it at below book value & also at a discount to its cash on hand, its working capital and inventories, I could stand to lose or even watch the co. go bust b/c i know my investment will still be prosperous."

    ^^^^
    thats an investment
    , that's what an investment is because you're relying on fundamental factors based on fact found in the annual report and a solid judgement made based on those facts.

    Remember - You're right not because your right, you're right b/c your facts are consistent and the reasoning behind it is too.


    Heres an example of Speculating:

    "I will invest in ABC Oil b/c I think the trend for oil is going to go up b/c the price for natural gas is down. If the economy pulls back my stock in ABC Oil will go up. If more roads are built or development in India continues my stock in ABC Oil will rise. It wont lose money because its a "defensive stock".

    ^^^^
    thats speculation
    b/c its not based on anything "real" - first of all Oil is IMPOSSIBLE to determine where it will in the short & long term. Not to mention just because Oil goes up not all oil companies profit. What a lot of people don't understand is that there are different types of oil companies for example, an upstream oil company will profit if oil goes up b/c they drill it out of the ground & sell it to a refiner who will make it usable. A downstream oil company is a refiner or gas station, they still have to buy their oil & sell it. With the example used above theres no way to tell if roads built in another country will help your stock, theres no way to tell if its a defensive stock (btw the term defensive stock is often attributed to a co. with low trade volume, the reason why it may not drop so suddenly is b/c it isn't traded as often or perhaps a few individual firms or ppl own HUGE stakes in them & dont trade often.


    The proof is in the pudding, just read the annual reports of the business that they give out and ignore analysts expectations or forecasts (just think - how can an analyst predict what a company will make in a year if the co. itself can't even predict that ? this a good ex. of speculation).


    Overall the point is to avoid speculating & only invest. To be able to invest u have to think analytically - be a critical thinker. Or better yet u know what ? look at it from the perspective of a private buyer or banker/mortgage lender - a banker wants to get every bang for his buck & wants a safe investment and obviously a good return. Mortage lenders look at employment history, debt-to-asset ratio, credit history - u should do the same, banks NEVER lend to ppl with no money only to those who dont need it. Investment should rest on what u know, can prove & can see (the annual reports/financial statements). Speculation is basically gambling. If u want to try speculating go ahead & try it - dont be mad when u lose ur entire principal tho - it happens all the time to speculators, just ask them how many people knew on 9/11 that the buildings were gonna come tumbling down sending commodities into the toilet ? How many people knew that the Japanese earthquake or Tsunami would reach nuclear reactors & plunge the price of Uranium down ? Speculating will get you no where. Learn to see things clearly & "invest" don't speculate.
  • SionSion Moderator, AHH Content Producer, AHH Editor Posts: 20,420 Regulator
    edited August 2011
    4. P/E Ratio - buying Earnings on the Cheap


    P/E = price to earnings, all this means is that given the current price on ur co.s current net income (after taxes) that is how long it would take for it to pay itself off based on current earnings. Typically a reasonable P/E is b/w 12-15 anything lower than 12 can be considered cheap. One form of investment others do is that they buy co.s that have very low P/E & then wait for more ppl to start buying until the P/E to shoot up b4 selling - in Graham's book he makes mention of this & hes quite critical of it.

    Something else to keep in mind - sometimes if you watch Jim Cramer's show he'll talk about Pro Forma or what analysts are predicting the company will make SMMFH. Pro Forma is future predictions for the companies earnings or other terms you might hear are "Forward Earnings". If the CEO himself couldnt tell u the dollar amount of how much he thinks his company will make what makes you think Cramer will ? And if you read an annual report and the CEO makes a bold prediction I'd pass on the company, from experience those types of companies or CEOs usually use "fancy disappearing-acts" on their financial reports to make things look better than they actually are.

    Granted in investing you want to have an idea of how much you'll make on anything and thats cool to feel that way, the thing is DONT make investments based on someone's prediction. Base your investment decisions on fact you found in the financial statements & from what you know about the business, don't listen to the media or analysts.


    ADDITIONAL NOTES:

    Another important aspect of investing is HOW MUCH DOES THE BUSINESS MAKE !? That's important, because at the end of the day no matter how great a balance sheet is if the earnings aren't there & it's not making any money there's almost no point in investing b/c it will lose money & it will lose money for you too.

    Im gonna show you 3 examples of a business with solid earnings, a business with declining businesses and a business that has lost money consistently....

    The first company is Paladin Energy's income statements....

    paladinenergylosemoney.jpg

    You see the brackets ? Well in finance when numbers are set in brackets it represents a loss. On the income statement Paladin Energy has lost money for the last 5 years, & they've lost more & more money as the years passed SMH.


    Here's an example of a business with declining earnings this is Citigroup's income statement....

