Financial Freedom: Stock trading?

[GBGames]

I just recently started reading "Safe Strategies for Financial Freedom" after a suggestion from Justiciar. One thing I am interested in is the stock market.

I am really kicking myself right now for not already having an account somewhere. I read in the paper that Nvidia's stock dropped on Friday morning. It has stuck aroun 9.5/share until today where it is currently trading at 10.5/share. That's over 7% increase in only a few days! Definitely much better than what you could get at any bank over the course of a year.

And even better, I KNOW it will go up this next quarter and this year, especially since Doom 3 came out and the introduction to the dual-GFX card configuration they own the patent on.

Anyway, I'm looking to open an account to do stock trading. etrade.com's Power account seems nice, but I was wondering if anyone else preferred a different brokerage.

I also do not have much to invest at this point. etrade's $1000 account minimum is still a HUGE investment for me. It is the primary reason why I haven't already gone ahead and applied. I know that fees and the like aren't the only things to look for, but my knowledge stops there.

[robleong]

I use Ameritrade - was formerly with Datek Online but was bought over by Ameritrade. I've had no problems with Ameritrade, and would strongly recommend them - trades only cost $10.99 or thereabouts. I wouldn't suggest you invest in stocks if you cannot afford to lose the money, as, whichever way you look at it, it's still a gamble. If Osama does his thing to the US again, all the stocks will fall, even Nvidia!

[Bluecat]

Also, and a friend gave me this advice, don't make lots of small trades.

Even with a ten dollar fee, this reduces the percentage of your return. A lot of people recommend trading only in blocks of $5000 or more. This keeps the fees eating into your profits. Note, I am not a stock broker, financial advisor, or other economic luminary. So don't sue me!!!! ;)

[princec]

...buy stocks in weapons and anti-terror technology then...

Cas :)

[svero]

Stock trading eh? Fun game... if you're a gambler. My advice is hook up a big slot machine arm on the side of your monitor and have it make a random trade every time you pull the handle. You'll probably do about as well as if you would if you learned the details of complex put and call strategies.

Course if you want to see how you'd do join up one of the trading sites that gives you play money to trade with but uses real stock feeds for the results. There are quite a few. It's not perfect because with your real money you tend to make different decisions. You're Less likely to sell at a loss and so on. But it may make you hesitate.

[GBGames]

Even with a ten dollar fee, this reduces the percentage of your return. A lot of people recommend trading only in blocks of $5000 or more. This keeps the fees eating into your profits. Note, I am not a stock broker, financial advisor, or other economic luminary. So don't sue me!!!! ;)

This is what keeps me from getting into it. Nvidia closed at 10.63, up 0.78 (7.92%). That's almost 8% in one day. Of course, with a $10 fee, it would have cost me $20 to buy and then sell. If I would have invested $1000, $60 ($80-$20) in profit in one day sounds nice.

But I can't make small trades, like buying one or two shares of stock. There would be no point.

I believe my best bet for now is to wait until I get more regular earned income before worrying about stocks. Stock investing/trading seems to require too much of a percentage of my current savings to be a good idea at this time.

[Mark Currie]

I got lured into the stock market back when the NASDAQ was at 5000. I would spend a couple hours a day doing researching and making trades. I got out of the market when the NASDAQ bottomed at 1500. I was lucky in that I only lost about 10% of my initial investment. My real loss though was all that time. It was sort of fun, but I think I’m better suited for developing games instead of checking tickers.

[robleong]

Or, you could combine the two - write a stock trading game!

Or, have you considered www.sharebuilder.com ?

Oh, and you could PM me and I'll give you a stock tip too!! :)

[Valen]

From what I understand, the best way to make money in the stock market is to build a company and take it public. :)

[Hamumu]

I'm with svero... if you want to learn, either find a fake trading site, or just do it yourself fake - track how much pretend money you have in each stock on a spreadsheet, and see how you do. I think you'll learn quickly that it's very very difficult to make money trading stocks! If it wasn't, it'd be free money. Remember that on the end of every great sale is the sucker who bought it... and vice versa! I've got the bulk of the vast Hamumu Fortune invested, and I used to day trade (but that was when the market was nothing but roses). Nowadays, I'm just letting it all ride in ones I feel I can trust, and I don't even check it more than once a week or so. I'm probably still down overall from the big crash. Luckily, I'm only playing with money I don't consider 'real', or I'd be in some deep dung. It's extremely fun when it goes well, but if you're going to try to rely on it, the parts when it doesn't go well will give you grey hair, and possibly send you to the poorhouse.

