08-17-2007, 05:42 AM
Stock tips are a bad idea in part because the tipper doesn't remember to tell the tippee when his/her research indicates it's time to get out. I'm a buy and hold kinda guy, but nothing lasts forever, and at some point you're going to want to sell.
Buy what you know. If you don't know, do the research. Here's a fun and easy way to get started. I've suggested this to many people over the years and alway seem to get positive feedback:
Read a few financial magazines or go online and find a highly rated and widely diversified mutual fund company. Pick one whose web page is easy to navigate, has low fees and none for tranfers within the company, allows phone and on-line transactions, and doesn't tightly restrict transaction numbers. Open an account with a deposit into some milktoast fund like a money market, then go shopping. Get onto their web page and read a little about each of the funds. There will be dozens of them. You'll be looking at more than just past performance - things like the manager's credentials, investment goals, objectives and strategies, etc. Determine what YOUR investment goals are, and compare that to theirs and to the degree of risk you're willing to take (remember, risk is your friend). Narrow it down to a few, then get into those few in depth. Decide how diversified your portfolio is going to be - that is to say how many funds are you going to own. Mutual funds are somewhat diversified by their nature but also usually diversified by category. Learn exactly what stocks make up each fund and how they've done since the inception of the fund. See if you can identify a trend and ask yourself based on everything you know if you think that trend will continue. I'm talking politics, sports, weather, national and world events and economies, everything. Past performance is one indicator, but if the fund has done well for short periods and you can't figure out why, don't invest in it. On the other hand, when you find something you like, something that really does make sense to you, pick up the phone and buy it. (Take deep breath here)
Once your portfolio is established, you'll want to watch it work. It's a living thing and needs to be nurtured. Look up the fund's performance by symbol and add that page to your favorites (it'll refresh depending on how your computer is set up). That way you're never more than a click away from seeing how it's doing. I check most of mine every day. When I see one start to slip, or one outperforming the others, I find out why. If I see a trend developing I adjust my portfolio accordingly. If you see one component of your fund (a stock) doing particularly well, and you think, based on your research, that trend will continue, you can always open a stock account and invest more heavily in it.
Most mutual fund companies limit the number of times per month or year you can reallocate your portfolio, particularly for international funds. In and out of the fund is called a "round trip". This is done to discourage market timers. So, research up front is all important. But, when you see things moving in a different direction, by all means fix it.
Investing in things you have little or no control over isn't for everyone. I'm lucky in that it's one of my hobbies (and I really enjoy it), but also my income. It has a tendancy to open your eyes to things you otherwise would not have seen. Good luck and have fun.
Buy what you know. If you don't know, do the research. Here's a fun and easy way to get started. I've suggested this to many people over the years and alway seem to get positive feedback:
Read a few financial magazines or go online and find a highly rated and widely diversified mutual fund company. Pick one whose web page is easy to navigate, has low fees and none for tranfers within the company, allows phone and on-line transactions, and doesn't tightly restrict transaction numbers. Open an account with a deposit into some milktoast fund like a money market, then go shopping. Get onto their web page and read a little about each of the funds. There will be dozens of them. You'll be looking at more than just past performance - things like the manager's credentials, investment goals, objectives and strategies, etc. Determine what YOUR investment goals are, and compare that to theirs and to the degree of risk you're willing to take (remember, risk is your friend). Narrow it down to a few, then get into those few in depth. Decide how diversified your portfolio is going to be - that is to say how many funds are you going to own. Mutual funds are somewhat diversified by their nature but also usually diversified by category. Learn exactly what stocks make up each fund and how they've done since the inception of the fund. See if you can identify a trend and ask yourself based on everything you know if you think that trend will continue. I'm talking politics, sports, weather, national and world events and economies, everything. Past performance is one indicator, but if the fund has done well for short periods and you can't figure out why, don't invest in it. On the other hand, when you find something you like, something that really does make sense to you, pick up the phone and buy it. (Take deep breath here)
Once your portfolio is established, you'll want to watch it work. It's a living thing and needs to be nurtured. Look up the fund's performance by symbol and add that page to your favorites (it'll refresh depending on how your computer is set up). That way you're never more than a click away from seeing how it's doing. I check most of mine every day. When I see one start to slip, or one outperforming the others, I find out why. If I see a trend developing I adjust my portfolio accordingly. If you see one component of your fund (a stock) doing particularly well, and you think, based on your research, that trend will continue, you can always open a stock account and invest more heavily in it.
Most mutual fund companies limit the number of times per month or year you can reallocate your portfolio, particularly for international funds. In and out of the fund is called a "round trip". This is done to discourage market timers. So, research up front is all important. But, when you see things moving in a different direction, by all means fix it.
Investing in things you have little or no control over isn't for everyone. I'm lucky in that it's one of my hobbies (and I really enjoy it), but also my income. It has a tendancy to open your eyes to things you otherwise would not have seen. Good luck and have fun.