    DayumCiti.jpg

    Sooo basically 5 years ago they reported a 20 billion dollar profit in 2006, in 2007 they only reported 3 billion dollars (remember in 2007 was the year of the credit crunch), in 2008 they lost 27 billion dollars, in 2009 they reported another lost of 1.6 billion dollars & in 2010 they reported 10 billion dollars in profit (which they prolly got from deleveraging/selling lots of poor assets and some growth in the housing market). Now sure 10 billion dollars may sound like a colossal amount of money but its not a lot of money if ur a 163 billion dollar business with TRILLIONS of dollars that your responsible in both debt & assets. If they were worth say half of that & did 10 billi i'd say thats dope. Citi is a co. with declining profits & the mere fact that its also a poorly managed businesses prolly means it will stay like that for a while. In the short term with the economy recovering I suspect itll do well but in the long term its not worth it. At least imo....


    Here's the income statement for Corning Inc. (GLW):

    Corninggrows.jpg

    THIS is an example of a good income statement, in 2008 (arguably the worst year of the recession) they still reported a record 5.5 billion dollars.... overall u see how from 06-2010 they've grown profits ? Thats what u want to see. U want a company that is making money, now keep in mind also that since 2008-2010 & even 2011 were tough years a lot of companies are gonna show poor showings or slight declines, that doesn't mean theyre not worthy. I'd say contrast their earnings to their equity. A company thats worth 5 billion dollars & only reports 500 million dollars still represents that the co. made 10% of its worth in a year, although mediocre, id rather have a steady showing in earnings then NO showings at all....

    & btw Corning is a spectacular co. selling at a great price.....
  • SionSion Moderator, AHH Content Producer, AHH Editor Posts: 20,420 Regulator
    edited August 2011
    hhhmmm I think that's it for now.... Im tired so I'll post more tomorrow & during the week.
    miamivice305
  • SionSion Moderator, AHH Content Producer, AHH Editor Posts: 20,420 Regulator
    edited August 2011
  • Miles HIGHMiles HIGH Posts: 5,441 ✭✭✭
    edited August 2011
    Well damn...This is useful...Imma need some more time to really read through it all...But so you think now is a good time to start buying?...And if so, what companies would you recommend?
  • blakfyahkingblakfyahking The IC's Resident Father Figure Posts: 14,349 ✭✭✭✭✭
    edited August 2011
    sionb55 wrote: »
    4. P/E Ratio - buying Earnings on the Cheap


    P/E = price to earnings, all this means is that given the current price on ur co.s current net income (after taxes) that is how long it would take for it to pay itself off based on current earnings. Typically a reasonable P/E is b/w 12-15 anything lower than 12 can be considered cheap. One form of investment others do is that they buy co.s that have very low P/E & then wait for more ppl to start buying until the P/E to shoot up b4 selling - in Graham's book he makes mention of this & hes quite critical of it.


    .....

    good shit

    but clarify the bolded better for me fam.............I think I know what you are saying but I'm not really sure



    also one thing to add when looking at P/E ratios: pay attention to the company's competitors in the same industry. classifying all P/E ratios for each individual company is misleading when you look at them alone


    if you looking at say a bank's P/E ratio, then it makes sense to compare it to other similar size banks' P/E ratios

    otherwise you might think you are value investing when really you are just buying a company where the share prices have already severely declined
    jayvon32
  • black caesarblack caesar Posts: 7,807 ✭✭✭✭✭
    edited August 2011
    Digging this right here my man. It's always good to keep staying abreast. Props.
  • SionSion Moderator, AHH Content Producer, AHH Editor Posts: 20,420 Regulator
    edited August 2011
    good shit

    but clarify the bolded better for me fam.............I think I know what you are saying but I'm not really sure



    also one thing to add when looking at P/E ratios: pay attention to the company's competitors in the same industry. classifying all P/E ratios for each individual company is misleading when you look at them alone


    if you looking at say a bank's P/E ratio, then it makes sense to compare it to other similar size banks' P/E ratios

    otherwise you might think you are value investing when really you are just buying a company where the share prices have already severely declined

    The stuff I posted was finished in April, & much of it still needed to be edited, that part just means that basically P/E is also a measure to see how long it will take a company to pay back ur investment per share.

    @ the bolded u goin over their heads fam lolol.... that might be a bit too much work for the typical investor to do as they also may not know what their looking at exactly since not all companies are the same.
    jayvon32
  • SionSion Moderator, AHH Content Producer, AHH Editor Posts: 20,420 Regulator
    edited August 2011
    Digging this right here my man. It's always good to keep staying abreast. Props.

    Thanks fam, feel free to contribute.
  • black caesarblack caesar Posts: 7,807 ✭✭✭✭✭
    edited August 2011
    sionb55 wrote: »
    Thanks fam, feel free to contribute.

