Investing in Stock
precisionk
Registered User regular
Registered User regular
So I think I want to start buying and selling stock. A guy a work with uses Stock Signal Pro and looks to be relatively easy to use, though with a hefty price $275.
I am more or less asking if anyone else has used this program and or other programs to help find out which stocks seem best. Also any general tips with trading, websites etc. would be appreciated.
I am more or less asking if anyone else has used this program and or other programs to help find out which stocks seem best. Also any general tips with trading, websites etc. would be appreciated.
precisionk on
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Shogun Streams Vidya
Well I plan on starting small, probably around $500 bucks. It is NOT going to be a full time thing, just something I do in my spare time, trying to make some extra money while still having a full-time job.
You are not going to make extra money from $500.
Edit: Add a one on the front and you've got yourself a very small start.
Shogun Streams Vidya
Are you expecting to make short-term money, or are you going to be putting money in for the long-term?
The reason I ask is that short-term trading, while it looks attractive, can be a fool's game. I mean, you're essentially joining the most cutthroat, no-holds-barred competition on the planet. There are thousands of people who do this sort of thing full-time, and who make it their mission in life to create profit on the market. Often, that profit comes at the expense of the part-time small investor.
I'm not trying to scare you off, by any means, I'm just trying to give you a friendly warning. I always try and take the long-term view on the market. Buy, hold, and hold some more. That would be my suggestion. Forget the stock market, and start looking into mutual funds. The short-term performance might be less spectacular, but the risk is lessened substantially.*
*It's still there, though.
Have you considered getting together with a group of people with similar ideas and forming an investing club, so you could diversify a bit and buy more then a few shares of one stock?
Also, I think there are some monopoly money markets where you can use real stock performance to see how well you'd do.
I host a podcast about movies.
tldr: To learn about the market, find some free "game" that lets you trade stocks without money. To invest, buy broad, indexed mutual funds.
(Please do not gift. My game bank is already full.)
With what is honestly a negligible starting amount ($500 means you can buy max 1 stock at $5/share) I would recommend you save a bit first until you can buy a well diversified portfolio of stocks, or just invest in a mutual fund. Otherwise, you have a huge chance of losing all of your money. Granted, it's not very much.
Day trading or trading constantly can be very, very bad for your money. You will lose a lot of your returns on commission, and honestly the chances are fairly good that you don't have a clue what you're doing - most people who trade regularly do not. But there will be lots of literature out there telling you to trade often and manage your money - these things will be published (no real surprise) by banks and other investment intermediaries. Think about why they might tell you to trade more (think: commissions).
This is just starting mind you. These are investments. Long term or short term, depending on how the market plays.
I am not going through a human broker, but instead doing everything through online, such as ScotTrade, 7 dollars a trade to and fro.
Now to everyone who is stating that $500 isnt enough. I am aware, this is just starting money.
I am not going to invest in penny stocks, so there is no worries about that. Gameplan so far as it to purchase this software. Then for a few months play the market via paper trades. Paper trades essentially is pretending you are playing the money for real, but not investing anything yet.
This will be to measure how I do. If it looks good, then after those months of saving, I will put down a small sum and increase from there.
So far that is the game plan.
Edit: I am looking at stocks right instead of Mutual funds, because I know at least basics about some of the stock market. Plus I am already investing in mutual funds via Roth IRA and 401k.
(Please do not gift. My game bank is already full.)
Are you making the yearly contribution to that Roth IRA? It was $4000 now I think its $6000. If you're not making the maximum contribution do not bother pissing your $500 into day trading. Do something smart and put it in that IRA. If you've already made your max contribution then send that money to me so I can put it in my IRA.
Shogun Streams Vidya
You don't just need software for trading; you need a brokerage firm to do the trading for you. If you could find a brokerage firm that would charge you less than $7 per trade, I would be shocked.
Trading with $500, your fees are going to eat up all of your capital.
Put it all in an ING account, where you earn simple interest at 4.5%, and at the end of the year you've earned 522.50. Do you see what the difference is?
ING is no risk. You will earn money off of your investment. With day trading, you could go up... or you could go down. In fact, day trading only really works if you have a large sum of money and can spread it around numerous stocks. That way, if something goes sour, you have plenty of other assets that are more "sure bets" that perform well.
Generally, as a young person, financial advisers will stress that a good spread of stocks will include some portion of risky investment and a larger portion of stronger stocks. The risky ones could win big, or could fail. The stronger stocks are there to provide a more low-risk investment, to cover your ass. This is also the rationale behind mutual funds, and, sure enough, over time the stock market goes up.
But even then, some mutual funds do poorly.
Why not just put it in a 1 year CD? Most offer interest rates over 5% and require no work on your part.
Yeah I was doing max of what my company (used to, cheap bastards) match, which was like 3%. I got just about $6000 in it now. Lord Abbet Small Cap FTW.
That is the problem. Brokerage firms will charge vastly more. Thus, why I am looking at online trading sites like ameritrade or Scottrade, who charge $10 and $7 per action respectfully.
The $500 will be a minimum to start, then add more money each paycheck.
T-bills right now are a hot investment. Hell, most short-term investments right now are looking really good, because at this point, we're on what's called an inverted yield curve: normally, long-term investments pay better than short-term investments. However, right now, short-term investments are paying better interest rates than short-term investments. With interest rates where they are, it's a good time to snatch up short-term CDs or Treasury Bills (which, if you buy them through the federal government, have no fees whatsoever). It's not going to make you a shitload, but it'll pay for a nice dinner for two, and it's free money.
