I'm new to this concept of stocks. But it seems to me like a huge gamble. Isn't it where you put money on something that you think will earn a lot of money and hope for the best? Thoughts?
You own a piece of the company. Stocks that have a consistent record of making money often give out checks to their investors at set time points. These are called dividends.
Basically, if you own a stock you are betting that the company will be making money and that people in the future will think that the stock is valuable.
Also, think long term and buy solid companies that let you reinvest your dividends to buy more shares.
Mt uncle complained every year about getting company stock for Christmas and bitched and moaned but just reinvested because my dad suggested it.
The stock was worth 1.2 million on his death. My aunt had no idea.
Gamble long term and you'll always lose...the house always wins. Buying & holding stocks, on the other hand, has historically returned an average of around 8-10% a year. Big difference.
The markets are volatile so you have to have a strong stomach if you want to buy individual stocks. You are often better off making regular monthly purchases of an an aggregated index fund. My advice from the last couple of cycles is to take money off the table when you see you have major profits, especially if it's in a retirement fund. But you should not invest in individual stocks without doing research.
I made $40,000 off 100 shares of a tech stock I bought in the booming '80s for $1,500. It would have been $80,000 had I sold it a the right time.
And if I had reinvested the profits in Apple or Microsoft I'd be a multi-millionaire now. I lived off that money instead, and now I'm surviving on a pension.
The capitalist landscape always changes and it takes some luck to ride a wave.
The "Stock Market" is a casino in which most people eventually lose everything.
The deals are thru inside players, even though it is officially illegal, it happens all the time.
Yes, I worked in the securities industry for years.
Riiiiiiiight R7. You'd have to be an amazingly horrific investor to lose *everything* in the stock market.
One word: Plastics.
r7 is full of shit. Buy into a well diversified index fund, like Vanguard's total stock market index fund.
Better yet, google boglehead forum and do some reading. You need to spend a little time and learn the basics.
Best of luck to you & goof for you for getting started.
Be careful and always think, why people give certain advice to you.
r11 is right. If you are using a "financial advisor" and be sure you understand how they are paid. If they get a commission, run! There is too much of a conflict of interest on a commission based sale.
"Retail" clients are known as lambs for the slaughter.
This advice is perfect:
"Buy into a well diversified index fund, like Vanguard's total stock market index fund.
Better yet, google boglehead forum and do some reading. You need to spend a little time and learn the basics"
Also check out the 3-fund portfolio at the Boglehead site.
OP....did you graduate high school?
No wonder the poor stay poor.....
If you read that boring thing called the "prospectus" the funds send out every quarter, you can get a better idea of when to sell.
That's how Warren Buffett started - and apparently he STILL reads that stuff.
Boring is good. Sexy can lead to ruin (sorta like any relationship). Have mostly boring stocks that nobody ever talks about - utilities, consumer goods and maybe one or two "sexy" stocks - tech, real estate.
Warren Buffet used more insider information than the NSA.
Stop glorifying these financial predators.
Walmart. You'll never lose.
Proctor & Gamble is another sure-win.
Actually the stock market and real estate market over time are strikingly the same.
When you own stock, you own a share (or shares) in a publically held company. In theory, when the company does well, the value of that company (the value of your shares) increases and visa versa. Trouble is that many factors now-a-days enter in the value equation.
Investing in stock is what is called making an equity investment- as opposed to buying bonds, which is debt investment. That is to say, you are lending money to some entity (corporate or gov't) with a promise to be paid back (short or long term bonds). You are paid interest on that loan as well. And when bonds are traded, their base value can vary. Some types of bonds offer tax protection like municipal bonds because they presumably are for public works. Their interest is not taxed. Tax on stock dividends like capitol gains is at 15% now I believe.
The stock market is not so much gambling as it is taking measured risk- know what you are buying and for how long you want to own what you buy. I have been in the stock market and owned real estate pretty much my entire life (directly or indirectly e.g. family trust). In total (I am 59) I have done quite well from both. Never ever sell anything when the markets crash if you can help it. Buy when the markets are low (undervalued stock and real estate), and sell only when times are good. Problem is you have to be able to follow these basics. Thus make sure you have a job if you are not so wealthy that (the vast majority of people) that your dividends and interest returns provide enough.
