Mr. S Posted May 24, 2005 Share Posted May 24, 2005 Well, in an attempt for my mom to make me learn the stock market, and me being ****y a little, I wanted to see what people thought about day trading or rapid buying/selling of stocks. If anyone has any good websites that help follow/understand the market easier, thatd help too. My idea is that I'll try joining a cheap online trading center, and then invest in some penny stocks. Usually they give you some free transactions at first. I spend enough time on the computer as it is, and with my job starting in mid June, I have enough time to spend anyways. I just wanted to know what is a good way to go about this, and what advice you all can offer to a young investor? Thanks! Link to comment Share on other sites More sharing options...
Southtown Posted May 24, 2005 Share Posted May 24, 2005 I have no experience in day trading so I'll let a pro give you advice on that. As for penny stocks, this website is pretty solid: http://www.pinksheets.com/index.jsp It sounds like a porn site but trust me it'll give you the penny stock info you are looking for. Link to comment Share on other sites More sharing options...
Yomar Posted May 24, 2005 Share Posted May 24, 2005 Originally posted by Mr. S Well, in an attempt for my mom to make me learn the stock market, and me being ****y a little, I wanted to see what people thought about day trading or rapid buying/selling of stocks. If anyone has any good websites that help follow/understand the market easier, thatd help too. My idea is that I'll try joining a cheap online trading center, and then invest in some penny stocks. Usually they give you some free transactions at first. I spend enough time on the computer as it is, and with my job starting in mid June, I have enough time to spend anyways. I just wanted to know what is a good way to go about this, and what advice you all can offer to a young investor? Thanks! A couple of points to consider before talking about day trading/investing: A) No one knows what a stock specifically or the stock market in general is going to do on any particular day If you agree with this, then day trading is nothing more than gambling. In the long run, stocks are based on the economic performance of the underlying business. If you agree with this, then stocks do have an intrinsic value and that value is based on the future earnings of the business. In theory the "intrinsic value" of a stock is all of its future cash flows discounted to the present C) The future is unpredictable, but if you try to understand the business, you can make an informed estimate as to a stock's intrinsic value. If you can make an informed estimate, you have a much better chance of buying a stock when it is "cheap". No one knows what the true intrinsic value is or will be recognized until after the fact, but if you are right in your analysis and estimate, eventually that value will be reflected in the market. This in a nutshell is the difference between investing and day trading. Day trading is based on momentum, something that has nothing to do with the value of the stock or the business underlying it. If it isn't based on fundamentals, then it is based on supply and demand in the market place. How do you know what millions of people plan to buy and sell on any given day before they do it? If you want to get rich quick, then day trading is the way to go, just realize you are just as likely to lose all your money just as quickly. I would recommend reading "The Intelligent Investor" by Ben Graham. Link to comment Share on other sites More sharing options...
Yomar Posted May 24, 2005 Share Posted May 24, 2005 The only other piece of advice I would give is advice I was given. Remember that every time you make a trade, there is someone on the other side of that trade that disagrees with you. No one sells a stock if they think it is going up (there are some rare exceptions to this, but it is generally true), and no one ever buys a stock if they think it is going down. So the question you always want to ask yourself is, "Does the person on the other side of this trade know something I don't? Why are they selling/buying?" Its an impossible question to answer literally of course, but the point is you always want to be cautious and try to cover all the angles. You just can't do that when you day trade. Link to comment Share on other sites More sharing options...
Zen-like Todd Posted May 24, 2005 Share Posted May 24, 2005 For the first time in a long time, Yomar is correct, although I dont know if he (Mr. S) is necessarily ready to jump into the Intelligent Investor. There are a number of books written about Graham's protege (Warren Buffet) that are probably far more accessible. I will say however, that the idea of a perfectly informed, perfectly functioning market is a joke. People make money off of market imperfections all the time. Is it however investing? No. Will you lose your shirt in the long run if you don't get off your ass and learn how to evaluate the intrinsic value of various companies? Most probably. Link to comment Share on other sites More sharing options...
