Stock picking help

[noelm]

Hello folks,

I am very new to investments, have never ventured in this arena. Have been happy with CDs but now its time to get my toes wet.

The background, I make ~68k annually. DS, age 4, has a diagnosis of autism, good prognosis, still never know when and how things will go bad. Suggested by some parents to 'stock up' for his future.

I am done with building emergency fund of ~30K, now would like to invest in retirement plans (my employer does not offer one) and stocks. I am still not clear what I should start with first. Understanding stocks seems little easier than retirement funds, hence starting with them.

- Can anyone suggest me some good stocks (is it also called as blue chip stocks?) I should start going with? Apple and Google are ideal but they are too expensive for my budget. Suggestions welcome.
- If there are any utilities you use to track stock prices Or anything else related to stocks), would love to know them.
- Is there any broker that offers a facility where you put a price alert and when the stock reaches that price, it automatically purchases the number you put in that alert?
- In am considering Scottstrade as a broker. Anybody suggesting any other? I am not very clear about mutual funds yet but reading up on them, so will eventually invest in them too. So please consider it.

Many thanks in advance.

 

[frayne]

I would suggest doing a little reading and research so as to understand some basic concepts, like diversification, asset allocation, etc. Anything by John Bogle is a good read and pretty easy to follow, in my humble opinion. If you are hell bent on buying something just for the sake of buying I would steer you to an index mutual fund for starters like the S&P 500 Index Mutual funds with either Vanguard or Fidelity. As for utilities to track your investments, most brokerage institutions have software programs you can access to see how you are doing. There are also many free on line sites, like Yahoo and Morningstar that let you do the same with varying levels of sophistication. Although I do own a few stocks I am not a proponent of buying singles stocks and prefer mutual funds instead. Also since your employer does not offer any type of retirement plan seriously consider an IRA in order to get the advantage of deferring taxes on what you put into the IRA. Under the umbrella of a tradition IRA you can buy, sell, trade, stocks, mutual funds, ETFs, CDs, etc. without being concerned about the tax implications. Also look into Roth IRA advantages. Gotta run but I'm sure others will be along to offer some good advice. Good luck.

 

[MichaelB]

Noelm, sorry to hear about your son, but it is good to see you thinking now about how to help if needed later. Don't forget life insurance for yourself.

Before getting into stocks you might want to learn about investing. Here is a reading list that will help http://www.early-retirement.org/for...reading-list-with-a-military-twist-46732.html Don't worry about "military " in the title, the list is good for all of us. All of William Bernstein's books are very good.

There is no compelling need to invest this instant. If you rush into this you will only be feeding the sharks with your money. Take a few months, read and learn, ask questions, and then you can start looking for ways to invest for your future and your family's as well.

 

[Nords]

I am still not clear what I should start with first. Understanding stocks seems little easier than retirement funds, hence starting with them.
- Can anyone suggest me some good stocks (is it also called as blue chip stocks?) I should start going with? Apple and Google are ideal but they are too expensive for my budget. Suggestions welcome.
- If there are any utilities you use to track stock prices Or anything else related to stocks), would love to know them.
- Is there any broker that offers a facility where you put a price alert and when the stock reaches that price, it automatically purchases the number you put in that alert?
- In am considering Scottstrade as a broker. Anybody suggesting any other? I am not very clear about mutual funds yet but reading up on them, so will eventually invest in them too. So please consider it.

We get this question a lot on this board. You're asking for all the right reasons, but you're asking all the wrong questions. Take heed from all the people on this board who've gone before you and learned their own harsh lessons.

What you're proposing is the investing equivalent of walking on to a car dealer's lot, handing them your credit card, and asking "How much can I afford?" You'll get the answers eventually, but it'll be a very expensive and painful tuition payment.

Before you research any of those questions you're asking above, you need to educate yourself on asset allocation. In addition to the reading list, you can also start with the summary at the Bogleheads wiki. Read here: Bogleheads and then click on the "Getting started" link.

Then when you've learned about cheap index investing, you'll know that you should stop caring about the answers to the above questions. Either invest in the stock index funds on your own, or seek the help of a cheap advisor like Rick Ferri.

