Hey, I am taking a personal finance class this semester and we are doing a stock market game where we pick a stock invest in it and see where it goes. Also I am thinking of buying some for myself. I was wondering what types of stock you guys own or think are good to invest in. I was thinking apple would be ok. Figured I would ask you guys.
N. Robinson
I think if you invest in individual stocks without insider information or an already well sized, well allocated portfolio you’re a spastic retard who deserves to lose everything you’ve ever made.
But, you know, obviously that doesn’t apply to you since you’re doing a simulation. You’re not going to see any significant growth from Apple, the iPhone announcement has already been made and now they’re being sued. You’re going to have to go to low cap growth stocks if you’re trying to beat your peers.
If you have time, and you’re investing a significant amount of play money, you would probably be better off ‘cheating’ and just throwing it all into SPY or QQQ. Or another ETF, if it’s allowed. I think RAD (rite aid) and BMET are positioned for growth, but I have money in both so I’m far from unbiased.
HAHA you were thinking Apple would be OK?
Lets see, if you’re serious, start by getting yourself a copy of “The Intelligent Investor” by Benjamin Graham and read that.
Your average day-trader whos “plays” the stock market is a shmoe, because you run a risk of losing all your money (VERY HIGH), or making a lot of money (not so high).
There is no way of telling which company is going to be the next big thing, so a lot of research must be done into the financial situation of a company, the competency of their managers, their price/earning ratios, your margin of risk, whether a stock is over-priced or not. Don’t buy a stock because someone who’s rich has become that way because of it, because chances are by that stage it’s already over priced.
One of the best ways to at least have half a chance of not getting completely screwed is by diversifying, and splitting between high grade bonds and high grade common stocks that pay dividends - buy an index fund (aka “buying the market”), as it will have every stock worth having, and you can make good to above-average gains.
For the purposes of your project, pick a company that you know, or one which you trust because you use their products, and then research them, and the financial position. If they are doing well, aren’t growing too fast, aren’t overpriced and have a good record for the past, say 10 years, then buy their stocks.
I’m very new to the game, so this is just my point of view, hope it helps somewhat.
[quote]rsg wrote:
Your average day-trader whos “plays” the stock market is a shmoe, because you run a risk of losing all your money (VERY HIGH)[/quote]
While I don’t believe in day trading, this isn’t really accurate. You’re at risk of losing your position. Losing all your money is an issue for people who are stupid enough to have weak diversification. Or addictive personalities, they’re pretty prevalent in this.
There is, but the opportunities are rare, and if you know about so does everyone else.
PE ratio is just, I don’t know. People base entire investing theorems on it, and I don’t agree with it. It plays a significant role in the initial evaluation of any stock, but basing decisions off it is short-sighted.
But yes, research is the way to go, and if you don’t know why you want to buy a stock then you shouldn’t buy it because you don’t know enough about investing. This is why I am a believer in 99% of all people should have 99% of their portfolio in a selection of mutual funds, bonds and “stable” REITS (if it’s even possible for a REIT to be stable).
Most people who say they’re rich are only rich on paper. Never look at a car, never look at the watch, never look at the hair. Block out the image. Listen and internalize and try and figure out if people are full of shit. Living in South Florida I run into more millionaires every day than I can count, and most of them in reality are ten thousandaires who are floating cash and are overleveraged up to their eyeballs.
People get rich one of four ways:
Most of the time, it’s a mix of all four. Remember that the people you’re talking to who don’t exactly strike you as self-made men are going to most likely be a result of 2), and you shouldn’t listen to them.
Dividends are so rare that looking for stocks that pay dividends will limit what you’re capable of investing in. I love me some dividends, but they’ve been going the way of the pension for a long time now.
The stock market is unpredictable - although it follows patterns.
The best of investors/traders fail miserably with many of their pics - they simply fail less than they succeed. Trading is a statistics game - you never know what you’re gonna get, but you can game it to improve your odds.
