Stock Newbie

ch33zw1z

Lifer
Nov 4, 2004
39,797
20,393
146
Looking at getting into buying stock.

Here's the scenario. My employer offers a stock program through www.computershare.com

computershare seems pretty good overall, and I'm interested enough in it to consider other stocks too.

I'm looking for any thoughts about something like computershare.

overall, starting to get very interested in building long term wealth, more or less to secure wife and I, and/teach kiddo's eventually.

Any help for this newbie is appreciated.
 

dullard

Elite Member
May 21, 2001
26,078
4,729
126
I don't know a thing about ComputerShare.com. But I can give general advice.
1) Maximize any free benefit from your employer. Free is free and is the best deal you will ever get in your life because in most cases it is many thousands of dollars absolutely free each year. Yet, a large amount of people who qualify pass it up.

2) Beyond whatever you need to do to get free stuff from your employer, you need to be quite careful about fees. No one in the world can perfectly predict the future and say that stock A will do better than stock B. But everyone in the world can say that stock A has such a high fee that it is unlikely to do well enough to do better than stock B. These could be fees to buy the stock, fees to sell the stock, and/or fees to hold the stock.

3) Fees over about 0.5% should be looked into very carefully. An annual fee of 1% to 2% is common. It doesn't sound like much. But take 2% out every year for 40 years (when you are likely to sell it to fund your retirement) means that the fee usually adds up to be more than 50% of your total gains. You took the risk with your money, and the people getting the fees get the profit for doing next to nothing. If instead you had a 0.2% yearly fee for 40 years, the fees are only about 7.5% of your total gains. Do you want to give up half of thousands/millions of dollars or 7.5%?

4) For that reason, many, many people recommend Vanguard. Low fees. Low fees aren't a guarantee that you will do well, but high fees are a guarantee that you will do poorly. Vanguard fees are about as low as you can get.

5) Also, consider mutual funds instead of individual stocks. Mutual funds let you own a bit of every company. That way if a company is an unexpected smash hit, making a killing, you own it. On the other hand, if a company goes bankrupt, you only own a tiny amount since your money is spread around everywhere, so one company going bad doesn't really affect you. It is the best of both worlds.

6) See what you qualify for that helps save taxes. Deferring tax, or avoiding tax altogether, makes investing easier (you can buy and sell when you want rather than worrying about tax consequences) and you can gain a lot more money without forking over the money to the IRS. That generally means:
6a) Do a company retirement plan just enough to get the free money from your employer.
6b) Next, invest in a Health Savings Account, if you qualify,
6c) Next invest in a Roth IRA (possibly a traditional IRA).
6d) Next finish out your employer plan, if possible.
6e) If any money is left, buy through a taxable account.
 
Jan 25, 2011
17,097
9,581
146
Looking at getting into buying stock.

Here's the scenario. My employer offers a stock program through www.computershare.com

computershare seems pretty good overall, and I'm interested enough in it to consider other stocks too.

I'm looking for any thoughts about something like computershare.

overall, starting to get very interested in building long term wealth, more or less to secure wife and I, and/teach kiddo's eventually.

Any help for this newbie is appreciated.

Computershare is a transfer agent, not a broker. So you're limited in your options. It can give you a benefit of discounted reinvestment of dividends but beyond that it's not going to be much help. They are basically the company that manages the stock on behalf of the company.
 

jlee

Lifer
Sep 12, 2001
48,518
223
106
General investment priority guidelines:

1) Max 401k to employer match
2) Max HSA contributions (if eligible) via payroll deduction (to avoid FICA taxes)
3) Max Traditional IRA (if eligible)
4) Max 401k to IRS limit
5) Max Roth IRA if ineligible for Traditional IRA
6) Buy low cost index funds (e.g. Vanguard Total Stock Market Index, etc)
 

zinfamous

No Lifer
Jul 12, 2006
111,866
31,364
146
A: like Dullard says, maximize free employee money. Nothing is better

B: No one really knows anything about what a stock will or won't do. Not really. So go hog wild.

