Sunday, April 26, 2009

Beginner Stock Market Investing

Beginner stock market investing is where you'll want to focus on how to get started investing in the stock market. Since you are new, it's often recommended that you "paper trade" to get the hang of how the market goes up and down. This means that you would pick a stock and record in a practice financial ledger your gain or loss. These days, paper's probably no longer required as you can set up a mock stock portfolio on many websites including at Yahoo! finance. This is a very good free internet resource for the investor just starting out who doesn't have a lot of money to spend on investment services that provide more detailed information.

As a beginner, you'll also want to start researching where you'll want to open a brokerage account online. There are many services available and trading stocks today is much cheaper and easier than ever. After that, you'll want to look at the minimums to open an account and the type of account you'll need. Are you opening an IRA stock account or Roth IRA? Is it a custodial account, joint account or account in your own name?

I suggest that you apply for not only a cash account but also apply for the margin and option features of the accounts whenever you open an account so that will be in place should you ever need it.

Once you decide on an online broker, you might also search the web or look at their website for special promotions for new accounts. I saw one the other day at E-trade that offered a free blackberry. Many times they offer so many free trades for investors beginning new accounts with them. If you don't buy and sell much stock initially though, most of those freebies will expire before you can use them. But, it's better than paying for your first few trades.

Once you have opened your stock account, you should the familiarize yourself with the tools the account provides, sign up for online statements and trading alerts as well as look at how to execute trades. If you have any questions, be sure and call the 800 number customer service as they'll be happy to answer any questions you might have.

Trades are usually executed as market orders so if you want to buy at a certain price that hasn't been reached as of yet, you'll want to place what is called a limit order and not a market order. Most orders are good til cancelled though so once you execute a trade, you'll want to keep an eye on it in case it is not executed right away.

As a stock market investing today beginners trader, you'll want to advance from paper to the real thing as soon as possible because that is the only way you can really learn- by using real money and seeing how you handle investment decisions when your own money is on the line and not fake money. Funding your account is easy but it still might take a few days to have your funds available.

Stock Market Investing For Dummies

Stock market investing for dummies is an appropriate phrase these days since most of us seem to be dummies after having lost 40% (or more) of our fund values. It has me and many of my friends questioning the logic of buy and hold strategies of the past because it seems pretty stupid to watch our investments fall so far in value in such a short period of time. It's going to take a lot of time to gain that money back.

So, on a whim I went by the bookstore and perused the investing section of the bookstore to see what types of books are available on the subject. I figured they had done a book on investing in the stock market for dummies and they had but it was actually called Stock Investing for Dummies by Paul Mladjenovic. He is a certified financial planner. This was the 3rd edition. I didn't realize it but I had already bought another book he had written called Precious Metals Investing for Dummies.

In the first part of the book he talks about the essentials of stock investing. He introduces the concept by having the reader take stock of their current financial situation and goals. After that he talks about common approaches to stock investing, the risks involved and how to get a snapshot of the market using the various indexes like the Dow Jones Industrial Average and the Standard & Poors 500 index (more commonly known as the S&P 500 index). Some other indexes he mentions are the Wilshire Total Market Index, Nasdaq indexes, the Russsell 3000 index along with some international indexes. He then talks a little about investing in indexes through index mutual funds and exchange-traded-funds or ETFs).

The next section talks about what you have to do before you can buy stocks. He talks about how to gather investment information about stocks and using stock tables. What's covered are the basic things like 52 week high and 52 week low. Also included are: Name and symbol, dividend, volume, yield, P/E or price/earnings ratio and so on.

Then he talks about brokers and the usual discussion about full-service brokers vs discount brokers as well as the types of investment accounts like: cash accounts, margin accounts and option accounts.

Once he is done talking about that he then delves into two types of investment strategies, investing for growth and investing for income and how to pick leaders in each category. The next section talks about how to choose a companies management and looking at a companies fundamentals like return on equity, equity and earnings growth.

As far as income stocks he talks about how to analyze the dividend yield and the typical types of stocks that are income stocks. Those are how to analyze a utility stock, real estate investment trusts (REIT's) and something called royalty trusts which are companies that hold assets related to oil and gas.

He wraps up the section by talking about how economics affects stock prices, mainly supply and demand. It also discusses different economic schools of thought like Marx, Keynes and the Austrian school which as a finance major myself, I hadn't been taught but he strongly endorses primarily because the currency is tied to a gold standard.

Following those chapters he then goes into a discussion about how to pick winners using basic accounting principles and how to understand the value of company from its market value, book value and its sales and earnings value. He begins by looking at a companies balance sheet. Its assets, financial assets, inventory, debt, derivatives and equity. Then he moves on to the income statement with a review on sales, expenses and earnings. He details what to look for in each statement and each type of category. He then spends some time talking about the P/E ratio and its analytical value and the PSR or price to sales ratio.

After that he reviews how to analyze a companies annual report and use investment services like Value Line, Standard & Poor's, Moody's and how to set up your own research department which I thought was an excellent concept. He recommends reading Barron's, The Wall Street Journal, Investor's Business Daily or IBD as it's known more commonly. Magazines he recommends are Forbes and SmartMoney. In addition, he suggests keeping the last three years annual reports for any stocks you own. He then spends some time going over how to analyze industries and how politics plays a huge roll in the stock market investing.

What follows after that is a discussion of choosing between investing and trading. He also goes into call options and put options which are in reality beyond the scope of the book in my opinion but worth knowing about if you are a new investor.