(Please do not gift. My game bank is already full.)
Its not a bad idea. Problem is those investments currently seem to require a vast amount of more money, then I am currently willingly to give. Not to say Stock Market doesn't, but you definitely are locked into those. The after reading about the Ladder way, it seems pretty good.
gmacbank, ingdirect.com, hsbcdirect.com are your friends for safe, high-yield, and convenient investments.
man what
Then why are you even doing this? If you want to throw your money away give it to a charity. Do good with it. Seriously. Roth IRA. Make that deposit. The $4000 you put in now is a good $120000 when you get it out, tax free. But if you're set on flushing that chump change down the toilet, please donate it to a charity. Don't waste it on trading fees at an online brokerage. Those companies look for small time suckers every day. I understand you're interested in the market but buy some books take a class. You can't even learn anything jumping in with only $500. The only thing you'll learn is that you really did waste your money.
Shogun Streams Vidya
If you can't afford to lose that money for 6 months, then you can't afford to invest that money on the stock market and lose it forever. However, you can stick it in an ING Direct savings account, and get 4.5% interest on it, no minimum, no fees. GMAC offers similar interest, from what I've heard, though I'm not particularly familiar with them. Either way, you're going to get a better return on your investment, which isn't to say you'll necessarily make more money, but taking the risk premium and fees into account, it's a much better investment than dumping that into the stock market.
But I don't think the max contribution on traditional and Roth IRAs changed in 2007, I believe it's still $4,000. That's what my Fidelity account says, and it's supposed to go up to $5,000 in 2008.
But I'll be the first to say that Fidelity might not have their act together, at least with regards to the laws in individual states. When I caught wind of the first change in 2002, I asked them around November if this applied to my account. Their response was something along the lines of "We don't know, check your local state laws," which apparently isn't their job or something. California hadn't decided whether or not to ratify the change in the federal regulations, and it did take a while, but I still have the impression that Fidelity (probably most brokerages in general) doesn't really give rat's ass about customers that don't have half a million dollars in their account.
That is... news to me. I'm not saying it's wrong. Just that it's really unusual for states to have to ratify a federal program like that.
Edit: And just imagine if you make that yearly contribution every year until you reach the ripe age of 59 1/2. Monies. Tax free. My pants get tighter just thinking about it.
Shogun Streams Vidya
oh dear god yes, me too. Then think if your spouse also contributes the max every year from your mid 20s until retirement. $$$
I'm graduating college in May as is my wife, both as accounting majors. Just need to work towards becoming a CPA and wwweEEE I'll be a rish old fart someday.
Buy a mutual fund.
STAY AWAY FROM DAY TRADING
Ok. I'd see if you get another $500 or so, then put it in a Roth IRA. You can then buy/sell shares with that money. Assume you are going to lose it all, so also start a small savings account. There are more than stocks too.
Stocks - Basiclly buying a piece of a company; the more other people beleive the comapny is teh awsome, the more stocks they buy, thus raising the price and making you money when you sell.
Mutual Funds - A mix of stocks (and maybe bonds) an "expert" has picked out. There are all kinds of MFs; tech stocks, international, low-risk, high-risk. Funds are good because it's still stocks, which equal higher return, but a mix, which genneraly equals less risk.
SPDR "Spiders" - Similer to mututal funds, but are tied to the S&P 500. Supposed to be an even better ratio of risk/reward. Bonus for the cool name.
The one site you need to print out: The Motley Fool
Thanks for the all the information from everyone so far. Mind you, this is all in the planning stages, so nothing is set in stone.
That Website is a good read, and I will take a look at it some more.
That is the one of the many nice things about index funds. They diversify for you. Add to that low fees and tax efficiency and you can see why they are the way to go in most cases.
(Please do not gift. My game bank is already full.)
The money you put into the Roth IRA cannot be touched until you turn 59 1/2. The only exception is that you can withdraw up to a set amount penalty free to purchase a home. Otherwise if you touch the money you get gargantuan penalties. Its the wonders of compound interest.
Shogun Streams Vidya
Also, just putting money in an Roth doesn't get you anything by itself, aside from the no-tax benefit. You have to invest, and that equals risk. With a savings or CD account, you are guaranteed interest. 5.45%/12months is pretty good.
With a traditional IRA, you put your money into the IRA, and you can invest it however you want, and you can't pull it out until retirement. When you withdraw it, your interest is taxable.
With a Roth IRA, you put your money into it, you don't get to deduct it from your income, but none of the interest is taxable (provided you don't withdraw it before the age limit). These are pure awesome, the best thing ever for retirement savings, which is why there's an investment cap: you're limited to investing $4,000 a year, or your taxable income for the year, whichever is lower, assuming your taxable income falls below the maximum income for the investment. Say you make $300,000 a year; you're not allowed to invest in a Roth IRA. It's stepped, though, so at certain income levels, the amount you're allowed to invest declines. Investing in one when you're in your 20s, and not making enough to hit any of that, as well as getting 40 years of compound interest out of it, is a good idea.
Also, a slightly more mathematical question; do revolving CDs cut into your interest? Say I have 3 small CDs coming out every 6 months instead of one big bugger. I looked at with Pe^(rt) and it seems to me that it doesn't cut profit at all, but I'm nervous when applying math to the real world.
Your math is correct, and many people recommend revolving CDs to maximize your interest rates while still keeping your cash relatively liquid.
And you get higher interest rate CDs by shopping around. Don't stick with one bank out of some past loyalty or family trend; go with one with good interest rates and good service.