 

[pb4uski]

The problem with investing in individual stocks like Apple, Google, etc. is that it takes a lot of time and effort to assess the hundreds of companies out there and make wise choices. Even the professional money managers rarely beat the market and they dedicate all their time to doing that, so it is unlikely that an individual investor with limited time to pick stocks would do very well.

Most of us here prefer to invest in low cost index mutual funds that provide the benefit of diversification and generally give us a return that approximates the return of the stock market as a whole (or a targeted segment of the stock market). The Vanguard Total Stock Index fund would be an example.

I suggest that in addition to what others have recommended that you visit Vanguard's website and look at their insights on savings and investing and investing truths.

 

[David1961]

Sorry to hear about your son. I recommend you should be thinking about a good stock market index fund, instead of individual stocks. And start thinking about how much time throughout your life you will be able to devote to investments. If you want to eventually branch out and own individual stocks, it will take more of your time to research, track, etc.

 

[noelm]

Thanks everyone for your comments. I totally understand, it is not as simple as going to the store and buying milk, regular study is required. I will start working on it soon. As I mentioned in my post regarding son's condition, currently most of the time is spent on reading for him (i.e. different therapies and stuff). I am left with hardly any time. Not that I am making excuses but its the fact, hence I decided to build a emergency fund first instead of working on all points at the same time.

If you are hell bent on buying something just for the sake of buying I would steer you to an index mutual fund for starters like the S&P 500 Index Mutual funds with either Vanguard or Fidelity.

This is exactly what I was looking for until I am ready to understand and can stand by myself in this field. I will be very happy if some other recommendations comes through. My point is, I do not want this money (in addition to emergency fund that is sitting in checking account) just to sit and gain nothing, every tiny bit of addition is welcome.

Before getting into stocks you might want to learn about investing. Here is a reading list that will help http://www.early-retirement.org/for...reading-list-with-a-military-twist-46732.html Don't worry about "military " in the title, the list is good for all of us. All of William Bernstein's books are very good.

This is awesome list, absolutely brilliant resource. It will take a very long time to go through everything but a very good starting point. I will see what our local library has and then start off. Thank you very much.
I am already in the process of taking care of life insurance. I applied to 4 companies for term life insurance, max. amount that I am eligible for (= to my assets) and it should be finalized within few weeks. Thanks for pointing it out.

Before you research any of those questions you're asking above, you need to educate yourself on asset allocation. In addition to the reading list, you can also start with the summary at the Bogleheads wiki. Read here: Bogleheads and then click on the "Getting started" link.

This is another great link. Thank you. I think this will be my starting point. I can read hours on screen but just minutes with books..

Most of us here prefer to invest in low cost index mutual funds that provide the benefit of diversification and generally give us a return that approximates the return of the stock market as a whole (or a targeted segment of the stock market). The Vanguard Total Stock Index fund would be an example.

You are right with individual picks. It needs a lot of work, at the same time, many a times that work pays off, unless its Enron or similar. Afterall, it IS a gambling, just not in Vegas. Imagine a guy who bought Apple 8 years ago when it was $75, today he got almost 10X appreciation.. Honestly, I am willing to take this risk with 15% of my portfolio.
Could you come up with some more such examples, again, just to begin with. I am yet to get a clear understanding of 'low cost index mutual funds' though but that is exactly what the study will be about.

@David1961,
You are absolutely right. See, the issue is, I would like to end up with more than $2million at least. No, not for me but for DS. I am hoping for the best but preparing for the worst. And if that is what it needs, I will do it as well. In other words, I really don't have much option.

Thank you to everyone for very helpful replies. I truly appreciate all of this help. Before ending, a few more questions,
- Do you use any board, like this one, for investment issues?
- I remember vaguely, there was a discussion about brokers, after CR came up with their list of best brokers and a few mentioned that they use more than one because some brokers offer commission-free trading of some funds. Can someone either shed light on it or direct me to the relevant link?

 

[pb4uski]

......Could you come up with some more such examples, again, just to begin with. I am yet to get a clear understanding of 'low cost index mutual funds' though but that is exactly what the study will be about.....

Suggest that you visit vanguard.com and explore.