Time is your friend when you invest. Best way to invest in stock is via an index fund (least costs) and do so long term. Only invest short term what you can afford to lose, or only invest on a tip speculatively that which you can afford to lose. If you gain, good for you. But "gamble" on winning in the long term. I always have. These strategies are not mine rather a very smart father (investment banker now 93 retired) among many other savy investors and:
Buy Andrew Tobias's The Only Investment Guide You Ever Need. Read it, takes its advice if you can afford to invest, and all will be well. It's an easy to read and even funny short book that will explain all of this and much more if you care to learn more complicated investments (derrivatives etc.)
R20 You do realize that you lost about 95% of the people that are on this site in the first sentence.
Most of these people expect the government to take of them.....
Like the stock market is covered in high school, R16.
"Most of these people expect the government to take of them....."
What? Is English your first language?
Can anyone recommend some other good books for those new to the stock market?
Believe it or not: The complete idiot's guide to stock investing is pretty good
Stocks are amazing, but only if you stick with them. I actually have one which I bought 40 years ago (and have accumulated much more since, a bit at a time,) which pays a dividend which is now six times more a year than the original purchase price of the stock. (Splits and price rise)
You can also lose it all (see: Washington Mutual)
R22 Now read this very slowly (and a second time if necessary).....when I asked the OP if he graduated high school, it wasn't in reference to him learning about stocks in high school (although I actually did), it was in reference to the simplicity (being nice here) of his question.
I like r20's response. The markets are coming back, which draws new investors. But the boom cycles are short. Dividend stocks are great for retirement funds because you do not have to report capital gains.
Stocks might surge. Maybe.
The bear market for bonds, though, will be fierce.
Detroit is defaulting. Puerto Rico is going to soon. Illinois is on the brink. Chicago is a disaster.
3 California cities filed this year!
Look at the link. The reporter is pretending like this is "no big deal, shit happens" while the reality is that such big defaults are just the start.
I feel sorry for people that listen to the MSM and believe the bullshit they spew.
(Cue the Krugman worshipping "the government is always right" troll)
[quote]Ed Yardeni notes that weekly data from the Investment Company Institute shows that $66B flowed out of bond mutual funds during the past 5 weeks - July 3. But of even more significance, only $300M flowed in!
This is a historically HUGE move out of bonds.
No 5 week period in modern (aka since...ever) history has seen an outflow of this size.
Most of it was institutional, meaning the big boys are panic selling their bond portfolios. Anyone selling today is selling at a loss unless they've had them for...well, for-never. They're selling at a loss. The bloodbath is coming.
I'm just bumping this for 2 reasons-
1-Maybe the (few) economically savvy people here will take this as a warning and move ALL of their money out of ANY bond postions (I started to leave that as "bong positions") and be prepared for an even faster rise in interest rates.
2- This should prove, once and for all, that Paul Krugman is a fucktard shill for the government/Federal Reserve and deserves all the scorn heaped on him for not seeing this rout coming.
[quote]And if I had reinvested the profits in Apple or Microsoft I'd be a multi-millionaire now. I lived off that money instead, and now I'm surviving on a pension.
I know your pain, Brother. I bought Microsoft right after it went public. I made a quick 30% and sold it, laughing all the way to the bank. It's been years since I did the math, but if I had held it I would be retired and living on the dividends right now.
Frozen concentrated orange juice futures are where it's at.
We just made 1000 euros on paper, overnight, on this news!
Remember that it's safer to view stocks as a long term investment. Don't panic and sell low at the first sign of trouble, don't cash them in for frivolous reasons. Reinvest your dividends if you can and try for long-established too-big-to-fail companies. If you're investing in start-ups or other risky types make sure you never spend more than you can afford to lose.
The key to understanding the stock market is to understand where demand is coming from, namely low interest rates, the rich with lots of money and no place to park it, and the middle class sold on a fake promise of retirement. There is also a little added value because many think the GOP will privatize social security, adding huge demand to the stock market and forcing prices up. But that is a long way from happening. If we start taxing the rich as we should and paying the workers more, stocks won't go up. Indeed, in most countries over the long term, they don't go up. They've gone up in America because demand has been put on them (mutual funds, IRAs, 401Ks from time to time).
Thanks r35, you have just given us an explanatia why European stocks have relatively high dividend yields but only modest capital gains, almost the opposite of USA stocks.