It is gambling, and gambling's addictive... Damn that random reward schedule!

[Coyote]

What's a good 'fake' trading site? I wouldn't mind getting some practice in...

Right now, I have a portfolio that I don't DARE look at after the bloodbath of the last 4 weeks. I figure I pretty much lost all the gains I've made this year.

[Screwball]

You will always make more money in the long run investing in blue chips then you will trying to pick the big market fluctuators. Investing in blue chips is also not a gamble.

[Mithril Studios]

Stock trading eh? Fun game... if you're a gambler.
Like anything where there is a risk of losing, it's only gambling if you play with losing odds. If you come up with a system that has an edge to it, you are no longer gambling.

Course if you want to see how you'd do join up one of the trading sites that gives you play money to trade with but uses real stock feeds for the results. There are quite a few. It's not perfect because with your real money you tend to make different decisions. You're Less likely to sell at a loss and so on. But it may make you hesitate.
I'd definately recommend doing this, and to continue paper trading until you are able to pull the trigger without hesitating.

Two sites I know of:
Wealth-Lab (http://www.wealth-lab.com) is where I have my sandbox at.
Another is at investopedia (http://simulator.investopedia.com/Default.aspx?cookie_test=true)

You can see my wealth-lab "score" at aweissen (http://www.wealth-lab.com/cgi-bin/WealthLab.DLL/profile?user=aweissen) -- not stellar by any means (yet), but my goal is learn how to consistently be a profitable trader.

There are also other market simulators, like for commodities, or currencies, but I don't remember where they are at as those markets are beyond my expertise at the moment.

Anthony (aka Justiciar)

[Mithril Studios]

Anyway, I'm looking to open an account to do stock trading. etrade.com's Power account seems nice, but I was wondering if anyone else preferred a different brokerage.

Interactive Brokers (http://www.interactivebrokers.com/php/main.php) is the best online deep discount brokerage I know of.

Per transaction you are looking at a minimum of $1 per trade, with a cost of $.01 per share up to 500 shares. Over 500 shares, the fee drops to $.005. However, their requirements for opening an account a bit more strict than with Scottrade or Ameritrade, for example.

Scottrade is the next cheapest I've found, and you only need $500 to start off.

Anthony

[Mithril Studios]

Also, and a friend gave me this advice, don't make lots of small trades.

For the most part, this is sound advice. Always take your commission and slippage costs into account when determining the profitability of a system!

Anthony

[svero]

Like anything where there is a risk of losing, it's only gambling if you play with losing odds. If you come up with a system that has an edge to it, you are no longer gambling.


The problem is that there are no "systems" that work. The only people who consistently make money in the market are company insiders, and crooks.

[Sillysoft]

The problem is that there are no "systems" that work. The only people who consistently make money in the market are company insiders, and crooks.

Buy and hold is a "system" that has shown itself to work quite well over the long term. It may not be as fun or exciting as active trading, but 'fun' is not a good reason for getting into the stock market.

[Captain Nemo]

For good information about the stock market (and sometimes fun reading) look at http://www.fool.com.

Making a living from your stock investments is not easy, believe me!

[Mithril Studios]

The problem is that there are no "systems" that work. The only people who consistently make money in the market are company insiders, and crooks.

Sorry Steve, but this is flat out wrong. There are plenty of people who have come up with honest systems that will consistently bring profitable returns on the market. Will they always be profitable? No. But given enough time and proper discipline they will generate profits.

Learning the markets is very similar to learning your customers buying habits. Just like you conduct A/B tests to find out what "settings" generate the most profit, if you expect to do well with equities you need to come up with a hypothesis and test it. In my limited opinion, making money in the markets is just as difficult as taking a game from concept and bringing it to the point where it's a successful seller.

I could give you a list of people who are well known for making quite a bit of money in the markets, but I suspect you would categorize them as being crooks or insiders, so how about someone you (somewhat) know -- Thomas Warfield.

I'm not saying it's easy, or it's for everybody, and there certainly are crooks and insiders; but to say you're a crook if you are making money consistently off the markets...?

Anthony

[svero]

Buy and hold is a "system" that has shown itself to work quite well over the long term. It may not be as fun or exciting as active trading, but 'fun' is not a good reason for getting into the stock market.

You can buy a stock and hold it as it loses value of a number of years and the company goes bankrupt. Holding a stock long term is no guarantee of profit.