Different industries succeed at different points of the economic cycle. There are tables that help you understand this effect.
News impact the stock. Tobacco just got escaped an 80 billion dollar lawsuit - how do you think their stock is going to fare on the news? Up, baby.
When a company like Apple starts mass-producing the hottest item in the world, what do you think that does for Apple suppliers? Up baby. I wouldn’t touch Apple, but understand the effect they have on suppliers stock.
The goal is to understand how a stock is LIKELY to react to certain factors - news, economic cycle… finances, analysts downgrades/upgrades, etc.
When you’re playing a statistics game, the goal is to use as much available information as possible to game the odds in your favor. But do this knowing that in the end a statistics game is a statistics game - and NOTHING can predict the OUTCOME of things…only the LIKELIHOOD of such outcomes.
In the game, have fun with OTCs, penny stocks, etc. but expect to lose. With your real money I would stick with ETFs. Many emerging markets are poised for growth. Think China, India, Australia. Check their history and Morningstar ratings. These funds are diverse enough to provide some security, yet have very good growth potential.
I use TD Ameritrade, no fees, $10 trades, and they’re offering a bunch of free trades (45 days?) and $100 incentive for opening a new account. Lots of cool calculators and tutorials on the site too.
[quote]N. Robinson wrote:
Hey, I am taking a personal finance class this semester and we are doing a stock market game where we pick a stock invest in it and see where it goes. Also I am thinking of buying some for myself. I was wondering what types of stock you guys own or think are good to invest in. I was thinking apple would be ok. Figured I would ask you guys.
N. Robinson[/quote]
If it is for yourself, your best bet is to go with some of the blue chippers and hold onto them for a while. If you are not prepared to hang onto them for 4 or 5 years, then you might not be truly ready to invest (unless you want to play day trader which, to me, is akin to slightly educated roulette).
For your simulation, it doesn’t really matter. Just use it as a learning experience to gain an understanding of what makes a stock of value in relation to another. As for your own money, you’d be playing roulette at this point – you don’t know shit, so it’s just a gamble (as exemplified by your ‘should I get Apple’ comment). There’s nothing wrong with this, but just realize you shouldn’t throw your money in the pot yet. Get busy reading and studying. One guy said to read Benjamin Graham, and that would be a great place to start.
Another interesting book which isn’t too ‘high-brow’ for a beginner which I think is excellent is ‘The Only Three Questions That Count: Investing by Knowing What Others Don’t’ by Ken Fisher. Though I wouldn’t call Ken a contrarian, he definitely has a unique (and very successful) approach to the market. He has a strange sense of humor, but you can learn a lot from this book – about how to analyze the market, what to look for in a company, and what you can learn by watching the investors around you.
And he’s definitely not just a ‘stock picker’, which what most amateurs are.
[quote]Dweezil wrote:
Losing all your money is an issue for people who are stupid enough to have weak diversification.
[/quote]
How many day traders do you know of who REALLY diversify? Honest question.
If everyone knew what the next Microsoft was going to be, and everyone bought into it, would it not grow to fast and crash pretty quickly - much like an IPO? I’m asking, not attacking. I’m sure there are a lot of factors which I still don’t know about.
Wait, P/E ratios play a significant role in the initial evaluation of a stock but you don’t believe in it? I wasn’t suggesting buying a stock because of just it’s p/e ratio, but in my opinion its part of what you should be looking at when researching a company.
I wasn’t saying listen to a “rich” guy, I meant don’t buy a stock ONLY because someone else has made good money from it, it may be a good investment, but don’t base it on that alone.
Dividends are a bonus, but yes you are right about that - I’ll learn, I’ve read a couple books and done hours of research and I still dunno shit.
I reckon that nothing is certain in the stock market, a stock may be doing well one second and the next minute a scandal arises and it crashes, so once again, diversifying will help cushion any such blow.
[quote]diesel25 wrote:
The stock market is unpredictable - although it follows patterns.