    Any good day trader simulators that you or anyone can recommend?
  • traestartraestar Posts: 5,163 ✭✭✭✭✭
    edited August 2011
    I really like the information provided Sionb55

    I myself am looking to get more involved into investing soon,
    right now I'm looking into alot of ETFs, Dividend Stocks, and Mutual Funds
  • SionSion Moderator, AHH Content Producer, AHH Editor Posts: 20,420 Regulator
    edited August 2011
    Any good day trader simulators that you or anyone can recommend?

    Questrade. It only costs 10$ to trade (9.95) & can go as low as $5 per trade. As for simulators ? Go to Investopedia Simulator, the only drawback is that Investopedia doesn't add dividends which could make a big difference.

    Here's a replica of my portfolio on there. My return for 2010 was 19.77% but with the dividends it should be 22%. My real portfolio returned 25%.

    InvestopediaAnnualizedReturnsasofDecember192010USD.jpg

    Investopedia is a good place to practice.
    traestar wrote: »
    I really like the information provided Sionb55

    I myself am looking to get more involved into investing soon,
    right now I'm looking into alot of ETFs, Dividend Stocks, and Mutual Funds

    Thats good to hear.

    http://tmx.quotemedia.com/quote.php?qm_symbol=SPY:US

    ^^^^
    This is a great ETF to follow. It tracks the S&P 500.

    This one is good too http://tmx.quotemedia.com/quote.php?qm_symbol=DIA:US but in Ben Graham's book I think he said something against holding an index that tracks the Dow, I cant remember but ill re-read & post his reason why. Personally I think its still a good grab. Especially given the recent drops.
  • traestartraestar Posts: 5,163 ✭✭✭✭✭
    edited August 2011
    sionb55 wrote: »
    Thats good to hear.

    http://tmx.quotemedia.com/quote.php?qm_symbol=SPY:US

    ^^^^
    This is a great ETF to follow. It tracks the S&P 500.

    This one is good too http://tmx.quotemedia.com/quote.php?qm_symbol=DIA:US but in Ben Graham's book I think he said something against holding an index that tracks the Dow, I cant remember but ill re-read & post his reason why. Personally I think its still a good grab. Especially given the recent drops.

    Nice!! DIA looks good, I'll add that to my portfolio, SPY is already in there!!

    I use Google Finance to track stocks and other information, Morningstar is second, even sometimes straight from ETrade. Forgot to mention Investopedia, but I basically use their calculators!!

    I've recently looked at this site for new ETFs or for people who need them for different reasons
    http://etf.stock-encyclopedia.com/
  • black caesarblack caesar Posts: 7,807 ✭✭✭✭✭
    edited August 2011
    I've been copping the WSJ for a week now. I always hear about the points dropping or raising. What does this mean and how is it calculated?
  • it's me bi***esit's me bi***es Posts: 1,413
    edited August 2011
    Good drop! Thanks for tha knowledge! So i've been thinkin bout investing for years but havnt cuz to b real i dont get tha game and i dont like to lose money so how does sumone like me first of all, get started and second of all, lose tha fear that i have for loosing money cuz from what i can tell shit goes up and down on a daily basis...
  • SionSion Moderator, AHH Content Producer, AHH Editor Posts: 20,420 Regulator
    edited August 2011
    I've been copping the WSJ for a week now. I always hear about the points dropping or raising. What does this mean and how is it calculated?

    The stock market is a what its name implies - a market place for ppl to invest cash into businesses who will use it to expand. When large trades are taking place whether thru buying or selling it has an effect on where the Dow,S&P or Nasdaq points will go. If bad news hits the airwaves people will sell their stocks which means that points will drop. If good news hits the airwaves then ppl will buy & points will go up. When this happens u want to take advantage - now this doesnt mean u should always buy if the general market falls (b/c u have to still consider if ur paying too much for the stock typically by seeing what its price-to-book value is) but u should be looking for bargains tho.


    Good drop! Thanks for tha knowledge! So i've been thinkin bout investing for years but havnt cuz to b real i dont get tha game and i dont like to lose money so how does sumone like me first of all, get started and second of all, lose tha fear that i have for loosing money cuz from what i can tell shit goes up and down on a daily basis...

    The number one thing to keep in consideration tho is not to get so warped up in where the Dow or S&P moves - this is a MAJOR problem why most ppl can never successfully invest b/c their emotions get the best of them. Understand this = You cannot predict how the markets will move in the short term & to some extent the long term BUT u can look at an individual co. & tell where it will be in 10-20 years from now.