[svero]

Sorry Steve, but this is flat out wrong. There are plenty of people who have come up with honest systems that will consistently bring profitable returns on the market. Will they always be profitable? No. But given enough time and proper discipline they will generate profits.

Then put your money where your mouth is. If you know of such a system the answer is very simple. You cash out all your money, take loans do whatever it takes and play that system and you'll be rich.

However, I've never known of anyone who defends this point of view that does what I've suggested.

It's always somebody elses system, or they don't have enough cash or some other excuse. There's always an excuse. It's just like psychics who can't perform when a professional magician is around. Suddenly the right vibrations aren't in the air.

Learning the markets is very similar to learning your customers buying habits. Just like you conduct A/B tests to find out what "settings" generate the most profit, if you expect to do well with equities you need to come up with a hypothesis and test it. In my limited opinion, making money in the markets is just as difficult as taking a game from concept and bringing it to the point where it's a successful seller.

I'm sorry but I can't agree. You're really comparing apples and oranges here. In my view you're suggesting something akin to analyzing dice rolls to predict when the next 6 will come up.

I could give you a list of people who are well known for making quite a bit of money in the markets, but I suspect you would categorize them as being crooks or insiders, so how about someone you (somewhat) know -- Thomas Warfield.

I've read some of what Tom wrote about stocks on his blog and so on, and I've made money on stocks myself. That being said, I believe he's wrong on this particular subject. He's not the only one in the world who thinks there's something to know about trading. There's obviously a lot of "experts" and books on the subject and so on and I've read many of them. The same could be said about telling your horoscope. You cant tell what kind of a person someone is because he's born a certain day and similarly you can't tell where a stock will go based on a historical graph. If Tom has made money in the market then good for him, but I don't think it's based on clever strategy. I'm sure Enron would have looked like a fine investment based on the information the public had. How can you really know? You can guess. You can say.. I think the work that optimal biometics is doing will be successful in developing a new drug and buy some of their stock. But you can't know with any certainty! And if your strategy is based on charts and historical data and trading strategies then you're really rolling the dice as far as I'm concerned.

I guess people heavily in the market would like to believe that, but at the end of the day they're vulnerable. You can improve your odds maybe by using some clever strategies, but never so much that you will consistently turn a profit.

Everyone is an expert when the market is doing well and almost nobody is when it crashes. I spent years working on stock market software of one kind or another for well known wall-street companies so I do know a little about this sort of thing. I'd love to have a good trading strategy, but I think at the end of the day it boils down to luck or knowledge others dont have.

I'm not saying it's easy, or it's for everybody, and there certainly are crooks and insiders; but to say you're a crook if you are making money consistently off the markets...?


I stand by my original statement. I won't respond to this subject again, because it's one of those that can lead to endless debate. I'd say that if you believe such trading strategies exist that you can consistently turn a profit then just put your money into it. Most people are a hell of a lot less sure of their trading strategies when it comes to betting everything they have though.

[Mithril Studios]

Then put your money where your mouth is. I am.

If you know of such a system the answer is very simple. You cash out all your money, take loans do whatever it takes and play that system and you'll be rich. However, I've never known of anyone who defends this point of view that does what I've suggested.
Yep, within realistic reason. You need to have cash on hand to eat and pay rent, so it would be foolish to put that money into any investment where you could lose it either due to illiquidity or temporary drawdowns.

Do I leverage with loans? Yes, as much as I can, but with the whole picture in mind. It doesn't make sense to borrow money at 8% if your system only returns you 5%.

I'm sorry but I can't agree. You're really comparing apples and oranges here. In my view you're suggesting something akin to analyzing dice rolls to predict when the next 6 will come up.
In a sense, you are. But instead of plopping a wad of cash down that the next roll is going to be a 6, you take many other things into consideration. How much money you have. What the profitability will be if you are right. What the loss will be if you are wrong. It has very little to do with how often you are right or wrong, and much more to do with how you are positioned when you are right or wrong.

I guess instead of counter-pointing more of your counter-points :) I'll end with this. I'm not saying you are going to be right consistently in the stock market, because you won't be. I am saying you can make money consistently -- and "consistently" can vary depending on the system, whether daily, weekly, monthly, yearly, whatever. You can be wrong, and still make money on a consistent basis.

~finis

Anthony

[Morphecy]

Recommended reading:

RICH DAD, POOR DAD

Then, continue with the books he suggests.