Yomar Posted May 24, 2005 Share Posted May 24, 2005 Originally posted by Zen-like Todd For the first time in a long time, Yomar is correct, although I dont know if he (Mr. S) is necessarily ready to jump into the Intelligent Investor. There are a number of books written about Graham's protege (Warren Buffet) that are probably far more accessible. I will say however, that the idea of a perfectly informed, perfectly functioning market is a joke. People make money off of market imperfections all the time. Is it however investing? No. Will you lose your shirt in the long run if you don't get off your ass and learn how to evaluate the intrinsic value of various companies? Most probably. As usual Cranky Todd remains an ass... that being said, he is right to agree with me, although not sure where the efficient market rant came from Link to comment Share on other sites More sharing options...
Zen-like Todd Posted May 24, 2005 Share Posted May 24, 2005 Originally posted by Snyder Dan As usual Cranky Todd remains an ass... that being said, he is right to agree with me, although not sure where the efficient market rant came from An ass(et) to the community, why yes I am. The efficient market rant regarded the fact that it is in fact possible to make money without relying on decisions based on the intrinsic value of the company, in specific, limited situations. Link to comment Share on other sites More sharing options...
Yomar Posted May 24, 2005 Share Posted May 24, 2005 not sure what you mean, but since we both seem to agree that efficient market theory is nonsense, no point in pursuing this Link to comment Share on other sites More sharing options...
Mr. S Posted May 24, 2005 Author Share Posted May 24, 2005 you guys make great points, thanks! Though I said day trading, I wasnt fully meaning within the same day. I was thinking of more like 'very short term investments', like try and change every week or something. Not sure if that still is considered day trading. I do understand that I'd need to be better educated about it, and I really am not, sorta why my rents are letting get a crash course in it with a small amount. Maybe I should try some mock stock sites first? Anyways, my plan also was to monitor small penny stocks for a while, then invest in one, and when I see it gain a significant amount, sell it. So yes, in that sense, I have the idea of wanting to gamble. Thanks guys for all the help, any other advice or websites that help would be great, especially any online trading place. Thanks! Link to comment Share on other sites More sharing options...
Zen-like Todd Posted May 24, 2005 Share Posted May 24, 2005 Check out the Motley Fool. The Fool's school is probably up your alley. No, that doesn't mean you are a fool. Its just the name of the site. http://www.fool.com/school.htm?ref=G02A06 Link to comment Share on other sites More sharing options...
Predicto Posted May 24, 2005 Share Posted May 24, 2005 Day Trading is almost always a mistake. During the bizarre tech boom of the late 90s, all sorts of people made money day trading, and thought they were investment gurus, but they weren't because a monkey would have made money then. Those days are long gone. The reason that day trading is bad is simple - transaction costs. Each time you trade, you pay a commission. The more you trade, the more commissions you pay. It destroys the profit margin of almost every day trader, even if you are using the cheapest discount broker. Most of the day traders of the 90s are broke now. Charles Schwab is really rich. The way to invest in the stock market is: find several good companies, industry leaders with good bottom lines. Buy their stocks and hold them, and reinvest the dividends (if there is one). If a company is no longer an industry leader, or the whole industry is going downhill, sell that stock. And stay diversified. That is all. Not glamorous, but effective. Link to comment Share on other sites More sharing options...
Yomar Posted May 24, 2005 Share Posted May 24, 2005 Originally posted by Mr. S you guys make great points, thanks! Though I said day trading, I wasnt fully meaning within the same day. I was thinking of more like 'very short term investments', like try and change every week or something. Not sure if that still is considered day trading. I do understand that I'd need to be better educated about it, and I really am not, sorta why my rents are letting get a crash course in it with a small amount. Maybe I should try some mock stock sites first? Anyways, my plan also was to monitor small penny stocks for a while, then invest in one, and when I see it gain a significant amount, sell it. So yes, in that sense, I have the idea of wanting to gamble. Thanks guys for all the help, any other advice or websites that help would be great, especially any online trading place. Thanks! The point remains the same as far as short term investing is concerned. You just can't count on the intrinsic value of a stock being recognized in any short period of time. Your time horizon should at least be a year if you are basing an investment decision on the "value" of the stock. However, you can/should look for "catalysts" that will increase the likelihood that the market will reflect the intrinsic value sooner rather than later. There are some stocks that look "undervalued" but never move. They are typically refered to as "value traps" The problem typically is with the company's management etc etc, but the point is that you do want to look for a reason why the market will recognize the true value of the stock/business as well. Honestly, I recommend Joel Greenblatt's book "How to be a Stock Market Genius", it is easy to read, geared towards beginners and deals specifically with catalysts in the form of special situation investing. I may have gotten the title slightly wrong, but it is a silly title. The knowledge in the book however is priceless. That is where I would recommend you start. The Motley Fool is fine too, but it is a lot tougher to figure out what to pay attention to and what not to. Better to start with one voice. BTW, The Intelligent Investor is pretty reader friendly too, you can do it Link to comment Share on other sites More sharing options...
