• We’re currently investigating an issue related to the forum theme and styling that is impacting page layout and visual formatting. The problem has been identified, and we are actively working on a resolution. There is no impact to user data or functionality, this is strictly a front-end display issue. We’ll post an update once the fix has been deployed. Thanks for your patience while we get this sorted.

A complete newb when it comes to stocks curious about buying

A

archcommus

Diamond Member
I'm about to graduate college and have never bought stocks before. I usually don't even think about it. However yesterday my roommate approached me and said he wants to buy AIG right now since he thinks it's very unlikely they will go under with all the money that's been pumped into them recently and since they provide insurance for 100,000 companies, etc. The stock's low was around 33 cents and it sits at 50 cents right now. Now I know you shouldn't dabble in what you don't understand, and penny stocks are always a risk, but if you agree with that feeling about AIG, wouldn't now be a good time to pick some up? If you feel it's definitely possible that they'll go under like GM, etc., please tell me why. Or if you have another reason you think I'm dumb for considering this, tell me that too! Thanks.
 
You'll get a thousand different opinions when it comes to stocks. Best bet is to find someone you can trust in real life who knows what he/she is talking about, and ask him or her.
And even then, it's possible to get seriously messed up.
 
Do you know something about AIG that the rest of the market doesn't? If there was a high probability that the stock was going to bounce back big, the price now would already be higher to reflect that.
 
If you don't understand stocks then for the love of god don't put any more money in it than you can afford to completely lose. At this point treat it like gambling and that all money you put in has a good chance of going away.
 
Originally posted by: Special K
Do you know something about AIG that the rest of the market doesn't? If there was a high probability that the stock was going to bounce back big, the price now would already be higher to reflect that.
Click to expand...

Sounds to me like it's just friends talking (and dreaming) about hitting it big with companies they think won't tank. I doubt they know any more about the company than you or me.
 
I wanted to jump into stocks when I was 19/20 to be a big boy. Thank god I was smart enough to research brokerage options, yet be too lazy and pussified to actually go to the bank and open an account. I did not have a stable income then, and had no tolerance for risk. Now that the markets are turd, I'm glad I was a pussy.

I bought my first bond mutual fund to get a taste last month, and I'm fluctuating between -1% to -3%.

If you don't get it, don't play it. Some guy in my building said it best in the elevator 2 weeks ago: "I don't gamble except in the stock market." Your friend is a pretty good representation of stock buyers, buy something when it's down, hope it explodes and turn rich from nothing.
 
Yeah we definitely don't know any more than your average semi-informed individual, and the stock price is definitely so low for a reason: no one expects anything good to come of AIG any time soon. Our line of thinking was, the price is low due to current and short-term future bad predictions. We would hold on to it for at least a few years, so it comes down to whether you expect them to fold or not, which we're thinking no. Not looking to "hit it big" really, I would only put in about $1000 which I could afford to lose, and which wouldn't make me a millionaire. The current opinions say not to do it, but again, who expects AIG to fall? The government seems super determined to keep them viable.
 
There is no reason gov't intervention in AIG would protect common shareholders. Quite the contrary; severe share dilution is all but inevitable.
 
Originally posted by: archcommus
The current opinions say not to do it, but again, who expects AIG to fall? The government seems super determined to keep them viable.
Click to expand...


The government may keep them viable, but that doesn't mean that current stockholders won't get wiped out in the process.
 
You might as well go to Vegas instead of betting it all on a single company based on no real information.

With a stock index mutual fund or ETF (exchange traded fund) you are betting on a large number of companies, 500 of them for an S&P 500 index fund. The potential payoff is lower, but the risk is also much, much lower than picking one stock.

Do you have some emergency money in high-interest savings like INGDirect.com? You should probably do that before playing in the stock market.
 
Invest in an index fund or a 2050 fund. The funds set for a retirement year (2050, 2040, etc) have a mix of higher risk/higher reward stocks and then lower risk bonds. When you're young and have longer to ride out any issues in the market it will be heavily in stocks. As you get older and closer to retirement the fund will automatically shift to safer fixed income investments like bonds. You don't have to do a thing. There are some people here who say you can do better and you probably can if you do all your homework and watch your investments like a hawk. These retirement date funds are good for the people who don't know enough to make good decisions.
 

on a good day, it's like gambling.

i wouldn't buy AIG unless i had insider info - and then it would be illegal.

i think you need to watch a market for about a year before you put any money into it, and then, it's wise to do it a chunk at a time - not all your money at once.

it's real easy to get carried away and THINK YOU'RE GONNA GET RICH - woohoo !
 