[tentons]

I do stock transactions through www.buyandhold.com. It's $6.99 per month for two trades ($2.99 for each after that). You can also do automatic buys if you want to be super-disciplined about steady investment. Ie, $20 per month or whatever amount you want directly from your checking account.

Think of it as an interest-bearing savings account. :)

Oh, and it's usually wise to only invest in companies who's market you understand (ie, software and technology, in my case).

[ggambett]

I live in a galaxy far, far away, so I have very little knowledge/culture about the stock market (ie normal people just don't trade in this country), but I'm interested in the subject anyway.

I understand picking a couple of stocks yourself is risky, and if your capital is small, you can pick only a couple of shares. But isn't that the idea of mutual funds? Isn't buying a few shares of a mutual fund equivalent to buing fractions of shares for a much more diversified portfolio, and with experts picking that share subset?

[svero]

I live in a galaxy far, far away, so I have very little knowledge/culture about the stock market (ie normal people just don't trade in this country), but I'm interested in the subject anyway.

I understand picking a couple of stocks yourself is risky, and if your capital is small, you can pick only a couple of shares. But isn't that the idea of mutual funds? Isn't buying a few shares of a mutual fund equivalent to buing fractions of shares for a much more diversified portfolio, and with experts picking that share subset?

You're correct that mutual funds were meant as lower priced diverse portfolios supposed to lessen a small investors risk. However the New York Attorney General Eliot Spitzer, investigated mutual funds and described them as a cesspool, and the entire industry has been rocked by scandal since last year. Just type in "mutual fund scandal spitzer" into google and you'll bring up pages of info on this stuff.

[GBGames]

I understand picking a couple of stocks yourself is risky, and if your capital is small, you can pick only a couple of shares. But isn't that the idea of mutual funds? Isn't buying a few shares of a mutual fund equivalent to buing fractions of shares for a much more diversified portfolio, and with experts picking that share subset?

The problem with mutual funds these days is that they are consistently underperforming the market.

It turns out that the people who pick the stocks try to pick stocks in keeping with the market indices. The stock pickers get to keep their jobs because they didn't do much worse than the market, and you're still paying them to do it.

Mutual funds are in general not a good deal, and contrary to what a lot of people believe, you can lose money in mutual funds. Money market accounts do better in this economy, although interest rates are still fairly low.

[ggambett]

Money market accounts do better in this economy, although interest rates are still fairly low.
OK... so what would be a good low-risk (therefore low-profit) investment? Banks here pay like 3% a year, so anything better than that is a good idea :)

[Nemesis]

I started dabbling with stock trading via Etrade a few years back, at the height of the DotCom hype. I was doing quite well initially until the first downturn of September 2000 followed by 11th September a year later, causing Nasdaq amongst other sot plummet way down.

My mistake was not to let go of lossy stocks in the hope of a recoup.. now I have two stocks in particular (Lucent and Ballard Power Systems) with a loss of 90%!!! I have my doubts if I'll ever manage to recoup at least half the purchase price!

Anyway.. it was mostly a fad at the the time.. right now I'm too busy with a day job, side job and a life to bother following trends and fundamentals ona daily basis! :)

I'll eventually stick to the longer-term blue-chips.. but you never know.. with the Nasdaq index so low I'm hoping for an eventual long-term improvement of the market.

At the moment I feel it's far more likely to get some income from indie game development!

[svero]

Oh and.. one more thing about investing in the market. I think everyone should check this out...

http://www.investorhome.com/darts.htm

- S

[nquijano]

Flame on if you feel the need to :

We're all proud to be indies (although, I'm going back to part time indie), and a common leitmotiv is doing things different
Well, using the stock market to get financial independence is NOT different.
More so, you're helping to maintain a detrimental status quo, where money keeps being made out of nothing : the stock market is pure artifice and this is made worse and compounded by what svero brought up about insiders and crooks.
That said, I'm not going to say anyone is bad because they do, etc. :)
Just food for thought, about double standards and all that.

[robleong]

Generally, I think, all those who have dabbled in stocks before have been burnt in the past few years when the dot com bubble burst. I was one of them. But they're now wiser (and I hope I am)! You'll need to know the stock you're investing in really well (not necessarily as an insider yourself, nor that you need to know people who are working in the company!) to be able to make money from it - I find the Yahoo company message boards extremely useful. Timing the market, or day-trading, is very much a gamble, so I agree with the "buy and hold" advice. Just don't use any money that you cannot afford to lose.

