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 Post subject: Investing Tips for Beginners
PostPosted: Fri Oct 12, 2012 6:41 am 

Joined: Fri Oct 12, 2012 3:47 am
Posts: 1
1. Investing is not a hobby. To big merchant banks, it is a very competitive business. Therefore, you should also treat it as a business. That means understanding your own profit and loss as well as the companies in which investments are made.

Once this thought pattern is established, it makes the whole process so much easier. Simply ask, "Will this investment / trade / software / subscription make or lose me money?" Once an answer has been established, a clear course of action will present itself.

At first, investing can feel like gambling and many beginners want to learn how to play the stock market, but the real skill starts to come as an investor takes it more seriously.

2. Get some great investment management software. These days, a speedy internet connection and good money management and investment software costs virtually nothing. Why spend the time and effort trying to figure out the best ways to do things when solutions already exist.

Ideally, look to purchase two types of software. One will be for personal money management. This can be used for profit and loss and keeping track of the costs of subscriptions, stockbrokers and the like. The other will be used for tracking stock and fund prices, storing company news, technical and fundamental analysis and more.

3. Get an education. Warren Buffett has suggested in the past that every investor should be able to understand basic accountancy principles, an annual report and stock market history. You probably do not need to become an accountant, but being able to understand the scoring system of the game can only help.

4. Learn about money management. Every investor will have the occassional (at best) loser and it is vital that no individual holding can wipe out a portfolio. Understanding asset allocation is vital.

Years of talking to people about investments has taught me that there are fundamental differences between the way investors behave. New investors ask for 'a tip' and want to know, "What should I buy?".

In contrast, professionals do not want tips. They have dozens of good ideas of their own. They won't be sharing those ideas with you and they will not be expecting you to share yours. Instead, they ask about how you allocate money. "Which sectors and markets do you like and why?" The difference between these approaches is like night and day.

5. Read widely. Getting a wide ranging education in personal finance, corporate finance, taxation, economics and investment theories will help. However, finding areas of the world or business in which you can become relatively expert can help in the process of finding investments.

The reality is that in the modern world - especially with the power of the internet - there is very little information that is not in the public domain somewhere. However, the world now has information overload. Whilst the information might be available, few people now have the time to find or understand it. The people who know these things and can 'join the dots' have regular opportunities for stock market investment.

Once the basics have been covered and understood, it may be that just one or two hours of reading each week will be enough to keep knowledge up to date. But keeping up to date is vital.
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Do you have any idea how cheap stocks are now? Wall Street is now being called Wal-Mart Street. - Jay Leno.
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 Post subject: Re: Investing Tips for Beginners
PostPosted: Fri Oct 12, 2012 8:16 am 

Joined: Fri May 04, 2012 2:23 pm
Posts: 810
What about "buy low, sell high?"

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Bichon Frise

"If you only have 1 year to live, move to Penn...as it will seem like an eternity."


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 Post subject: Re: Investing Tips for Beginners
PostPosted: Mon Oct 15, 2012 7:04 am 

Joined: Mon Oct 08, 2012 10:03 am
Posts: 19
Those are really great tips! Thanks.

I actually have a quick little post about this subject matter on my personal finance blog dedicated to helping people take control of their finances.

Basically, it talks about some of the most basic places to invest in - the types of accounts available and whatnot.

If you are interested, here is a link: http://www.fifteenyearplan.com/basics-of-saving-and-investing/

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Adam Randall

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Adam

http://www.FifteenYearPlan.com - How could this 35 year old save enough to retire working only fifteen years? AND WHY AREN'T YOU doing these things


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 Post subject: Re: Investing Tips for Beginners
PostPosted: Tue May 28, 2013 12:15 am 

Joined: Fri Apr 05, 2013 2:30 am
Posts: 154
If you’re a beginner and investing for the first time, it is better to take help from a financial planner. He will let you know where to invest and get better returns.

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 Post subject: Re: Investing Tips for Beginners
PostPosted: Tue May 28, 2013 3:10 am 

Joined: Sat Dec 10, 2011 7:25 am
Posts: 783
Do this several times... Buy a good stock at a great price and hold it forever.
1. If you watch the stock price each day and worry you are doing it wrong
2. If you try to time the market you are doing it wrong - learn what dollar cost averaging is. and the learn difference between investing and trading
3. You can manage it all on a spreadsheet I have one that pulls market prices with a button click - a great place to build a budget too.
4. if you pay a fee to buy a mutual fund or any investment if you do you are doing it wrong
5. Buy dividend stocks fo the psychological impact of receiving that dividend
6. Never buy any instrument that someone is hawking - great ideas do not require selling. If they have rented space at a hotel and are holding a seminar run away do not walk...
7. Set modest goals..
8. buy etfs to ease of diversification and for liquidity
9. Never buy a fund of funds
10. Buy in industries you understand (i hold for example: verizon, southern company I understand what they do)
11. Subscribe to money magazine
12. I do not agree about getting an investment adviser.. better to invest by yourself in vanguard S&P 500 and growth and income (a diverse set of low admin cost mutual funds). Finding a honest and knowledgeable investment advisor is like looking for a particular red grain of sand in the Sahara - good luck with that. If you must- get one that charges by the hour and does not sell anything!

