Stock market trading

[burnedout]

Originally posted by: Hector13

Originally posted by: wyvrnA friend of mine invested in Enron and lost it all, he also invested in another company that went belly up. All in all I think he lost $7000, even though the companies looked fine at the time.

you should never invest in single stocks (unless you have some sort of material inside info or something). Always buy broad market funds (preferably index funds) unless you like to gamble your money. Trust me, you have no chance at consistently beating the "street" if you start trading individual names.

New investors should invest in index mutuals. However, if one performs adequate research, pays attention to their portfolio and reinvests dividends, they can "beat the market" with very little churning or turnover. I've never looked at it as "gambling money". Have always viewed investing as buying into a company.

The figures below are reposted from another thread: I'll post the total cumulative and average annualized, to include other issues I've held longer than 10 years (PG, HDI, MCD), after work tonight. And I know of other long term, "small" investors who have had greater returns than I because they bought into MSFT, Amgen, etc.

For comparison,(see notes):

Issue----Total Cumulative Return, 10 years

VFINX-----125% (Vanguard 500 Index Fund)
-------------------
WEN--104%
PFE----246%
BOBE----70%
EMCI---202%
NCC----269%
RBNC---591%
ASRV--(-40%)
LMT------207%
SKYF-----172%

1. All issues listed above purchased between May 1993 - Feb 1996 and held in DRIP accounts via book entry.
2. PFE originally purchased as UPJ. Merged to PHA, merged to PFE
3. RBNC originally purchased as CFB, sale of CFB reinvested as DNFC, merged with RBNC
4. ASRV and SKYF originally purchased as UBAN.
5. LMT originally purchased as Comsat Corporation
6. This section does not include KEI. Originally purchased between May 1994-June 1996. Sold Aug of 2000 after 1923% gain.
7. Issues held more than 10 years not included in comparison.
8. Total weighted (for amount invested), cumulative return = 198%
9. As of 6/16/03

 

[draggoon01]

Originally posted by: draggoon01
what's the best way of investing in index fund?

i always intended to do that, but never got around to reading up on it. there's various fees you have to consider right?

ideally, i could just put away money into the fund whenever i have some to spare and not have to worry/think about it

anyone?

 

[Hector13]

Originally posted by: burnedout
New investors should invest in index mutuals. However, if one performs adequate research, pays attention to their portfolio and reinvests dividends, they can "beat the market" with very little churning or turnover. I've never looked at it as "gambling money". Have always viewed investing as buying into a company.

The figures below are reposted from another thread: I'll post the total cumulative and average annualized, to include other issues I've held longer than 10 years (PG, HDI, MCD), after work tonight. And I know of other long term, "small" investors who have had greater returns than I because they bought into MSFT, Amgen, etc.

For comparison,(see notes):

Issue----Total Cumulative Return, 10 years

VFINX-----125% (Vanguard 500 Index Fund)
-------------------
WEN--104%
PFE----246%
BOBE----70%
EMCI---202%
NCC----269%
RBNC---591%
ASRV--(-40%)
LMT------207%
SKYF-----172%

you also need to remember that return is not everything, you need to look at how risky your investments are. I looked up just a few of the names above on yahoo over the past 10 years and did some quick excel work to get the following (I don't know if the table will come out looking okay):

______Months__Total Return__Monthly Return__Monthtly Risk___IR
VFIVX_124_____239.55%_____0.71%________0.41%________1.75
PFE___124_____652.08%_____1.52%________0.65%_______2.35
EMCI__124_____347.91%_____1.01%________0.76%_______1.33
NCC___124____445.18%_____1.21%________0.62%________1.96
LMT___124_____282.69%_____0.84%________0.77%________1.10
SKYF___124____120.96%_____0.15%________0.87%________0.18

if you look at the information ratio (return over risk), only two of these investments actually beat the SPY (I used montly return and risk here). Even though the other had better returns, they did not "beat the market". I don't know what weight you had in each name, but I am willing to bet that if you look at the risk and return of your real portfolio over this time period, you probably had an inferior IR vs. the market. In other words, you would have been better off borrowing money and investing in the market if you wanted the same returns that you had gotten with your portfolio, but with lower risk.

 

[Hector13]

Originally posted by: draggoon01

Originally posted by: draggoon01
what's the best way of investing in index fund?

i always intended to do that, but never got around to reading up on it. there's various fees you have to consider right?

ideally, i could just put away money into the fund whenever i have some to spare and not have to worry/think about it

anyone?

I am not sure what your exact question is, but if you do a quick google search, you will find many "intros" to mutual funds (and their fees), including:

Invest-faq.com: Mutual Funds - Basics
Fool.com: A Grand, Comprehensive Overview to Mutual Fund Investing
MsFiscallyFit.com

and many others.

If you are getting an index fund, though, the fees won't be too bad. Your safest bet is probably something that indexes the S&P 500 (500 largest companies in the country) or whilshire 5000 (almost all stocks in the US, closer to 8000 than 5000, I believe). Vanguards VFINX is probably the best known SP500 index fund.

If, for some reason, you have a "view" on small cap vs. large cap, you can play around with Russell 1000 (large cap names) or Russell 2000 (small cap stocks) funds.

You can also get ETFs (they are like mutual funds but trade like stocks) that can index any of the above or can be even more focused (like holding just stocks in the biotech sector). You can read about ETFs here

 

[ultimatebob]

I like Ameritrade, myself. It's only $11 a trade, you get free real-time streaming quotes, and there is no account maintience fees if you have over $2,000 in your account.

 

[Orsorum]

I prefer Ameritrade. Low cost, no maintenace requirements. I think they have a minimum account balance, but only if you go below it for a certain amount of time (I think).

 

[DaveSimmons]

Originally posted by: draggoon01
what's the best way of investing in index fund?

i always intended to do that, but never got around to reading up on it. there's various fees you have to consider right?

ideally, i could just put away money into the fund whenever i have some to spare and not have to worry/think about it

Cheapest way is probably to get shares of VFINX (S&P500 index fund) directly thtough vanguard.com. You need a certain amount of money to start with them, but I believe you can then add more shares free, while brokerage houses like etrade or schwab charge you a transaction fee for every new purchase.