[ggambett]

We're all proud to be indies (although, I'm going back to part time indie), and a common leitmotiv is doing things different
Well, using the stock market to get financial independence is NOT different.
Awwww, come on. I associate "being different" just because with teenage behavior. I want to do what I want, the way I want, even if sometimes that's a traditional thing done in a traditional way. I think that's the point of being an indie. Being "independent", not being "different" just because it's "cool".

[nquijano]

I meant being different as in being better, no juvenile notions of cool :)
Things evolve 'cause people try different things, not from any teen notion of cool.
Matter of fact, I'm turning 34 today, and I like to think, that while I retained some aspects of juvenility, I've learned a thing or two about life.

Indie as in independent, not egocentrical and not caring about what the repercussions of your actions are.

I'm taking the moral high ground on this one, and not decrying anyone who doesn't : as I said, food for thought, nothing more, or less, but that doesn't take away from the fact that the stock market is an artificial construct and one of the great sources of inequity in the world we all live in.
Ask any economist worth his salt, he'll tell you that, as well as mention what svero said.

[carl]

For what it's worth (I haven't made my first million yet :) ) I view the stock market from a business owner's perspective:

As a business owner, I am investing my time and money in the hopes of generating more money*. If I did not think I could generate a return on that investment, I would not be calling myself a business owner. Before deciding what to focus my business on, I ask a series of questions - what is the size of the market, do I have an idea that will generate money in that market, what does the competitive landscape look like, do I have a large enough moat around that idea to keep competitors at bay, am I confident in my abilities to pull it off, and so on. The answers to these questions are critical to determining the success of my business.

When deciding to invest in another company through the stock market, I ask myself the same kind of questions. What does the market for this company's products or services look like? Is the company doing a good job of serving that market? What competitors are out there? Can this company beat the competitors? (If not, maybe I should invest in the competition...), do I trust the management of that company to execute?

This is not an exhaustive list by any stretch, but it helps explain my perspective. I agree with Svero - if you "play" the market you are gambling, and as likely to lose your money as you are to make any. It is my belief that approaching the market as a true investor gives you a much greater chance of success. There are certainly risks, just as there are risks to running your own independent game development company. The key is to take intelligent risks that you are comfortable with.

How can you answer these types of questions when you aren't an insider? The best way I know of was defined by Phillip Fisher in "Common Stocks and Uncommon Profits" as scuttlebut. It means doing the legwork - talk to customers, employees, distributors, investor relations, company management, read articles (both good and bad), drive by the head office and see what the employees are like on their way into work in the morning (or find a friend online that can drive by for you). It's a lot of work, but so is owning a company, and when you purchase a share on the stock market, that is what you're doing.

I think following this advice will allow you to consistantly make money in the stock market. Time will tell :).

Cheers!
Carl

* This does not mean I am only in it for the money.

P.S. I also have nothing against trading based on technical factors. I studied some chaos theory in school, and my final project was an AI that learned what stocks it should invest in based on price fluctuations and a few other heuristics. I just don't consider this approach investing.

[grimreaper]

I'm taking the moral high ground on this one ...
LOL! No you're not. You're just being a patronizing, lefty, PITN.


and one of the great sources of inequity in the world we all live in.
How predictable!! Dont forget to blame globalization, colonialism, racism, american imperialism. Dude, stop reading Naomi Klein, She's so last year...


Ask any economist worth his salt, he'll tell you that, as well as mention what svero said.
Yes, Marx would tell you that. But you wouldnt really want him as your economic adviser would you??? :D

Any economist worth his salt will tell you that a stock market is just a market, just like, for example, ebay or WalMart. The advantages of markets like the stockmarket and ebay is that the demand and supply set the price in a more transparent manner.

Bye, bye comrade! :)

grimreaper

[goodsol]

There's a lot to say about this thread.

First off, to the original poster - you really need to have a lot more money available to you before you go buy an individual stock - you really need $3000-$4000 to put into one stock before the trading costs become efficient. If you have less than that, I would recommend using one of the brokers that allow you to put small amounts into lots of stocks, such as Sharebuilder or FolioFN.

Secondly, I would stay far away from Nvidia. The gain you saw has a name - it's called a "dead cat bounce". You may think that the stock has to go up, but the chart says otherwise. Every technical indicator on that chart says that stock is going down, down, down. They could be wrong, but I wouldn't care to bet any of my money on it.