Oh, is that a brokerage company that also offers access to mutual funds? If so, and you just want security, piece of mind, and no effort, do like jlee said and bet it all on VTSAX (if offered--or a comparable low fee total stock market index fund).

..and ride the Trump depreciation wave to cheap costs now through the chaos, and huge profits later. :D
 

ch33zw1z

Lifer
Nov 4, 2004
39,797
20,393
146
I had a couple questions on the 401k thing. I had been contributing the max for about 7 years, I had to stop due to health care costs eclipsing disposable income, for lack of a better phrasing.

I am reviewing the plans now, and I've been dumping everything into a moderate 65%bonds/35%stocks fund, and have been earning ok some years, not as much others.

I feel like, at 36 years old, I should change to the aggressive fund 10%bonds/90%stocks instead, and allocate 100% of it to that for the next 10 years.

thoughts? Forgive my ignorance in this matter, and after reviewing this stuff....I'm not sure anyone can make an educated guess without reviewing the funds themselves.
 

zinfamous

No Lifer
Jul 12, 2006
111,866
31,364
146
I had a couple questions on the 401k thing. I had been contributing the max for about 7 years, I had to stop due to health care costs eclipsing disposable income, for lack of a better phrasing.

I am reviewing the plans now, and I've been dumping everything into a moderate 65%bonds/35%stocks fund, and have been earning ok some years, not as much others.

I feel like, at 36 years old, I should change to the aggressive fund 10%bonds/90%stocks instead, and allocate 100% of it to that for the next 10 years.

thoughts? Forgive my ignorance in this matter, and after reviewing this stuff....I'm not sure anyone can make an educated guess without reviewing the funds themselves.

Yes, that's what I do. But I'm more ~98% stocks. There is some talk about the potential of trade war on the horizon or, at best, a sharp and extended contraction in the market (it is overdue), so it might be prescient to convert those shares into 100% fixed return annuity if you have one in that package. Maybe, or maybe not. who knows. In the end, for you and I, (pretty much the same age), we shouldn't be too concerned about this momentary lapse of reason in the world market. It will eventually keep going up, steadily.

So, you can more than likely safely keep money in stocks, all the while watching them plummet, confidently buying more and more at even cheaper prices and so greater returns later (assuming mutual funds). The benefit of going to an annuity for the short term is preserving that current value and avoiding sharp dips, if you're the type that is bothered by this. You can then re-invest in your preferred stock mutual funds when it starts climbing, re-obtaining all of your shares at a much better cost. ....but that's market timing. No one can do that.

As for me, I don't yet know what I'm going to do. I like the idea of a temporary hold with a fixed rate, but I'm probably too lazy to push those 4 or 5 buttons to make that happen. I also have no idea what I'm doing.
 

DaveSimmons

Elite Member
Aug 12, 2001
40,730
670
126
Low-expense stock index mutual funds or ETFs (index based not "actively managed") are usually the best choice for a new investor. Trading individual stocks is a bad idea for most people, it's gambling not investing.

An S&P 500 index fund is a good choice, so is a Target (year) fund from Vanguard.com.

Buy and hold. Do not sell when the bubble pops, you're too late. Ride it out and you'll do fine. That's actually a good time to keep putting money into stock funds through your 401k since you're buying at a discount.
 

Red Squirrel

No Lifer
May 24, 2003
70,677
13,837
126
www.anyf.ca
I've recently gotten into stocks, not really that deeply into it and I would not say I know what I'm doing at this point, it can really be a full time job if you want to do it "right". I kinda gamble and go with gut feeling and news etc.

Also it seems you want to do it for wealth, if that is your primary goal you are probably better off with something through a financial institution like GICs. Stocks are pretty much gambling especially if you're just doing it on the side. Personally I see it like buying lotto tickets. I put a bit of money towards it in hopes I get lucky, but I don't count on it to retire on or anything. If I end up making a killing with it, it's money that would go towards buying something nice.
 