Im sure its just me but, having some 25 - 30 year old tell me how he can make me all kinds of wonderful returns makes me want to ask the question: "If you are so good why do you need me?" then watch his or her eyes. Snake oil salesman look different these days...

good luck....

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RayinPenn

“If you tell the truth, you don't have to remember anything.”
― Mark Twain


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 Post subject: Re: Investing Tips for Beginners
PostPosted: Tue May 28, 2013 9:30 am 

Joined: Fri May 04, 2007 8:14 pm
Posts: 1959
RayinPenn wrote:
Do this several times... Buy a good stock at a great price and hold it forever.

How do you define what a great stock is? And why hold it forever? What if it stops being great? There are many once great stocks that are mere shadows of themselves. They include Sears, Xerox, Eastman Kodak, DEC, Polaroid and SS Kresge. These were among the stocks once known as the Nifty Fifty. Even Warren Buffett sells stocks when he determines that they're dogs (see USAir).

RayinPenn wrote:
5. Buy dividend stocks fo the psychological impact of receiving that dividend

Why, if the impact is psychological and you're really not suppose to be paying close attention anyway? Berkshire Hathaway doesn't pay dividends because Warren believes that he can better manage that money on behalf of shareholders. Not that I'm against dividends in principle; I have stocks that pay dividends too, just like Warren. But I buy those stocks because I believe those companies will return rewards. Sometimes those rewards are in the form of dividends and sometimes they're in the form of growth.

RayinPenn wrote:
9. Never buy a fund of funds

Why not? Vanguard Target Retirement funds have an extremely low expense ratio.

RayinPenn wrote:
11. Subscribe to money magazine

Why would you need to do this if you've followed the other rules? What information does Money magazine give you that's not freely available on the Internet?


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 Post subject: Re: Investing Tips for Beginners
PostPosted: Tue May 28, 2013 11:09 am 
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VinTek wrote:
RayinPenn wrote:
11. Subscribe to money magazine

Why would you need to do this if you've followed the other rules? What information does Money magazine give you that's not freely available on the Internet?


I read Money Magazine when I was starting out. It was educational for a year or two but then became repetitive, boring, and just seemed to be selling things. I'm not sure it pitches the right advice. Some of the advice is good but it would alienate it's advertisers if it gave the strong message that it should - buy and hold, minimize fees, etc.

It might not be bad but I don't think I would recommend it.


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 Post subject: Re: Investing Tips for Beginners
PostPosted: Tue May 28, 2013 12:32 pm 

Joined: Fri May 04, 2007 8:14 pm
Posts: 1959
DoingHomework wrote:
I read Money Magazine when I was starting out. It was educational for a year or two but then became repetitive, boring, and just seemed to be selling things. I'm not sure it pitches the right advice. Some of the advice is good but it would alienate it's advertisers if it gave the strong message that it should - buy and hold, minimize fees, etc.

It might not be bad but I don't think I would recommend it.

It may have been useful for you at that time but then I'd guess that the wealth of information available on the Internet today wasn't available when you started out. Besides, I view with suspicion any publication that has an article like http://money.cnn.com/gallery/investing/2013/01/30/hot-stocks.moneymag/index.html, which was published January 30, 2013. Their lead piece of advice? Buy Apple.

Also, I'm not sure how this kind of article square's with Ray's advice, Buy a good stock at a great price and hold it forever. Does a beginner sell a stock if an article tell him to or hold on to it, as Ray suggests?


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 Post subject: Re: Investing Tips for Beginners
PostPosted: Tue May 28, 2013 12:44 pm 
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VinTek wrote:
It might not be bad but I don't think I would recommend it.

It may have been useful for you at that time but then I'd guess that the wealth of information available on the Internet today wasn't available when you started out. Besides, I view with suspicion any publication that has an article like http://money.cnn.com/gallery/investing/2013/01/30/hot-stocks.moneymag/index.html, which was published January 30, 2013. Their lead piece of advice? Buy Apple.[/quote]

I agree - that was essentially my point. Back then there was nothing like this. The internet existed, sort of, and I used it when working on a defense program. But there was no such thing as a web browser. But I digress. Money Magazine was useful for understanding a few basic concepts but their articles then, like now, were superficial with little useful substance. I have not even picked it up in at least 15 years, maybe 20.