The best of investors/traders fail miserably with many of their pics - they simply fail less than they succeed. Trading is a statistics game - you never know what you’re gonna get, but you can game it to improve your odds.
Different industries succeed at different points of the economic cycle. There are tables that help you understand this effect.
News impact the stock. Tobacco just got escaped an 80 billion dollar lawsuit - how do you think their stock is going to fare on the news? Up, baby.
When a company like Apple starts mass-producing the hottest item in the world, what do you think that does for Apple suppliers? Up baby. I wouldn’t touch Apple, but understand the effect they have on suppliers stock.
The goal is to understand how a stock is LIKELY to react to certain factors - news, economic cycle… finances, analysts downgrades/upgrades, etc.
When you’re playing a statistics game, the goal is to use as much available information as possible to game the odds in your favor. But do this knowing that in the end a statistics game is a statistics game - and NOTHING can predict the OUTCOME of things…only the LIKELIHOOD of such outcomes.
[/quote]
Nice post, Mr. Hussman.
I can’t really speak on the short term, way too short of a time period and way too much speculation.
As far as stocks for yourself Ben Grahams Intelligent Investor is a must read, you must be very disciplined and patient with stocks. I like to research and buy my stocks with the intent to hold for the long term, they will go up and down over the term and when they go down on bad news I love it and buy. Keep in mind you must stay up on the company and make sure the analysis doesn’t go bad, if it does you may have to get out for good.
[quote]Dweezil wrote:
rsg wrote:
Your average day-trader whos “plays” the stock market is a shmoe, because you run a risk of losing all your money (VERY HIGH)
While I don’t believe in day trading, this isn’t really accurate. You’re at risk of losing your position. Losing all your money is an issue for people who are stupid enough to have weak diversification. Or addictive personalities, they’re pretty prevalent in this.
There is no way of telling which company is going to be the next big thing
There is, but the opportunities are rare, and if you know about so does everyone else.
so a lot of research must be done into the financial situation of a company, the competency of their managers, their price/earning ratios, your margin of risk, whether a stock is over-priced or not.
PE ratio is just, I don’t know. People base entire investing theorems on it, and I don’t agree with it. It plays a significant role in the initial evaluation of any stock, but basing decisions off it is short-sighted.
But yes, research is the way to go, and if you don’t know why you want to buy a stock then you shouldn’t buy it because you don’t know enough about investing. This is why I am a believer in 99% of all people should have 99% of their portfolio in a selection of mutual funds, bonds and “stable” REITS (if it’s even possible for a REIT to be stable).
Don’t buy a stock because someone who’s rich has become that way because of it, because chances are by that stage it’s already over priced.
Most people who say they’re rich are only rich on paper. Never look at a car, never look at the watch, never look at the hair. Block out the image. Listen and internalize and try and figure out if people are full of shit. Living in South Florida I run into more millionaires every day than I can count, and most of them in reality are ten thousandaires who are floating cash and are overleveraged up to their eyeballs.
People get rich one of four ways:
Most of the time, it’s a mix of all four. Remember that the people you’re talking to who don’t exactly strike you as self-made men are going to most likely be a result of 2), and you shouldn’t listen to them.
One of the best ways to at least have half a chance of not getting completely screwed is by diversifying, and splitting between high grade bonds and high grade common stocks that pay dividends - buy an index fund (aka “buying the market”), as it will have every stock worth having, and you can make good to above-average gains.
Dividends are so rare that looking for stocks that pay dividends will limit what you’re capable of investing in. I love me some dividends, but they’ve been going the way of the pension for a long time now.[/quote]
Wow, Dweezil.
As someone who has busted your balls in the past, I gotta say that you are providing some excellent advice/thoughts on the topic.
Thanks for all the responses, like you guys were saying I should do more research before investing in stock.
N. Robinson
[quote]rsg wrote:
How many day traders do you know of who REALLY diversify? Honest question.[/quote]
Out of the ones who have survived more than 4 months with something besides luck? All of them.
