Stock market education

[antipop]

Originally Posted by BuffaloBill

The Intelligent Investor by Benjamin Graham. Fully understand chapters 8 and 20, they are the key to successful stock investing.

Read that and then only buy trackers and ETFs.

I don't own a very large portolio anymore but the remainder is composed of ETF (general ones like S&P, some geographic one and some more sector specific) and a couple of direct investment in companies I've researched and followed for some times.

With a tracker, you are perfectly diversified even with small investments and you get very low costs. Take one with reinvested dividends so you can save even more on fees. Buy once and forget.

As for current market sentiment, my feeling is that we are in a market that is well priced and on verge of being overpriced. This is lead by a strong rise in multiples created by the current very low interest rate environment. Once rates will start going back up, multiples will contract so unless the company had the expected growth the stock will suffer. I would also look at the corporate leverage which is going up and I would avoid anything related to insurance sector.

[cmalak]

harri009...I am an equity (stock) analyst by trade and I think you have been given a lot of good suggestions in terms of books to read and general advice to follow. Let me ask a few questions and make a few generic comments about investing in the stock market. First the questions:

1) What is your comfort level with basic accounting and financial terms and concepts?
2) If you were to open a company's financial reports (income statement, balance sheet, and statement of cash flows), are you able to understand what the individual line items are and more importantly are you able to decipher what they say about a company's operating and financial performance in total?
3) Do you have the time to dedicate to stock and market research?
4) Do you have a DIY personality or do you prefer to work with "financial advisors/planners" who can generate a more holistic financial plan for you and your family aimed at meeting multiple financial goals (saving for college funds for kids, retirement savings, etc...)?

And now for some generic comments:

1) If you do not have a great facility with basic finance and accounting terms and concepts and you don't think you will have the time or willingness to learn the basic language of investing, then steer away from investing in individual stocks, and furthermore, consider hiring a Certified Financial Planner (fee-based and not commission-based) to help you come up with a financial plan and an overall asset allocation plan
2) If you do have basic finance and accounting knowledge, then read many of the books suggested above on investing and only consider investing in individual stocks if you have the time to carve out at least a few hours a week (and more than that during earnings season when companies report their financial performance 4x per year) to follow news/events concerning your stock, study the stock charts, keep track of how the stock is valued relative to the market and its competitors/peers, etc...
3) Only invest in individual stocks if you believe you have a personality that can apply dispassionate analysis and if you can stick to your investment principles (once you decide what those are) without being swayed by the emotional roller coaster that often happens when a stock moves up or down.
4) Only invest in individual stocks if you think you have a personality that can sleep at night with the volatility that individual stocks can have in terms of their price swings.

Hope this is helpful but I think the first step is to do an honest self assessment of your personality, your facility with the language and concepts of accounting and finance, and your ability to commit substantial time to stay on top of things.

[antipop]

I forgot to mention one of the best way to invest money in stock market using trackers is to buy the same $ amount of a given tracker each month. For example, instead of buying $12000 of S&P500 right away, buy $1000 each month. This will smooth the market volatility and avoid errors due to market timing.

You will buy more shares when the stock is down and less when the stock is up. Your overall cost basis will be optimised this way.

BTW, I would avoid this method with individual stock as you could be following them all the way to 0.

[cma29]

Simple advice:
1) Stick with low-cost index ETFs. Vanguard is a good bet.

2) Allocate money to diversified group of ETFs. Dometic / Foreign. Large Cap / Small Cap. Just 4 or 5 ETFs should do it. For maximum simplicity this one ETF will give you all the exposure you need: VT

3) Put money in regularly.

4) Do not try to time market or sell when market goes down (like it did in 2008). You'll get it wrong most likely and end up buying high and selling low.

5) Based on age, add some bond ETFs, but if you are young stick to an 100% stock portfolio.

[Doug Lax]

Look for a good investmant advisor in the area . There are some that pay by the hour they can set up a do it yourself portfolio ...you deal with them on an as needed basis." financial advisors/planners" who can generate a more holistic financial plan for you and your family aimed at meeting multiple financial goals (saving for college funds for kids, retirement savings, etc...)? " Cyril is right

[o0OBillO0o]

[Mahalo]

Originally Posted by BuffaloBill

The Intelligent Investor by Benjamin Graham. Fully understand chapters 8 and 20, they are the key to successful stock investing.

+1 on this recommendation. I remember when I was in school Warren Buffet had considered this a must read.

He also wrote another book titled, "Security Analysis." What I find notable about both books is that The Intelligent Investor was first published in 1949 and Security Analysis was first published in 1934 and both books are still considered relevant today.

[Masterlu]

Avoid Pink Sheets, and Penny Stocks.

[harri009]

Originally Posted by Masterlu

Avoid Pink Sheets, and Penny Stocks.

Will do