Who does some stuff with the stock market?

In addition to looking at a company's earnings, earning growth, new products, I've found that investing is largely a matter of psychology. The old saying "Buy low and sell high" is easy to say but hard to accomplish. A lot of the reason for this is human psychology. When a stock is rising and flying high, everything within you says let it run. I'm getting rich! When a stock takes a nose dive the opposite is true. What you end up doing is doing the exact opposite of the adage, "Buying high and selling low."

I've been a master of this at times especially if the market is screaming up in general like during the dot.com bubble or when the market looks particularly gloomy. Of course, you don't always want to be selling your winners without letting them run either.

One piece of advice is to "Buy when there's blood in the streets." That was certainly true two days after the Crash of '87.

“The way to make money is to buy when blood is running in the streets.”
John D. Rockefeller

I always thought this was from Baron Rothschild but I suppose I was wrong.

 

inst stocks kind of like gambling?

just a thought i dont really know anything about stocks...

 

First, I think Peter Lynch would take exception with your describling him as not a Christian . . .

Second, the stock market is more about limiting risk than about investing IMHO. My instructors agreed with that appraisal, but not during class because of the ease of confusion for a beginning 'investor'.

Real Estate has offered the 2d highest rate of return historically. 'Rare books' offer the 1st highest rate of return historically. While this is IMHO, I believe that a reasonable look at the historic rare book market should justify that claim - it was actually written by an author of a book on books (but, the name of the book and original author escapes me).

During the last 100 years, the only time that the stock market out performed ANY other major investment (except bonds, gold, money, etc) was during the exuberance before a major market correction. The dot com boom and bust and before that the 1920's just before the 'Great Depression'.

Have fun and never RISK any money that you HAVE NOT written off before investing in the stock market.

Wayne
PS this is my opinion and not investing advice.

 

I tho't you were researching the market. IMHO IMHO IMHO Jim is not the advisor that I would go to for research - IMHO IMHO IMHO.

I know that he considers himself great. But, I think his bravado is for marketing purposes. HE ATTRIBUTED* that HIS great SUCCESS was DUE TO HIS GIRLFRIEND's SELL recommendation OVER DRINKS AT A PARTY. The drinks part I added for dramatic effect.

I lost alot of money ($500 bcause of black Monday) before I quit listening to that kind of 'advice'. My losses were not directly attributal to any advice by him.




* This was a money interview that I believe was on MSNBC. The interview was just after black Monday October 27th, 1997. His interview was about Tuesday or Wednesday.

 

It can be like gambling, but isn't automatically. You can invest in penny stocks that are probably going to go belly-up, but in the hopes that you will get rich, or you can research and study, and make sound investments (just like putting money into your own company). It can be a risk, but it's not necessarily gambling.

Personally, I prefer mutual funds. Buy a Thursday Wall Street Journal, investigate the long-term returns, and then let them do all the work. A medium risk fund brings a decent return, and it lessens the risk.

But, that's just me. (But, you still need to buy low and sell high.)

 

If you are only twenty-two, I would invest in mutual funds, as Hope of Glory has mentioned. Time and compounding is the greatest asset you now have with investing. Look for a no-load fund, with low expenses. Make sure the fund has a good track record for at minimum of five years, or even better ten. Then I would dollar cost average into the fund on a regular schedule. You should be looking at long term goals, not short. If you don't have an IRA, start with that before any other type of investments, and at your age would recommend a ROTH IRA.

 

To get a rough estimate of compound interest, simply divide 70 by the annual return, and the answer is how many years it takes for your money to double.

For example, the mutual fund that I have my money in has been averaging 14% over the last 15 years. So, if you divide 70 by 15, you get about 4.7. So, my money doubles every 4.7 years. With $100,000, that means that if I added nothing else, in 4.7 years, I would have $200,000. About 9.5 years from now, I would have $400,000. About 14 years from now, I would have $800,000. Etc.

 

You can open up an IRA yourself directly with the mutual fund company of your choosing. The reason in your situation a mutual fund would be a better choice is that you can be diversified, and take advantage of their expertise. Unless you have enough money to select enough stocks to diversify on your own, you would be at risk putting most of your money in just one or two individual stocks. Also unless you have the ability and the time to properly research numerous individual stocks in order to select the one to purchase the mutual fund managers do this for you. Plus know if and when to sell.

Also you are smart to think about the compounding. At your age time gives you a greater advantage when investing than anything else. Did you ever hear the question, would you rather work for thirty-five days given the choice to earn either one thousand dollars per day, or a penny the first day and doubling the amount each day for thirty-five days? The first choice would net you $35,000.00. The second choice would earn you in the hundreds of millions. Never look lightly at time and the power of compounding. At only twenty-two you are wise to be looking into long term investing.

 

Here is Jim Cramer's show recap if you don't have time to see it:

http://www.madmoneyrecap.com/madmoney_dailysummary_index.htm

Here is a site for checking after hours prices. Just enter the stock symbol:

http://dynamic.nasdaq.com/dynamic/afterhourma.stm

How to find high dividend stocks:

http://www.winninginvesting.com/researching_dividend_payers.htm

 

Roth IRA is your best bet for now - the return (profit) is not taxed - taxes reduces your precentage return by about 20%. A 15% return becomes 12% after tax . . .

Just my opinion.