I like the next part for beginning investors because he talks about specific strategies for specific situations depending on how much money you have to whether you are married with kids, single and so on.

The next part of the book talks about types of brokerage orders and trading techniques. These are basics a beginner really should know for sure. He details, day orders, good-till-cancelled (GTC) orders as well as market orders and stop-loss orders (stop orders) and how to use them. He also talks about how to buy on margin, DPP's (direct purchase programs), DRP's (dividend reinvestment plans) and DCA (dollar cost averaging), insider trading, stock splits, buy backs and taxes. Here he goes into some detail about IRA's (individual retirement accounts) including the Roth IRA and 401k plans.

An investing in stock market for dummies book wouldn't be complete without their customary part of tens section and a resources section. Overall, Stock Investing for Dummies does a good job of reviewing stock market investing today and how to invest in the stock market, particularly if you have no experience with it.

Wednesday, April 15, 2009

Online Stock Market Investing

Let's kick off my blog by talking about my son and what to do with some of his money we have gotten saved up. I'm thinking that it's time to look into doing a little stock market investing. He's gotten over a thousand dollars saved up and it's time to start looking at options above and beyond those high paying savings accounts. You know the one's at our local banks that pay like .000001 percent interest. And, the banks can't make any money, go figure!

Over the last couple of years, we've been putting his money into a savings account we found that has earned around three percent. Over a long period of time, stocks as a group have historically earned a higher return than any other investment. The question is which ones?

We begin our journey by going down the online stock market investing road to find the best stock market investing advice.

Beginner Stock Market Investing

Before we get started, I think it's important to talk about how he got to the thousand dollar level. A few years ago, I set him up with an allowance equal to his age and he has to save a dollar or ten percent whichever is greater. In addition to that, I set up an automatic payment of ten dollars to go into his account each week. That combined with a few gifts here or there, and it quickly added up. Last year, he made $27 bucks in interest which is more than a month's pay for him. The key then is to get started setting a regular amount aside into your account. It will add up over time.

Now, though, we are at a point where it's time to start looking at other options. Although he did make money this year, over a long period of time, the market will outperform a regular savings account even with ups and downs. Our first issue will probably be that are current investment amount is below the minimums to establish an account or invest in any kind of fund.

Before we do that we need to decide where we want to put his money. For this kind of research, I usually check out books at the bookstore first to look for some stock market investing books. I'm sure that there is probably a Stock Market Investing for Dummies book and I know that a long time ago I read a book called the Neatest Guide to Stock Market Investing but I can't really remember what it recommended to do or if it was even any good.

After that, I'll probably do some research online to see what websites are out there and what kind of advice that they recommend. As part of that, I'll also consider investing in some precious metals like gold and silver.

The hard part about deciding what to do is that there are so many choices to invest in, and that right now does seem like a scary time to enter the market because most investment accounts have fallen by about 40%. I know that some of my money and many people I know have lost a lot of money this year. It really makes you question the logic of the buy and hold strategy that has been passed down the mountain on a set of stone tablets when that much money is lost.

It's my personal opinion that this type of market we are in now also leads the skeptic in me to think that maybe the market was manipulated to create a fall in values that substantial and over all industries where complete confidence has disappeared but that is another story.

For now, I think that what we have to realize the possibility that the market might be more easily manipulated now than in the past. And, that maybe it was and that's going to affect our stock market strategy from here on out. I think it's necessary to avoid the kind of decline in values we have experienced this year. There has to be a way to put in some safeguards.

Most people I know have taken the losses in stride although it does make them sick. But, for someone just starting out, it's probably an excellent time to buy because so much of a price decline has taken place across the whole spectrum of investments from housing to stocks.

With that in mind, it's time to get started.

Stock Market Investing Basics

I've always been told that to make money in stocks, you've got to do three things:

1. Buy and hold
2. Diversify
3. Use a mutual fund

I think that what was always thought that if you diversify across a bunch of different stocks in a mutual fund that not all the stocks would go down at one time which is exactly what happen this year.

If your investment time horizon it really long term, buy and hold does seem to make sense if you are in a strong companies stock or a mutual fund where they do the buying and selling for you but not in a market where the bottom falls out.

The downside to a mutual fund to me is that they are always fully invested whether the market is horrible or not and that many of the mutual fund managers can't even outperform the S & P 500 index fund over time.

The other thing that happens over time, is invariably, people you know might give you stock market investing tips or you might even get an email that says buy stock this or stock that and you have to avoid that.

The real key here is that you can make money in stocks following the stock market investing strategies that were outlined above. The question is can you do better with another approach? Do you need fancy stock market investing software or can you get by with basic tools to guide you that do not cost you anything? That's what we are going to find out here over time.

Stock Market Investing 101

If you have read this far, then you should know the only way to find out what works is by putting real money on the line. That is the best education you can get by learning from your mistakes. And, that's what my son and I are going to do here.

Above, I've put his current investment account value so you can track it and see if what we end up doing is successful or not. I invite you to follow along and see what happens. Feel free to make comments on Stock Market Investing Today. It's an open forum.

Tuesday, April 14, 2009

Welcome To Stock Market Investing Today

Welcome to Stock Market Investing Today. This site is dedicated to showing you how to invest in the stock market. If you have any questions, I encourage you to put them in the comments section of the posts you have questions about. Otherwise, feel free to email me at