It is possible to make a lot of money trading stocks and contrary to some opinions expressed in this thread a lot of people do. But it requires a lot of work and patience. Buy and hold does not work, although if you make a good pick you can hold a stock for a very long time (even decades) and make a lot of money. But that doesn't happen very often.

Buy and fold is a much better strategy. When you buy a stock you are going to be right sometimes and wrong sometimes. The key to making money is to make a lot of money when you are right and lose as little as possible when you are wrong. This means that when you buy a stock and it goes down, you sell it. You don't care that the company may be great and you are sure that the stock will go up, you sell because it went down.

This happened to me just today. I sold a great company today - a wonderful 20 year record of increasing dividends, one of the best stocks of the last 20 years, fantastic earnings, absolutely nothing wrong with the future potential of the company - but it hit my predetermined sell stop level at which I simply won't let the loss get any greater.

No one who used this strategy got burned by Enron. If you bought Enron on the way up, you would have made a lot of money of it. I'm sure many people did. If you bought on the way up, the key was to sell when it broke its uptrend line, which it did long, long before it went bankrupt. If you went bottom fishing and bought on the way down, then if you had a good stop in place you still got out with a minimum of damage. The only way you got burned was if you bought it without a sell stop in place, which means you weren't a trader, you were a hopeless romantic.

Buying bottom fishing stocks like Nvidia with all your available money is just asking for trouble - the probabilities are against you. It's like going all-in in Texas Hold em with a 7/2 off suit. I will occasionally bottom fish, but you have to have a plan. For example, I recently went bottom fishing with New York Community Bancorp (NYB). I've owned it before and made a lot of money on it. It started dropping in April and I bailed out with my big gain. Recently it broke its downtrend line and moved above its 20 day exponential moving average (EMA). The company has good earnings and pays over a 5% dividend, and it just happened the it was about to go ex-dividend, meaning that if you bought it then you would get the quarterly dividend immediately. So I bought it as it moved over the 20 day EMA, with a stop to sell if it ever drops below the 20 day EMA. While the stock hasn't really moved much since, since the 20 day EMA has moved up close to what I bought it at and I've already collected a quarterly dividend, the risk is low. Best case scenario is that it stays above the EMA and I collect another dividend in 3 months. Worst case it drops to the EMA and I'm out and I find something else to put the money in. THis is what I call buy and fold, I bought it and I'll fold when it hits the stop.

If you read about people who make a lot of money trading (such as in the Market Wizards series of books, which I highly recommend), you'll see that they always do this - always have an exit strategy in place when you buy a stock. Always plan for it to go down immediately after you buy it and know when you will exit. Then you can only be pleasantly surprised if it doesn't happen. You wind up with a lot of trades where you lose a small amount of money, and some trades where you make money, and a few trades where you make a large amount of money.

[Applewood]

www.partypoker.com

I make about a grand a month from that, and it's fun too.....

[Kai Backman]

First a thank you to everyone for good comments and especially to Tom for the good book list he published some time ago. I sense there is a slight confusion of terms going on here, so just a quick recap:

On the difference of investing and speculation: (from Security Analysis by Graham, Dodd et. al.):

An investment operation is one which, upon thorough analysis promises safety of principal and an adequate return. Operations not meeting these requirements are speculative


If you speculate you should be prepared to loose your principal. As many have pointed out already, day trading without a clear and enforceable system is easily within the realms of speculation.

IMHO, there is a considerable gap between small time investment and big time investement. Where the small time investor can expect a modest annual net return (after costs, taxes and fees), the big time investor can naturally get better result. However, it seems like most mid-time investors do worse than small timers, many times considerably worse by loosing their principal. Big time investment in any form (including but not limited to day trading) is essentially a job or a business in itself, it requires your full attention.

For small time investors wanting to differentiate their net worth into common stocks, index funds are probably the best bet. They have low management fees and are essentially tracking the growth of wealth over a specific part of humanity (or humanity as whole). If you bet that humans will continue to prosper on the long term, an index fund is a good investment. Dollar averaging and a 50% - 50% bi-annually balanced allocation between stocks and bonds will dampen out most of the oscillations. A 3% net gain is fantastic in this scenario, and you use very little time with portfolio management. This is essentially value investing in its most basic configuration and interested parties can read more in The Intelligent Investor (http://www.amazon.com/exec/obidos/tg/detail/-/0060555661) by Benjamin Graham (originally published in 1949).

