05-20-2008, 09:37 AM

Hey guys,

I was hoping to get some insight on how to buy stock for the first time. What route did some of you take? What are the best brokerage firms/websites to sign-up at? I was thinking Charles Schwab, but I would like to get your opinions first.

Thanks

05-20-2008, 10:40 AM

If you want cheap, go with Zecco. They have free trades if you have over $2500 or something like that. And $4 trades any other time, which is the cheapest you are going to find anywhere. If you want more tools and information, go with ETrade or AmeriTrade, both of which are a bit more expensive than Zecco. I would not pay much over $9 per trade. ANy more and you are probably getting ripped off.

I would suggest reading around as much as absolutely possible.

Here is a good resource:
http://www.smartmoney.com/university/

Start small and get comfortable with trading before throwing big money into it. Also, don't get any grand illusions about making huge amounts of money in a short amount of time. Investing takes patience and a fair amount of research. If you invest smart, you WILL make money. But those miracle stocks are rare and take a certain amount of luck.

Next, figure out WHY you are investing. Is it long-term or short-term? Are you just looking to multiply your money quick or are you planning for retirement? This should determine how you invest. Short-term, you should be looking at individual stocks with high risk and high return and possibly dividends. But the odds are stacked against you. Long-term, you should be looking at ETFs that track entire exchanges or countries. This will give you immediate diversification. Also look into bonds and other low-risk investments. These will give you a secure return that you can bank on.

Investing is not easy, though it is not difficult. Read, read, read.

Hope that helped a bit

05-20-2008, 11:09 AM

I am a big fan of the Investors Business Daily approach. I have made some major money over the years using it. In fact, over half of this new Mac Pro I am now driving was paid for with proceeds from stock sales.

I would recommend getting the excellent book by William O'Neil "How To Make Money in Stocks". Read it through, and then start picking up a copy of Investors Business Daily (a newspaper) each day. Start "paper trading" - selecting stocks, making buy/sell decisions and then tracking those on paper vs. actually commiting money. When you are making money on paper trades after a few weeks, you are ready for the real thing.

I use Scottrade as my real time brokerage, but there are lots of such brokerages out there. I chose Scottrade because it was low cost ($7 per trade, no matter what the size of the trade) and because it has a real "brick and mortar" presence here where I live. No matter which of the big brokerages you pick, I am sure you will do fine. Just make sure they offer real time trading via your computer. Then you can buy and sell in real time as you wish, vs. going through a human broker and paying the larger fees that normally entails.

After that, it is practice, practice, practice. Learning how to buy and sell stock successfully is in many ways learning about yourself - what your tolerance for risk is, what sorts of financial outlays you are comfortable with, how you react in "the heat of battle" and so on. Honestly, it took me about two years to reach a state where I can repeatedly make money in the market. I made a LOT of mistakes early on, and lost some money along the way.

There is one BIG secret to investing - it is no real "secret"; you read it everywhere, but it is a fundamental truth. The key to making money in the stock market is to concentrate on not losing money in the stock market. If you are buying sound stocks at the right points in their price/volume curves, and if you avoid major losses, the gains will take care of themselves.

The golden rule is this: sell any stock, IMMEDIATELY, that drops more than 8% below your purchase price. If you follow this one rule consistently, and you are buying good stocks, you will come ahead. A word of caution - following this simple rule is incredibly hard. It is difficult to see your carefully researched and lovingly purchased stock misbehave and plunge through your 8% stop loss line, forcing you to sell it. It is even harder to pull the trigger at that point, take the loss, and admit that you didn't get it right this time. It is a difficult thing to do, but if you do it consistently, you will come ahead in the short to near term AND your stress level will be nicely contained. There is almost NOTHING more stressful than watching your losses mount as the stock you didn't sell when it crossed your stop loss line just keeps plunging. I have been there, I know!

So, get the book, read it, pick up the paper daily for a while, paper trade, and then go for it, concentrating on not losing money. It will take time, but it is profitable and rewarding.

05-20-2008, 01:22 PM

Thanks for the tips. I'm definitely not rushing into something like this.

05-20-2008, 10:24 PM

I use scottrade, because of the low trade cost, although it isn't the best one, I think that Etrade is.

If you haven't already I would HIGHLY, I MEAN HIGHLY suggest practicing in VSE (virtualstockexchange.com) - it gets you ready for what you really are going to do. Try and find a game that is realistic and start off using the same amount of money that you are going to invest in real life. Treat it like a real stock exchange, with YOUR MONEY.
my dad made me do this in the begging of my trading and it helped a lot.

And please don't try penny stocks, when I was doing VSE i had no idea on what they were, and when i started investing my real money, I was like "This stock just doubled in one day!!", so I found a high volume penny stock, and bought up shares, and guess what, the next week I was down over 2,000$ so i pulled out all of my shares and the next week the company left the exchange, went bankrupt a while ago.

I also suggest knowing the company, I mean everything about them, their past reports, news, if they have opened any new offices, how much it cost them to open those new offices, have they laid people of or are they hiring? What are there future plans are.

I'm sure you've heard this from nearly everybody and you will continue to hear it... but I have to say it.... Don't expect to make it big in a short time, investing takes time, and with that time usually comes rewards.

Also look up Regulation T, I'm serious I got hit hard by this, I was a repeated offender because I didn't understand it, and I wasn't allowed to trade for 90 days or something like that. -READ IT< KNOW IT

I wouldn't suggest buying in foreign markets yet, because that takes an entirely new spin on things,.