My personal favorites for simplicity are the Wellington and Star funds. They are each about 60-65% stocks and 35-40% fixed income and have reasonable expense rations and good track records. The Target Date 2020 would be another contender that is similar to the Wellington and Star funds.

 

[Animorph]

I'd start with a Vanguard Target Date fund or ETF, preferably the fund. Either the one that matches your retirement goal or the farthest out date they offer. They will differ in the amount of bonds they hold. Highly diversified, by stock and by geography. Very simple. An easy baseline to recommend. Do pay attention to minimum investment amounts and redemption fee time periods. Vanguard in particular likes you to buy more and hold onto it longer.

After you read all the recommended stuff, you can decide if you want to do something fancier. It'll be more work, and you hope to do better than Vanguard, but there's no guarantee.

 

[travelover]

...........It needs a lot of work, at the same time, many a times that work pays off, unless its Enron or similar. Afterall, it IS a gambling, just not in Vegas. Imagine a guy who bought Apple 8 years ago when it was $75, today he got almost 10X appreciation.. Honestly, I am willing to take this risk with 15% of my portfolio.
.........

I understand your hope, but the game is stacked against you. This hopeful thinking keeps brokers fat and lotteries humming. Much better to get guaranteed average market performance than a long shot at "winning".

 

[Sun456]

You've read the stories, seen the successes and have stars in your eyes. But losing your hard earned money is more likely than hitting the jackpot. I've done both. My nice safe granny style investing fund is HSTRX.

But I suspect that isn't your style right now. The market is at historic highs. Never a good time to jump in. Take a look at this chart. Look at what can happen when it is this high. Select the MAX tab to see the greatest amount of data.
http://quicktake.morningstar.com/index/IndexCharts.aspx?Country=USA&Symbol=$INDU

I suggest putting your money someplace safe (not in the market) and gain just a pittance while you study up and decide an investment style. If you don't have the time then leaving it in the slow steady safe place will benefit you more long term.

I suggest your first step be to start a ROTH IRA. It is simple. All you have to do is open one at a brokerage account. This will allow your money to grow tax deferred. This will be the start of your retirement planning. There are limits on what you can contribute every year. And there are conditions on when you can take it out. But tax deferral is important in building wealth. You can open one with just $2500 and get your feet wet.
https://www.fidelity.com/ira/roth-ira
If you do open an IRA pick something safe while you learn about the area you are getting into. Look at the historical data. I use Morningstar as a research tool. You can also talk to a Fidelity adviser and get their idea of what is good for you based on your experience level, family situation and goals. However never trust the advice completely and do your own research. Same thing with this post and anything else you read on the boards. You need to read and know about what your doing as you are in the best position to decide if it is the right thing for you.

For brokers I like Fidelity because they have a nice set of tools. But I'm an engineer so like gadgets and they have alot of nice evaluation tools and retirement modeling tools. I also have an account at Schwab because some of the way they display things gives me some good information. However be aware that the brokers will try to get you invested as quick as possible and you have a long way to go before you should have any money in the market.

I've gotten back to having a couple of million now and I don't want any of it in the market. My investment style is currently very defensive. The government has been interfering in the market though a couple of actions known as Quantitative Easing. While they have had some short term benefits I'm afraid of how the process will unwind as they try to withdrawal from doing it. I'm also afraid of unintended consequences that can happen when you muck with the complicated system that is our financial system.

You mentioned that while your son is doing well right now at any time things can go bad. You don't want to put money in the market and then need to take it out when the market is bad so really think about when you might need the money your looking at investing. If it isn't until retirement then investing can be a good idea. If it is a potential fall back for emergencies than the stock market may not be a good place because it might not be there when you need it.

 

[Meadbh]

Or, you could consider investing like a kid....

A surprising find: Children

 

[GrayHare]

noelm, you may find this online "getting started" guide helpful http://www.fool.com/how-to-invest/thirteen-steps/index.aspx

 

[target2019]

Noelm,
You need to start an IRA. Vanguard or Fidelity would be good for that. Go online and start the process now.
Keep it simple and start with US total market. As you learn more you can diversify further.

You can put 5k into the IRA, and reduce your taxable income by that much for year 2012. In 25% tax bracket that means $1250 less Fed income tax.