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 Post subject: Re: Investing Tips for Beginners
PostPosted: Tue May 28, 2013 4:06 pm 

Joined: Fri Sep 12, 2008 12:29 pm
Posts: 1627
Location: Seattle, WA
I have a subscription to Money that I have repeatedly, reluctantly renewed to keep frequent flier miles from expiring. I only read it for the humorously wrong advice and self-contradiction. Occasionally I rip out a checklist or whatnot that relates to something I've been meaning to do but not gotten around to; but even in those cases, I would run the advice through my own filter.


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 Post subject: Re: Investing Tips for Beginners
PostPosted: Wed May 29, 2013 2:52 am 

Joined: Sat Dec 10, 2011 7:25 am
Posts: 783
1. Southern company is a great stock as is mcdonalds
2. you are entirely to literal...hold it forever means do not trade - but rather invest. Sure if economics change over time get out. it all boils down to invest for the long haul. people need electricity and they love mcie dees and I dont see that changing anytime soon. but glazed donuts - naah!
3. dividends tend always to be positive and they come in quarterly - daily stock girations can make u crazy.

The story of three friends
My neighbor Tom had a successful tree business that pulled in a great deal of money years ago (the business eventually slowed)- His investment advisor put him in a bunch of smith barney specialty funds. I was shocked -loads! No prudent investment model and crappy funds infact they no longer exist. I think they are now legg masion funds... Anyway he was sold and robbed in my opinion. - dont be sold!

My soon to be retired coworker Debbie called me during the financial crisis - scared to death about her retirement resources. i assured her it will come back and do not panick. Ride it out you will be fine - she pulled the plug and was crushed. I hung in and did exceptionally well. - Invest for the long haul!

Many years ago another older than me coworker Lucille had invested all her retirement funds in 'cash-equivalent' low risk low yield investments. She wasnt keeping up with inflation. She had a very difficult life - her husband left her for a younger woman..and promptly died..leaving her with 2 kids and no insurance (bad lawyer?). I convinced her to invest her retirement in some growth and income mutual funds and some of the company stock. Years later when she finally retired she told me "Ray if it wasnt for you I wouldn't have anything" (It feels good thinking about it even all these year later) - Equities always outperform fixed income over time!

The reason you read money magazine is about discipline and how other people are getting on with their financial lives and the occasional good idea.

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RayinPenn

“If you tell the truth, you don't have to remember anything.”
― Mark Twain


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 Post subject: Re: Investing Tips for Beginners
PostPosted: Wed May 29, 2013 7:45 am 

Joined: Fri May 04, 2007 8:14 pm
Posts: 1959
RayinPenn wrote:
1. Southern company is a great stock as is mcdonalds

You're ducking my questions. How do you know when a stock is great? How do you know when it stops being great?
RayinPenn wrote:
2. you are entirely to literal...hold it forever means do not trade - but rather invest. Sure if economics change over time get out. it all boils down to invest for the long haul. people need electricity and they love mcie dees and I dont see that changing anytime soon. but glazed donuts - naah!

When all you put out is bullet points, how can a beginner (see the title of this thread) take it any way but literally? There are no caveats, no context, nothing that says that there are exceptions.
RayinPenn wrote:
3. dividends tend always to be positive and they come in quarterly - daily stock girations can make u crazy.

If you held Xerox you'd still be making those positive dividends (2.56% last year!) -- and have lost a huge amount of money. Again, I stress that I'm not against dividends per se -- I just don't think that they should a large factor in buying a stock.

RayinPenn wrote:
The story of three friends
My neighbor Tom had a successful tree business that pulled in a great deal of money years ago (the business eventually slowed)- His investment advisor put him in a bunch of smith barney specialty funds. I was shocked -loads! No prudent investment model and crappy funds infact they no longer exist. I think they are now legg masion funds... Anyway he was sold and robbed in my opinion. - dont be sold!

I agree with this -- I wasn't arguing against your statement about buying expensive funds. I was disagreeing that you shouldn't ever buy a fund of funds. For some people, a low cost target retirement fund works well. Please explain why you should never buy a fund of funds.

RayinPenn wrote:
My soon to be retired coworker Debbie called me during the financial crisis - scared to death about her retirement resources. i assured her it will come back and do not panick. Ride it out you will be fine - she pulled the plug and was crushed. I hung in and did exceptionally well. - Invest for the long haul!

Agreed. But if she had the appropriate asset allocation for her stage of life (soon to be retired), she might not have lost enough to panic and sell out. She would have known that if she had to retire before the market recovered, she could live on her more stable assets while waiting for her equities to recover their value.

