I don’t have much money, I’m in college, but I love the stock market. I’m far from a business major so I can’t exactly turn to a professor. I just sold about $400 in AT&T stocks because of the whole situation with wiretapping…I really can’t support something like that financially if I don’t morally.
have also found out that the stock market is a good way to compensate for the interest on student loans while leaving me a backup plan if I do require that money immediately.
So, you know my situation and with about $400 to spend, would do uou recommend buying?
disclaimer: Yes, stocks are what I’m looking to invest in. We can talk about mutual bonds, IRAs, you name it… but I’m shooting for stocks as investments for myself because, being a nerd, it’s fun.
Well, “IRAs” aren’t mutually exclusive from stocks.
If you want to play around with stocks, you could open a Roth Ira, put the money in there and trade willy-nilly without paying a cent in taxes. The thing is. . .you can’t take the gains out till you’re 60, but when you take them out, THEY’RE TAX FREE!!!
That will mean a lot more to you when you’re older. If you could find a way to grow that 400 at 8% for the next 45 years, it would be worth $12,000 and you wouldn’t pay a cent on it.
Your $400 is a good lesson, though. Realize that if you have a $10 transaction cost, you just took 2.5% right off the top just to buy the stock. Also, realize that if you sell it within a year, you pay a shit-load of capital gains on it, and another transaction fee.
The best thing for you to learn is to buy a low-cost index fund, reinvest the dividends and not even check on it until you’re 60.
But, I didn’t learn a lesson like that until I was 30, so you probably don’t care either.
Anyway. . .what to buy? No one can really tell you that. Losing your $400 isn’t the end of the world, so have some fun with it. If you’re going to sell your AT&T because you don’t like them, buy a company you do like. . .Apple? Microsoft? Krispy Kreme? Budweiser? Sirius?
You want to take some risk. . .buy a stock that’s been beat to shit like Merck, GM or Ford.
But most of all, try to stay away from lots of trading (it DESTROYS your money) and if you can, open an IRA to handle your money. You’ll thank me later.
With $400 to spend you may not make very much money buying the stock of your choice. Say you decide to buy something like BestBuy trading at around $57 a share. With $400 you can buy 7 shares. If they manage to get the shares up to $62 by Christmas you’ll make a whole $35 minus transaction fees.
So unless you find that diamond in the rough stock for a company that’s selling for $5 a share and about to skyrocket to $50 (few and far between and risky) it may make more sense to stick it in an index mutual fund and get some steady growth from it.
If you like stocks, you might want to look into the Forex market. Trade anytime, no commissions (brokers will get theirs in the spread), and orders are pretty fast. You’re basically trading currency. Its highly recommended to use a practice account, which most Forex brokers offer, before investing real cash. As its more fast paced then something like E-Trade. But unlike E-Trade or Ameritrade or such, you don’t need $25,000 to day trade. Where as right now, you probably had to wait a few days for your $400 to settle after your sale of AT&T. On the Forex, when you sell, you get it quickly. And then you’re on to your next play.
They are about to find out if they get FDA approval on several drugs…if they do…whoa boy…also they just got approval to move from the American Stock Exchange to the NASDAQ.
YMMV.
There are no guarantees. If they fail approval, it will be worth nil…
The whole video game market is in a bit of a tail spin since this whol “Next Generation Console Transition Phase” is not going as well as the analysts (and most game writers) had predicted. Sales are down and everyone is waiting for the Xbox 360, PS3 and Revolution.
So all video game stocks are bargain buys nowadays.
And with a ton of bug name, AAA games scheduled for this year and next for all major consoles, the PC and the hot, Hot, HOT handhelds, Activision should ride high.
Activision is presently very poorly rated and is a recommended “Sell”. AVNR is a small biotech stock that is considered very speculative. Do some homework before taking a plunge.
Its still $35 (assuming it goes up) and its the market. It really sounds like chef is most interested in getting his feet wet than turning a profit.
I’d pick five companies to follow. Get a feel for their lows and highs. Read their annual reports and figure out if they are bringing in cash from operations or if their busy financing themselves (sometimes both). Look for a company with good debt rations (they haven’t borrowed themselves into trouble). Then, when you feel the stock is a bargain, buy it. If you can follow some with decent volitility, you can do pretty well on this (my Dad used to ride Home Depot up, sell it, and buy in when it was down, buying or selling just Home Depot about every three months. I’m not saying HD is a good choice, though).
If you act on the stock tips of others, you’ll always be behind the curve and won’t learn anything.
It’s ok to invest based on your morality, however you need to realize that stock trading is an analytical exercise, not an emotional one.
Why are you investing? Investing to make money is very different from dabbling in stocks because you have an interest. And bear in mind that interest can wane quickly if you take a huge loss.
While you may not be a business major, you should look into researching how to value companies, risk vs return and so on. Motley Fool http://www.fool.com/ is a good place to start.
Before you even invest in a stock, you probably have your money in a savings account earning 2% interest. The only reason you want to take your money out is that you think you might get a better return elsewhere ( a no-load index fund like Vanguard for example). For you to even consider putting money into an individual stock, do you think that you can generate a better return (including trading fees at both ends)?
It isn’t enough money. You need to diversify. To do that you need maybe $10,000. With that, you could pick 10 stocks at $1000 worth each, and the $10 comission would only be 2% (1% when you buy, 1% when you sell).