    Take Johnson & Johnson (JNJ) for example - we KNOW that they haven't reported a deficit in a looooong time, we also know that they own the rights to the red cross symbol, the namesakes(rights) for vaseline, baby powder, the diaper, tylenol & much much more. We also know that they have the strongest competitive advantage of any co. in its field b/c of this & its profits and balance sheet dont lie. We can look at them & tell with near 95% accuracy that in 10-15 years they will most likely STILL remain at the top of their field & we can guarantee that it be a lot richer too.

    ^^^^^
    When u invest - dont pay attention to the stock market, the stock market dont mean shit, just ppl buying/selling. If u bought a farm, a cornerstore or say a mcdonalds restaurant would u be worried about where the stock market goes ? Hell nah, it makes no difference if u paid 10k or 25k for ur business & that the dow just dropped 10% b/c ur not affected, u know ur business will continue to make revenues & profits - THATS WHAT COUNTS. Another way to look at it is from this perspective, if u buy a business that sells at 0.30x book value (like Bank of America) ur essentially picking it up at a 70% discount. That means ur buyin a 222 billion dollar co. for 70 billion dollars. Now if it drops 10% more does that mean ur losing money ? Yes but no, yes in terms of market value NO in terms that u got the business far cheaper than its worth, at that point it only gets cheaper if it drops, ur investment might lose a couple bucks but the underlying truth is that ur business is still worth what u paid for it & given BAC's history we know it'll bounce back & most likely shoot ur investment 5 or 6 fold. & even if it were to hit zero on the stock market, or if it went into bankruptcy if they sold everything generally ud get the difference b/w 222 billion & 70 billion (this is why Warren Buffett can make billions even if a business fails).

    Another thing too, if ur getting into the field of investing u have to understand that YOU WILL LOSE money at some point. But if u follow the principles I laid out in my earlier posts I can guarantee that it will rarely happen to u, but still dont be naive except that at some point u will lose some money (ppl make mistakes). Now if ur terrified of losing money - invest it in an index fund that tracks the OVERALL MARKET like the ones I posted for traestar.

    Understand: the S&P in the long term will climb & be worth more in the future - new businesses will rise, ppl will invest in them, the most powerful co.s in the world will continue to grow, the economy will grow & more. Granted there will be moments where it plummets to historical lows one thing u need to know is that it'll go up. This is why I tell ppl to just buy an index fund that tracks the market if theyre still unsure about picking stocks.

    Peep the history over a 100 year period....
    Dow%2BLong%2BRange%2BTrend%2BGraph.jpg

    Dow%2BInflation-Adjusted%2BClosing%2BPrices.jpg

    Of course im oversimplifying but look at it like this - u see where the price drop offs are (peep 1931 & 1936 u see how far it fell & how far back up it shot) ? for the most part those are when recessions hit, niggas who sold must be pissed that in a few years it went back up & that over the long term that shit spiked.
  • it's me bi***esit's me bi***es Posts: 1,413
    edited August 2011
    Once again thanks for tha knowledge i appreciate it! Did u get my p.m?
  • CoolJoeCoolJoe Posts: 6,007 ✭✭✭✭✭
    edited August 2011
    Good shit good shit.
    Random question, my Financial Economics teacher hated Stock Brokers, would you suggest steering clear of them?
  • SionSion Moderator, AHH Content Producer, AHH Editor Posts: 20,420 Regulator
    edited August 2011
    CoolJoe wrote: »
    Good shit good shit.
    Random question, my Financial Economics teacher hated Stock Brokers, would you suggest steering clear of them?

    LOL i dont wrong him. If u can yeah. But it also depends on the type of person/investor u are. If ur the type that has a soft stomach & is highly prone to emotional swings but have a good chunk of money u want to invest then it might be a good idea to get one. But if u do make sure u screen them properly. Stock Brokers live for the moment & it doesnt matter to them if u do bad or good - theyre still gonna get a nice pay cut at the end of the day. U dont have to avoid them there are some really good ones theyre just extremely rare LOLOL.

    Ill get more into this later....
  • SionSion Moderator, AHH Content Producer, AHH Editor Posts: 20,420 Regulator
    edited August 2011
    Once again thanks for tha knowledge i appreciate it! Did u get my p.m?

    Yup I got it fam

    *daps*
  • CoolJoeCoolJoe Posts: 6,007 ✭✭✭✭✭
    edited August 2011
    sionb55 wrote: »
    LOL i dont wrong him. If u can yeah. But it also depends on the type of person/investor u are. If ur the type that has a soft stomach & is highly prone to emotional swings but have a good chunk of money u want to invest then it might be a good idea to get one. But if u do make sure u screen them properly. Stock Brokers live for the moment & it doesnt matter to them if u do bad or good - theyre still gonna get a nice pay cut at the end of the day. U dont have to avoid them there are some really good ones theyre just extremely rare LOLOL.

    Ill get more into this later....

    I see I see...
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