RayinPenn wrote:
Many years ago another older than me coworker Lucille had invested all her retirement funds in 'cash-equivalent' low risk low yield investments. She wasnt keeping up with inflation. She had a very difficult life - her husband left her for a younger woman..and promptly died..leaving her with 2 kids and no insurance (bad lawyer?). I convinced her to invest her retirement in some growth and income mutual funds and some of the company stock. Years later when she finally retired she told me "Ray if it wasnt for you I wouldn't have anything" (It feels good thinking about it even all these year later) - Equities always outperform fixed income over time!

Agreed. But not everyone has the luxury of time. I like anecdotes. They do a nice job of illustrating cases. But they're not a substitute for data. Do you have any idea of Boomers have had to put off retirement because they had everything in equities when they had the crash occurred?

RayinPenn wrote:
The reason you read money magazine is about discipline and how other people are getting on with their financial lives and the occasional good idea.

You're ducking the question again. I didn't ask why they should read the magazine. I asked why they should subscribe to it when there's so much information now available on the Internet nowadays.


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 Post subject: Re: Investing Tips for Beginnes
PostPosted: Wed May 29, 2013 9:36 am 

Joined: Sat Dec 10, 2011 7:25 am
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Funds of funds.
1)A fund of funds has administration expenses (Yes -very low for vanguard) but each and every fund it holds also have their own adminstration expenses.. Thus a duplication of expenses...which is not good.
2) a fund of funds becomes too diverse for my taste. If you so choose you could duplicate the portfolio with your own funds. Thus cutting out the middle man

A great stock has a history of performing, pays a dividend, doesnt rely on a single product, throws off cash, has an easily understandable business model and is loved by its customers. In addition to the two I mentioned I like Disney and Coke -- I avoid high P/E stocks as they spell risk that I am not willing to take.

VT you are too quick to say "You are ducking.." sometimes the answer isn't an easy one. I sometimes know what I don't like more then I like. I don't buy fads - Facebook for some is the bees knees but It doesn't appeal to me.. I am just not sure what could stop someone from coming up with a better social media alternative.

After saying all that it is a very rare person that can beat the market year after year
which is why more and more of my investments are in ETFs and mutual funds.

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“If you tell the truth, you don't have to remember anything.”
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 Post subject: Re: Investing Tips for Beginners
PostPosted: Wed May 29, 2013 10:01 am 
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VinTek wrote:
If you held Xerox you'd still be making those positive dividends (2.56% last year!) -- and have lost a huge amount of money. Again, I stress that I'm not against dividends per se -- I just don't think that they should a large factor in buying a stock.


I think it depends on WHY you are buying a stock. If you want income then owning a dividend-paying stock will produce it for you, assuming they don't cut the dividend. You may not get much if any capital appreciation, you might even incur a loss. But you still get the dividend.

If you had bought T in mid 2005 you would have paid about $24 a share for a 24 cent quarterly dividend for a yield of 4%. You could have bought 1000 shares for $24,000 and had $960 a year in income. The stock went up and down but you still got $960 a year or more as the dividend increased. Those same shares would be paying you $1800 a year now, almost double, and far over inflation.

Of course not all dividend stocks do that, and there is risk. I am not optimistic about the long term future of T, and I am also not a proponent of dividend investing, at least not in this stage of my life. But I think if a person is seeking income, buying stocks of quality companies that pay dividends can be very attractive. But you do have to be realistic about the ability and commitment to continue to pay the dividend.


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 Post subject: Re: Investing Tips for Beginnes
PostPosted: Wed May 29, 2013 10:33 am 

Joined: Fri May 04, 2007 8:14 pm
Posts: 1959
RayinPenn wrote:
Funds of funds.
1)A fund of funds has administration expenses (Yes -very low for vanguard) but each and every fund it holds also have their own adminstration expenses.. Thus a duplication of expenses...which is not good.
2) a fund of funds becomes too diverse for my taste. If you so choose you could duplicate the portfolio with your own funds. Thus cutting out the middle man

But for some people, diversity is exactly what they need. It's a major reason (but not the only reason) why index funds exist.

RayinPenn wrote:
VT you are too quick to say "You are ducking.." sometimes the answer isn't an easy one. I sometimes know what I don't like more then I like. I don't buy fads - Facebook for some is the bees knees but It doesn't appeal to me.. I am just not sure what could stop someone from coming up with a better social media alternative.

But Ray, the fact that the answer isn't easy is exactly why the questions have to be asked. We're dealing with a lot of beginners here. When we reduce advice to bullet points, questions have to be raised as to the potential pitfalls of such simplicity.


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