DaveSimmons

Elite Member
Aug 12, 2001
40,730
670
126
I've recently gotten into stocks, not really that deeply into it and I would not say I know what I'm doing at this point, it can really be a full time job if you want to do it "right". I kinda gamble and go with gut feeling and news etc.

Also it seems you want to do it for wealth, if that is your primary goal you are probably better off with something through a financial institution like GICs. Stocks are pretty much gambling especially if you're just doing it on the side. Personally I see it like buying lotto tickets. I put a bit of money towards it in hopes I get lucky, but I don't count on it to retire on or anything. If I end up making a killing with it, it's money that would go towards buying something nice.

In the US, that would be stock index mutual funds or ETFs, and they can be purchased from brokerages like Schwab, or directly from the companies like Vanguard. The most used index is the S&P 500 (500 largest US companies) or a similar "large cap" (capitalization) fund.

The long-term (decades) risk is very low for a US large-cap index. Before you'd lose your money we'd need to have entered a period of global financial chaos, at which point guns and canned food are the only good investments. Short of a Mad Max world you'll do fine with them.
 

Exterous

Super Moderator
Jun 20, 2006
20,577
3,764
126
I had a couple questions on the 401k thing. I had been contributing the max for about 7 years, I had to stop due to health care costs eclipsing disposable income, for lack of a better phrasing.

I am reviewing the plans now, and I've been dumping everything into a moderate 65%bonds/35%stocks fund, and have been earning ok some years, not as much others.

I feel like, at 36 years old, I should change to the aggressive fund 10%bonds/90%stocks instead, and allocate 100% of it to that for the next 10 years.

thoughts? Forgive my ignorance in this matter, and after reviewing this stuff....I'm not sure anyone can make an educated guess without reviewing the funds themselves.

At 36 65/35 is generally considered overly cautious given that you are likely 20+ years from retirement and the rolling 20 year ROI on the stock market is universally positive. Even the 10 years are pretty dang good. Throw in a little diversification and the 10 year portfolios returns look just fine. A very general rule of thumb is your age in bonds up until 40-60% depending on your views, account balance, time frame and risk tolerance. There are lots of nuances to % in bonds so that might be an area to look into to find what suits your situation. There are also a variety of 3,4 and 5 fund portfolios that are generally very very good but that might leave some $ on the table for the sake of simplicity and ease of management.

http://www.businessinsider.com/stocks-positive-returns-after-20-years-2015-11

Overall I thought the following thread was an interesting discussion regarding the marginal utility of wealth, stock\bond allocation, and advocate for intermediate bonds, safe withdrawl rate and country bias and includes inputs from several financial advisers and a few financial book authors.

https://www.bogleheads.org/forum/viewtopic.php?f=10&t=206636&start=100

One thing you need to consider when making your allocations is what is your risk tolerance. We're in one of the longest bull runs ever right now so its pretty easy to say "Yeah I can handle a downturn". But when the news is hammering doom and gloom at you every single day 24/7, you see houses being foreclosed, see 25% of your coworkers laid off along with 1.5 million other people in 3 months, banks fail, insurance companies fail, another round of layoffs at your company and supposedly safe and relatively liquid accounts be frozen with no end in sight what do you do? Can you sleep at night watching 50% of your hard earned wealth continue to evaporate over years?

Thats essentially what happened in 2007-09 and it caused many who said they wouldn't sell at the bottom to do exactly that. For some people its better to have a slightly higher bond\TIPS\Treasuries allocation to be able to get some sleep over a 2 year period and\or not sell stocks during a downturn (Other than for re-balancing depending on your views\goals)

Here's a pretty good thread about what people went through and even has links to threads created during that timeframe where people were struggling with these issues
https://www.bogleheads.org/forum/viewtopic.php?t=207809
 
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