Mr. S Posted May 24, 2005 Author Share Posted May 24, 2005 alright, I think I will start off with a mock site, just to get acquainted a little bit. Im currently looking for both a mock site and a decent day trading site if anyone knows of one. Southtown and Todd, your links are definitely a great help, thanks! Link to comment Share on other sites More sharing options...
illone Posted May 24, 2005 Share Posted May 24, 2005 www.forex.com Link to comment Share on other sites More sharing options...
National Defense Posted May 24, 2005 Share Posted May 24, 2005 you are ignoring all the advice being given. you are better off betting online than day trading. put your money to better use elsewhere (ie longer term investment planning--you are 20--stick your $ in a roth IRA). Link to comment Share on other sites More sharing options...
Yomar Posted May 25, 2005 Share Posted May 25, 2005 OK, last point. This is a quote from Seth Klarman, for my money the Michael Jordan of investing: "Greedy, short-term oriented investors may lose sight of a sound mathematical reason for avoiding loss: the effects of compounding even moderate returns over many years are compelling if not downright mind-boggling. Compound Value of $1,000 invested at different rates of return for varying durations: Rate 6% 5 years: $1,338 10 years: $1,791 20 years: $3,207 30 years: $5,743 Rate 8% 5 years: $1,469 10 years: $2,159 20 years: $4,661 30 years: $10,063 Rate 10% 5 years: $1,611 10 years: $2,594 20 years: $6,727 30 years: $17,449 Rate 12% 5 years: $1,762 10 years: $3,106 20 years: $9,646 30 years: $29,960 Rate 16% 5 years: $2,100 10 years: $4,411 20 years: $19,461 30 years: $85,850 Rate 20% 5 years: $2,488 10 years: $6,192 20 years: $38,338 30 years: $237,376 This illustrates that preserverance at even relatively modest rates of return is of the utmost importance in compounding net worth. A corollary is that it is very difficult to recover from even one large loss, which could literally destroy all at once the beneficial effects of many years of investment success. In other words, an investor is more likely to do well by achieving consistently good returns with limited downside risk than by achieving volatile and sometimes even spectacular gains but with considerable risk of principle. Link to comment Share on other sites More sharing options...
Mr. S Posted May 25, 2005 Author Share Posted May 25, 2005 Originally posted by National Defense you are ignoring all the advice being given. you are better off betting online than day trading. put your money to better use elsewhere (ie longer term investment planning--you are 20--stick your $ in a roth IRA). I understand completely. My mom is no stranger to the market, but she prefers low gain mutual funds, similar to what Yomar illustrated in his post above. Smart investing usually means exactly what Yomar said in his last line about gaining more with limited downside risks. I agree with you all completely, and am very appreciative of the help/advice. However, it may seem like I am ignoring, cause right now, I want to get a feel for what the market is like. For all it matters, I may end up investing in something and not touch it for a year or 5. I just want to get a feel for how the market works firsthand and see if i could make a quick buck, which is why I will probably try a mock site for a bit, then proceed if I have a better understanding. I will also try and checkout those books sometimes Yomar, especially when I want to become more serious. Thanks again! Link to comment Share on other sites More sharing options...
Golgo-13 Posted May 25, 2005 Share Posted May 25, 2005 Invest in Real Estate. Link to comment Share on other sites More sharing options...