Day traders should plow through the book list (http://www.asharewarelife.com/2004_05_02_archive.html) by Tom and watch out for those trading fees eating into your profit .. :D (And expect higher gains as well ..)

[nquijano]

LOL! No you're not. You're just being a patronizing, lefty, PITN.

And you're not ? Who do you think you are, and how do you think it sounded ?


How predictable!! Dont forget to blame globalization, colonialism, racism, american imperialism. Dude, stop reading Naomi Klein, She's so last year...

Now that's patronizing, starting to assume I must belong to a certian political group, read a certain author, etc. because I expressed one opinion.
FYI, never read Naomi Klein, and no interest in doing so.


Any economist worth his salt will tell you that a stock market is just a market, just like, for example, ebay or WalMart. The advantages of markets like the stockmarket and ebay is that the demand and supply set the price in a more transparent manner.
grimreaper

Yeah, right. Go talk to a few of them, they'll explain the peculariarities of the stock market way better than I can, and all the facts and principles that don't make it a market as we usually think of them.
They'll also explain to you that it's not driven by any "real" demand, only the demand for trading stocks, etc. This is basic economics, whatever political spectrum you're from. The divorce between stock market and "real world" trading happened a long time ago. Research the topic a bit before voicing your opinion.
You'll note that I never said "don't play the market", or that people who do are bad, and also afaik, this is not a cult where everyone has to say the same thing right ?

I also didn't call you or anyone else a savage capitalist for playing the Western Roulette, or any other typical term you might have been labelled as by a lefty.

And yes, I'm taking the moral highground for me on this issue, and not participating in the folly that the stock market is.
I'm not imposing my views on anyone, but I do have the right to voice them, however unpopular they might be

In closing, you did exactly what you're reproaching I did : be predictable :)

[svero]

It is possible to make a lot of money trading stocks and contrary to some opinions expressed in this thread a lot of people do. But it requires a lot of work and patience.

Gah... I'll break my promise and respond one last time. It's pointless to argue this really as I don't think that it's a debate that can be won. It's a little arguing a religious faith or political ideology.

But anyway, just for the sake of clarity!

I do not say it's impossible to make money on the market. Lots of people do indeed. But for every winner there are many losers. And statistically I'm willing to bet there are a hell of a lot more losers than winners. A little like roulette at the casino. And you don't hear a lot about the losers. It's the winners who write all the books. But nobody takes a roulette winner with a system all that seriously.

It's easy to say you cut your losses and ride your wins and you can make money. But in practice there's no way to predict when you should cut your loss or cut your win. You don't know what the stock will do so it's trivial to sell too early or cut too late even if you pre-determine the losses you're willing to take on any given stock. If the whole market is riding down you could easily take a loss on 10 different stocks and hit 0. There's a lower bound in this statistical game where you run out of money so you can't always ride out the lows.

To me it's no different than my giving the advice "buy low sell high" -- If you do that you'll consistently make money. Easy to say. IMHO Impossible to do with any guaranteed predictability. And I say that as someone who has only ever made money on the market. I'd still play. I like buying and selling stock. But I do so with the knowledge that there's no guaranteed return. I consider it a gamble with better odds than the lottery or vegas and I do what I can to increase them, but I don't delude myself of the danger with either short or long term "investments".

[Pyabo]

www.partypoker.com

I make about a grand a month from that, and it's fun too.....

Finally someone says something interesting on this thread! :)

What games and limits do you play, Paul?

I'm surprised this thread has also gone as long as it has without someone mentioning the Vice Fund (http://vicefund.com) either. You people are no fun. :D

Seriously though... I took a beating back in 99/2000 with my "petty cash" and haven't had the interest to get back into since then. Think I lost about 60% of my initial funds in that downturn. Ugh.

[goodsol]

Yeah, right. Go talk to a few of them, they'll explain the peculariarities of the stock market way better than I can, and all the facts and principles that don't make it a market as we usually think of them.
They'll also explain to you that it's not driven by any "real" demand, only the demand for trading stocks, etc.

I'm not sure if you are trying to say here that the stock market is not driven by supply and demand, but it certainly is. It is entirely supply and demand. Price is based on the supply of people willing to sell their shares and the demand of people who want to buy them.

This is the reason that the number of shares for a stock matters (and why options hurt a stock by creating more supply). The rate of increase of the number of shares is one of the few metrics I look at in a stock.