Why not play around with a “mock” portfolio for a while to get the feel of it. During that time you can build up your savings.
Diversification is important because bad things can happen to good companies. During the dot com boom, Proctor and Gamble lost half it’s valuation in a very short time. Detergent wasn’t as sexy as FLOOZ.COM. PnG has recovered that value since, and maybe more, but the only person who made any money on FLOOZ was Whoopi Goldberg. So another lesson: be careful of fads.
If you owned PnG exclusively, you would have lost half your money almost overnight, but if it was 10% of your holdings, you would only be down 5%.
It is also good to have some ready cash. Folks who got in after PnG’s drop have done very well!
Most valuable advice:
Be fearful in times of greed, and greedy in times of fear. -Warren Buffet
Oh, and since you are asking this sort of question, it tells me you don’t know very much about investing. While you are playing with your mock portfolio and saving up, educate yourself. Read anything and everything you can get your hands on. Listen to some pundits. I like Jim Cramer and Bob Brinker.
Cramer is a stock picker. This is a very hard game, and he is reasonable at it. I have made some money on his advice, but am always careful to research the companies he talks about. Don’t just run out and buy something on his say-so.
Brinker is a market timer. He shifts assests in and out of stocks depending on the overall market conditions. He is pretty good at it too. His weekly radio shows covers all aspects of investing and he manages to make it interesting.
Don’t feel bad. Now may not be the best time to be jumping into the market, what with it reaching record highs. See the quotation in my previous post. I believe Brinker is about to call for a shift out of stocks, if he hasn’t done so already. He believes we are in a secular bull market within an overall bear market. Wether he is right, only time will tell, but he does have a good track record of making such calls.
Brinker has a great reading list on his website. Delve into that as well. I am not as big a fan of the fool as some, but that is a good resource too.
What both of these guys have in common is the belief that you can do it yourself. I agree with this. Stock Brokers are basicly crooks, so stay away! I use E-Trade, but would probably switch to Ameritrade if it wasn’t such a hassle.
And learn about the tax consequences of investing. It is laden with booby traps .
You need a lot of expertise and a healthy dose of good luck to get big gains in the stock market, and making big profits is unlikely for a newbie investor. (I’m reminded of on brokerage ad: Everyone who who buys a stock expecting it to go up has bought it from someone who expected it to go down – not 100% true, but true enough).
If you’re investing $400 for the first time, a mutual fund is the best choice. No spectacular gains (but those are rare), but a good one will give you solid returns, considerably above what you might get in interest.
If you’re serious, start researching. Learn how to read a balance sheet and an annual report. Listen to experts (and remember, they’re not always right). Stay away from penny stocks (defined as those with a stock price of less than $5) – they are a trap (your broker is required by regulation to discourage you from buying a penny stock, and there’s good reason for that).
Start out with blue chips – stocks that are going to give regular but solid returns – and then add more risky stocks to your portfolio.
Remember, it’s time, not timing, that makes you money in the market. Timing is always risky, but buying 100 shares of GE is going to get you regular returns, and a lot of it as time goes by.
Well, if you want to stay in a bear market and watch your principal fritter away, I guess you could call that a sure thing. All investment involves risk. And if you bought GE five years ago when it was trading in the low 50’s, you lost a lot of money, and still might not turn be turning a profit for years to come.
For the record, this is why I’m banking on Activision hitting big in the next few years. Their 2006/2007 lineup:
2006
Over the Hedge (PS2, GC, Xbox, GBA, DS, PC)
X-Men (PS2, GC, Xbox, Xbox 360, GBA, DS, PC)
The Movies: Stunts and Effects (PC)
Gun: Showdown (PSP)
Enemy Territory: Quake Wars (PC)
Castle Wolfenstein (PC, Xbox 360)
Marvel Legends (Consoles TBA)
Call of Duty Console 3 (Consoles TBA)
Tony Hawk’s American Wasteland 2 (Consoles TBA)
Tony Hawk: Downhill Jam (Consoles TBA)
5 Untitled PSP Games
3 Untitled Xbox 360 Games
3 Untitled PS3 Games
1 Untitled Revolution Game
Well, the way stocks work they’re valued at a projected worth. So, if these games have already been announced for a while, chances are the stock price already reflects that.
Stock prices are always based on projected earnings. It’s when sales fall below projections or beat projections that you’ll see movement in stock price.
So you would be optimistic that Activision will sell a lot more of those titles than they already forsee selling?
Not to mention that you can have amazing sales, but not keep your SG&A costs in line. Companies aren’t about sales, they are about profit, and the market is about potential profit. I don’t know anything about Activision, but I agree that buying stock based on projected sales of products already announced is not a great strategy.
There are interesting strategies out there. My accounting prof told of one of his multimillionaire clients who does quite well buying stock the day they announce a split and selling it a year after the split. His rationale is that you don’t split a stock if you think the stock price is going to drop.
While these games are announced, no details about them have been revealed (which is when you really start projecting sales) and because so many of them haven’t been announced for specific platforms there’s lot of information still up in the air.
Buy now before E3 (in mid-May) when everything becomes “official” and all of these titles start getting evaluated by the game press. Right now they may as well not exist as far as sales estimates are concerned.