Day trading is about having OCD over minor fluctuations in news and statistics. It’s the equivalent of playing incredibly low stakes pot limit hold’em. If you lose, it’ll be a small amount and the commission. People that lose their life savings have no grasp of how frustrating day trading is and how regimented you have to be. People that lose their life savings really have no perspective on how to day trade, primarily because they can’t place hard limits on their losses.
It’s not investing in the next Microsoft. It’s investing in Microsoft for 4 hours because you know they’re about to make a conference call and announce exclusive deals to market Vista through major retail electronics chains and China, then selling the stock before the market closes or the next day when it’s still on an upswing.
I’ve never met anyone that’s been able to sustain day trading for years at a time. A lot of people have told me they have, but I’m confident that all of them are lying.
It’s not that I don’t believe in it, it’s that there are “advisors” out there who write for popular websites and are on television that believe in basing entire strategies for investing around it. It does not stand up on its own as an indicator of potential.
I was agreeing with you, I just expanded on it.
I would never rely on the stock market as anything more than 1/4 of my living income. I don’t even personally rely on it for that, because I think Nasdaq and the DJ is largely a retirement vehicle, but I do swing trade. Money can be made, and it’s only ever really made in droves for people that get lucky. For almost everyone on this Earth a balanced approach involving zero individual stocks, unless you know the company or have insider information, is the way to go.
A few of the greatest investors ever, Peter Lynch and Warren Buffet, have said to buy stocks in things you know and understand.
This is why my portfolio is heavy in porn, liquor and gambling. Kidding only a little.
[quote]WTF? wrote:
A few of the greatest investors ever, Peter Lynch and Warren Buffet, have said to buy stocks in things you know and understand.[/quote]
Warren Buffet also said once:
“Always ask other anonymous people on the internet for financial advice. Its the wisest thing you can do.”
Video Game Stocks. They hit a low point in the summer and then spike dramatically in the holiday season.
[quote]N. Robinson wrote:
Hey, I am taking a personal finance class this semester and we are doing a stock market game where we pick a stock invest in it and see where it goes. Also I am thinking of buying some for myself. I was wondering what types of stock you guys own or think are good to invest in. I was thinking apple would be ok. Figured I would ask you guys.
N. Robinson[/quote]
Word around the campfire is that Microsoft is going to purchase Yahoo! So my vote would be for Yahoo! stock.
Not Sirius. I am learning my lession the hard way… Thanks Howard…
Mutual funds are always good though
I was reviewing an educational DVD on short term trading (NOT day trading, which is a unique animal) and the instructor said that almost all “conventional wisdom” is just plain wrong. Then I read this thread and saw everybody spouting “conventional wisdom” and just laughed.
The fact is, it takes a minimum of 4 years of constant study to really understand what’s going on. I’m in my 9th year of part-time study, and I’m just beginning to get a clue. You’re not going to learn overnight how to pick a stock, nor in an 18 week course. I suspect the professor has a set of criteria he wants you to use, so just use that. I’ll guess he’s teaching value investing, so look for value stocks.
Stockcharts.com has a nice scanning feature that lets you look for stocks with certain characteristics, including technical patterns and historical data. A 3 month membership is less than the cost of a textbook, and you might get a 1 month membership for less. If you sign up, let me know and you can use me as a referral. (I get extra membership time for referrals.)
As for all those millionaires, they all use different techniques for different philosophies and they aren’t really comparable. Buffet is a long term investor. O’Neill is a medium term investor. Nassar is a short term trader. Fontanills is an option player. (The only day traders who get rich seem to be the floor traders.) It’s like looking for the best program…Do you want to lose weight? Cut? Bulk? The techniques are vastly different for different goals.
The one thing the millionaires all have in common is they lost a shitload of money before they started making money.
I’ll offer this piece of advice. The on-line investing forums are absolutely, 100% worthless for investing information. But they are fine as chat rooms.