Thanks everyone. I think you've persuaded me to stay away from it. The key things are the potential stock dilution as well as shareholders being completely wiped out in a reorganization. Both could result even if the government doesn't let them completely fold. I do have some money in ING Direct right now, although it's not very "high interest" anymore! Currently at 1.65%. 🙁 I would've taken the money from there, but you are right that AIG isn't a sure thing even with all the federal intervention.

So the discussion shifted a bit to general investment strategy. Might as well talk about it now since in less than two months I'll be starting my full time job and beginning my 401k and all that. Will these index funds/ETFs/2050 funds be packaged options on my 401k forms? Or are those separate things I can do in addition to 401k contributions? Also everyone discusses the Roth IRAs all the time - how does that fit into the picture? My employer will match 4% of my income into my 401k if I contribute 5%, so I'm thinking I should put 5% in there, 5% into a Roth IRA, and then anything beyond that save for other things like a house instead of retirement.

Thoughts? You've all been very helpful. 🙂
 
Putting 5% into the 401k is the right move, 20%+ in tax savings + 80% employer match = instant 100% gain on your investment. There's no way to know what stock funds your 401k will offer but even second-rate funds are great with that instant head start.

After the 401k the next step is indeed a Roth IRA. The IRA limits are not tied to your income they have a fixed limit, currently $5,000 a year (I think) or your earned income for the year, whichever is lower.

If you had a part-time job last year you could still make a Roth IRA contribution before April 15 for 2008 up to the limit, even if you've filed your taxes since Roth uses after-tax money. You don't have to wait until the end of 2009, you could put in (say) $2,000 for 2008 (if that's all you earned) plus another $2,000 towards your 2009 limit.

You can start a Roth IRA at most brokerages, or at a mutual-fund company like Vanguard or Fidelity. There's often a minium starting contribution of $2-3,000 but the fund choices are better at Vanguard.
 
Contribute at least enough to the 401K to get all the match. You can't leave free money on the table. After that, a lot of people say to max out the IRA, and then maybe allocate more for the 401K if you have enough money.

Your company 401K will have a selection of stock funds, bond funds, money market, etc. for you to choose from. The reality is that most of us get a small, mediocre selection of crappy and crappier funds. You'll get killed on expenses on a lot of those funds, you have to look at the fine print. 1% here or there sounds like nothing, but plug it into a retirement calculator and you'll see that it can cost you hundreds of thousands over your lifetime. Generally a market index fund will have a fairly low expense ratio.

You have a lot more freedom with your IRA money. I like Vanguard too, they keep the expenses down.
 
Forgot to add, you're on the right track by funding a real, diversified retirement first. If there's money left over to gamble with, then maybe you go to the casino or bet it on the black hole known as AIG.
 
Originally posted by: Special K
Do you know something about AIG that the rest of the market doesn't? If there was a high probability that the stock was going to bounce back big, the price now would already be higher to reflect that.
Click to expand...

Price doesn't always reflect reality in the market by any stretch. Should he find a stock that's much higher like $25 that looks healthy to bet on to go up? That doesn't automatically translate.

Its all about risk vs. reward, and $.50 is plenty cheap enough for an individual to take an affordable shot at it. Since most think its going to go under or the dilution affect will have practically the same affect, the risk is most likely very much already built into the low trading price.

A relevant question is tho, is aig the best of the bailed out companies who's stocks have gotten pounded lately to take a shot at, and that I have no opinion because I don't follow any of them.
 
..if you don't have the stomach for negative/positive volatility and a well thought out time horizon, stick with money markets or other guaranteed investments.
 
AIG common stock is worth $0. The trading price right now is just acting like an option with strike price $0 with no expiration date.
 
Originally posted by: Bignate603
Invest in an index fund or a 2050 fund. The funds set for a retirement year (2050, 2040, etc) have a mix of higher risk/higher reward stocks and then lower risk bonds. When you're young and have longer to ride out any issues in the market it will be heavily in stocks. As you get older and closer to retirement the fund will automatically shift to safer fixed income investments like bonds. You don't have to do a thing. There are some people here who say you can do better and you probably can if you do all your homework and watch your investments like a hawk. These retirement date funds are good for the people who don't know enough to make good decisions.
Click to expand...

So far my "Target retirement 2050" fund has lost me about $17,000.
 
You must log in or register to reply here.

TRENDING THREADS

Back
Top