Obviously don't buy stocks that have gone a lot in a day, cause they will probably go down the next.

I think that that is it.. OHH yea NO COULDA, SHOULDA, WOULDA.. what i mean is.. oh man i had that stock, i shoulda kept it, or ohh man i woulda bought that stock if it was a dollar lower, and look at it now it's up x%. That will just get you even more depresed and in a bad mood, and it will make you double guess every trade that you make.


Play it safe. And good luck.

- - I guess if you can try and buy Apple before the WWDC starts, cause they introduce the 3G, i think when they first introduced the iPhone stocks went from 80ish to 100ish, and when people started getting their hands on them it went from 110ish to 130ish. And now with Apple with their iPhones all around the world, sales are only going to go up. --
^If any one feels like disagreeing with me go ahead, but right now a majority of my money is APPL


ONE LAST THING, and probably the most important,-- ***Keep Your Portfolio Diversified--** So have some in energy, but also some in blue chip, and have some in consumer goods..etc., because if one sector takes a big hit one day and all you had was that one sector, you are going to get hit BIG!

05-20-2008, 11:05 PM

Originally Posted by Waterpolo820

- - I guess if you can try and buy Apple before the WWDC starts, cause they introduce the 3G, i think when they first introduced the iPhone stocks went from 80ish to 100ish, and when people started getting their hands on them it went from 110ish to 130ish. And now with Apple with their iPhones all around the world, sales are only going to go up. --
^If any one feels like disagreeing with me go ahead, but right now a majority of my money is APPL

I would never presume to advise people on what stocks to buy when. I like to keep my mistakes to myself!

However, I would tend to agree with the above. I have just bought a bunch of AAPL myself today, and will round out my position (buy some more) tomorrow. My reasons are somewhat different than the above, although I do generally agree with the sentiment expressed - I think the impending release of the 3G iPhone will drive the stock up, and that was in my mind.

However, anyone here who is a fan of the Investors Business Daily approach will look at the current price/volume status of AAPL and say "wow, great stock, good fundamentals, fabulous technicals, great accumulation characteristics, classic stock pattern... this stock is a high quality breakout waiting to happen... any day now". According to the IBD philosophy, I shouldn't have bought just yet, but likely in two or three days. However, I am leaving on a trip tomorrow and won't have access to the market for a few day, so I am taking a risk. Right now, AAPL is in a down drift, fighting what is known as "overhead resistance". I am betting it clears this in the next few days however, and I have decided to buy early rather than miss the breakout.

This is NOT advice for you to buy AAPL. I am not recommending it to anyone, just letting you know that I more or less agree with the above poster and feel that there are a lot riskier places than AAPL to put your money just now.

Just so you know though, I have hedged my bets. I am also holding Research In Motion (RIMM), the other big smart phone (Blackberry) stock in the business. BOTH stocks are doing quite well! Despite it being an awful market today overall, I made money on both stocks today.

05-21-2008, 04:19 PM

FYI, I opened my account with Scottrade. I read almost every article I could about the top online brokerage firms and I liked Scottrade the best. Time to invest! Thanks again.

05-21-2008, 04:24 PM

I trade with www.sharebuilder.com ... on the standard plan, I get 6 free trades a month which is perfect for my needs. I've been with them for almost 2 years now and never had a single problem.

05-21-2008, 05:33 PM

Originally Posted by mac57

The golden rule is this: sell any stock, IMMEDIATELY, that drops more than 8% below your purchase price. If you follow this one rule consistently, and you are buying good stocks, you will come ahead. A word of caution - following this simple rule is incredibly hard. It is difficult to see your carefully researched and lovingly purchased stock misbehave and plunge through your 8% stop loss line, forcing you to sell it. It is even harder to pull the trigger at that point, take the loss, and admit that you didn't get it right this time. It is a difficult thing to do, but if you do it consistently, you will come ahead in the short to near term AND your stress level will be nicely contained.

I think that might not be good advice taken in isolation. There are many other factors at play. It may be a good rule once you're established and have a diverse portfolio and you're buying and selling based on price movement, but otherwise it could be a bad move.

For instance, if you bought 10 shares @ $100 each with a 5% yield, and the price dropped $8 within a year, selling might be a pretty bad idea as you'd lose $80 immediately and miss out on a $50 dividend (effectively losing $130ish). Also, such a drop could be down to overall market conditions, and the stock could bounce back within weeks - this happened with Apple during the last quarter.

I think 'golden rules' are what get people into trouble. The advice Cheesybanana gave about asking WHY you're investing and more importantly what you want out of it. Are you going for long term growth, yearly dividends on a solid stock or looking to buy and sell your way to a fortune?

05-22-2008, 08:31 AM

A followup for everyone. I said above that I was taking a risk. I was. I bought AAPL the day before yesterday, and bought more of it yesterday as it rose again. Mid day, the stock plunged, sinking as much as $9.00 during the day, and closing the day out just a bit above that line. On paper at least, I lost a bundle. It didn't sink far enough to trigger my sell rule, but it got darn close.

No matter what you do, and how much experience you may have, investing is always a risky business. Keep that in mind as you enter the market.

05-22-2008, 07:29 PM

^^ Exactly, but a stock like Apple will rebound, its just a hickup. Today it dropped because there is a rumor going around that the rumored date of the iPhone is going to be pushed back, from the rumored June 9th intro date. but that is a rumor-rumor. They should get back to normal soon, once people realize how stupid it is to base a rumor off a rumor. I wouldn't get to worried.