Yomar Posted May 25, 2005 Share Posted May 25, 2005 Originally posted by Golgo-13 Invest in Real Estate. Invest in undervalued real estate Link to comment Share on other sites More sharing options...
iheartskins Posted May 25, 2005 Share Posted May 25, 2005 Here are a couple threads where I've given my opinions on this subject: http://www.extremeskins.com/forums/showthread.php?s=&threadid=89991 http://www.extremeskins.com/forums/showthread.php?s=&threadid=78414 http://www.extremeskins.com/forums/showthread.php?s=&threadid=83606 And lastly what I wrote about financial advisors to another member of Extreme if any of you are in the market for those: Dear X, I'm more than happy to provide any insight that I can. In the securities industry, there are basically two types of investment advisor managed accounts: those that charge on a fee (basis points) basis [which are typically run by "money managers"] and those that charge on a commission basis [which are typically run by "brokers"]. Basis points are a 100th of a percentage point, so 175 basis points = 1.75%--which is a relatively common fee on large (over $ 50 million accounts) and are usually charged on an annual basis--so if you have $50 million of investable assets, your money manager is going to charge you 1.75% of $50 million or $875,000 and probably charge you a fee for any commissions as well. Money managers work on this type of fee because the better your portfolio performs, the higher their fee. Money managers generally don't have an incentive to make lots of trades in an account; rather, they want to ensure that your portfolio has solid growth over time so that they have a larger fee at the end of the year (or quarter). Brokers tend to work off of commissions, so the more trades they make, the more money they make. (I don't know if you know this stuff, but if you don't, commissions are the fees that you pay to your broker for going into the market and placing your sell or buy order and finding a corresponding buyer or seller.) In both cases, where the money manager or broker is working for a larger investment bank (e.g., Goldman Sachs, Deutche Bank, etc.), there is usually an implicit conflict of interest in whatever information they are going to give you because most of these large banks have incentive programs such that the more in-house products (i.e., bonds underwritten by Goldman, or a corporate finance deal with a company working with Deutche bank, etc.) they sell, the better their bonus is at year end. There are new laws that mandate disclosure of these types of things, but not all brokers/money managers comply. When you work with someone outside the large banks, you are probably not as subject to conflict of interest type selling, but you also run the risk of working with someone who doesn't have a strong institutional reputation to back up their work. I wanted to write all of that information so I can properly frame my answer to you. If you open an account with a money manager and have less than say $100,000 of investible assets, you are going to be charged a pretty large fee--maybe something like 300+ basis points, if not more. If you open an account with a broker, you won't face these fees, but you will be working with a salesman who gets paid based on how many sales he makes. Which brings me to my next question... What are your investment goals? Are you trying to create a nest egg which will create the funds necessary for retirement or are you creating this account so you have some money to play around with in the market? Or is it something in between? If you are really conservative, then it might make sense to open something like an ING Direct Orange saving account which is currently paying something like 2.75% or some similar investment vehicle along those lines. Other low risk, low return investments are Treasury Bills, AAA-rated Municipal Bonds (which are also tax-free). If you do decide that you want to go into the equities (a/k/a stock) or bond markets and want to get a few long (hold the position for a long period of time with the goal of selling at a higher price than you paid as compared to shorting a stock) positions, then it might make sense to open an E*Trade or something comprable (discount brokerage where there is no broker overseeing your account) account where you put in your money--buy the stocks, bonds, options, or whatever and just hold them for the foreseable future. If you go this route, you'll be paying a lower commission and you won't be exposing yourself to salescalls--and once your wife starts pulling in the big bucks, you can move over to a full-service brokerage (like Merrill Lynch, Morgan Stanley, etc.) or a money manager (these departments are usually called Private Client Services or Asset Management divisions of the large investment banks.) If you have a large ammount (> $1 million in investible assets) then it might make sense to call a few money managers now. Don't give them your phone number unless you want them calling you back. Let me know if you have any more questions. Link to comment Share on other sites More sharing options...
Golgo-13 Posted May 25, 2005 Share Posted May 25, 2005 Originally posted by Yomar Invest in undervalued real estate Even better... Link to comment Share on other sites More sharing options...
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