The problem in the stock market today is that there are just too many shares out there willing to be sold and not enough people who want to buy them. Things like the Google IPO, which will add even more shares, will only make things worse (Google just issued more shares to Yahoo in a patent settlement, that will hurt their IPO more than anything else they could have done).


I do not say it's impossible to make money on the market. Lots of people do indeed. But for every winner there are many losers. And statistically I'm willing to bet there are a hell of a lot more losers than winners.

The sad thing is that there is a tremendous historical upward bias in the stock market. A random strategy of buying at a random time and selling at a random time would make money (particularly if the period between buy and sell is in years). And yet most mutual fund managers don't even do as well as a random strategy. They would do better just to let a computer take over.

Of course there have been times where a random strategy would not work, such as 1929-1954 and 1974-1982. And we may well be in another such time (we probably are). Yet even when the stock market is in such a bad period, you could make a lot of money (such as in 1933 or 2003). The stock market is far better than a casino game, the historical odds are rigged in your favor.

[svero]

Of course there have been times where a random strategy would not work, such as 1929-1954 and 1974-1982. And we may well be in another such time (we probably are). Yet even when the stock market is in such a bad period, you could make a lot of money (such as in 1933 or 2003). The stock market is far better than a casino game, the historical odds are rigged in your favor.

I would agree that you can hedge the odds more in your favor and that long term investments have a better chance of producing some kind of return. That's hardly a guarantee though.

I responded mostly because I found this story interesting and watned to post the link. It's about US senators and how well they do in the market.

http://www.csmonitor.com/2004/0309/p01s03-uspo.html

[MattInglot]

I've created accounts on both wealth-lab.com and investopedia.com as a result of this thread and I am having a lot of fun with this stuff :)

My virtual portfolio currently includes nVidia, Google, Microsoft, and Rogers. MSFT and RG are slow slow slow but I'm curious where they will end up a year from now. nVidia and Google are making me wish that I was doing this with real money. I was really slow on the ball with grabbing Google so I didn't get it until it was at $101.48. Neverthless I've gotten a 6.39% gain in the past few days. I'm going to keep it for a few more days (depending on how well it does) but putting a stop-loss order on it at $102. This should mean a tiny profit even if the stock does suddenly plummet back down.

nVidia was the first stock I bought (got it Monday I think) and it has resulted in a 19.32% profit. If this were real cash I might break a sweat and sell it but since it's not I'm going to see what happens. I'm convinced that with the next generation of graphics having just come to PC in the form of Doom that nVidia will do well over the next few months. Half-Life 2 is right around the corner.

I know nothing about stocks though so if you invest real money based on my advice then you deserve to lose it ;)

[Sunshine]

I don't know alot about stocks, besides my uncle being a stock broker and the 2 hour radio show every sunday. But I think most people making money now have Alot of money tied up in it. The stock market is just not a good way to make cash if you arn't prepaired to inverst alot and risk losing alot, particularly right now. I hear many investers that risked it all in 2000 are now profesional gamblers, and are much happier because the stock game is all rigged. At least in poker they have to show you thier hand, in stocks they only show earnings reports, and hide the inner details of the company that indicates the impending stock drop. [which they use to thier advantage BTW]

Also terrorists have learned how to hit America where it hurts. While I'm sure they are still making plans for conventional bombs and such, there are also alot of financial attacks that are actually more effective. It only took 1 attack to drop stocks to the floor last time and it is almost inevitable that it will happen again. [sorry to break the news to you :eek: ]

Besides why would you give money to another company and then ask for a tiny return? Most people here Own a company, invest it in yourself, then at least You will have some control over wether you make money or not!

[Sirrus]

I heard Rich Dad/Poor Dad was a farce ;)

[Bluecat]

Besides why would you give money to another company and then ask for a tiny return? Most people here Own a company

Well. You're not really giving money to a company for a tiny return. You are buying a 'share' of that company. It's just that most small investors don't have enough to buy a really big share of the company. So when you buy shares, you do actually own a company, or at least a bit of it.

Most people here Own a company, invest it in yourself, then at least You will have some control over wether you make money or not!

Of course, if you look at what the really big companies do, they invest in other companies by buying a controlling interest in them. Or by buying them out completely. Microsoft are (in)famous for buying smaller companies in order to own their product (or remove competition) but lots of other companies do this as well. By buying controlling interest in another company you will also have control over making money from it!

[Bluecat]

I heard Rich Dad/Poor Dad was a farce ;)

Yeah, I read that too! :p