If you had 1k dollars how would you invest it?

[Modee]

IN THE STOCK MARKET.

I would leave it exactly where it is. Bulls make money, bears make money, sheep (and hogs for that matter) get slaughtered.

A trader is considered “a hog” whenever he loses site of the original strategy and becomes too greedy — refusing to lock in a profit on either a bullish or bearish trade (as opposed to a long term investment) even though the trend has reversed itself.

Meanwhile, sheep have no trading strategy whatsoever. Typically, they trade based upon gut feelings. As states author Alexander Elder in his wonderful book Trading for a Living, “Sheep are passive and fearful followers of trends, tips and gurus. They sometimes put on bull horns or a bearskin and try to swagger. You recognize them by their pitiful bleating when the market becomes volatile.”

I and my family and ancestors have lived and died through many recessions, a great depression and more than a few wars, and we've always done well with the stock market and real estate. Because these may not be doing well at the moment is no reason to be a SHEEP and abandon ship on solid, long term investments.

[John14789]

Could one invest $500 for starters?

How much would one make if he invests that amount?

How is profit calculated in stock trading?

[Modee]

Sure, $500. is fine. But for smaller amounts you are better off with an aggressive no-load mutual fund than with any one stock.

I believe Consumer Reports rates these Mutual Funds regularly. The key factors are past growth history (track record) and lowest fees (lowest expense ratio). No-load means no commission per se, but there are always some fees.
Avoid these money mistakes
You can get the latest recommendations from CR either in their print magazines or at consumerreports.org If you have a subscription to the print mag, you can get online access for $12./ year. Well worth it.

[John14789]

How much of a return do mutual funds have?

How much of a return would a stock investment of 1k bring in?

[PayPal]

Could one invest $500 for starters?

How much would one make if he invests that amount?

How is profit calculated in stock trading?

well that depends on how much risk your willing to take?
u can use leverage to increase profits but its a double-edged sword.

OP is on about long-term and long-term (over at the very least 5 years) nothing beats stocks. If u r in for the long-term, history has shown that average returns are at least 20%/year, no matter if u were in a couple of recessions or depression during your, say 20-year timeframe. Markets bounce back. Its inevitable. Just make sure u r invested in for the good times as well.

If u r investing for less that a year, stocks are a big no, if u dont know what u r doing. Yes, u can invest 500$ in stocks but fees are high in stock trading and eat up u profits cos the charge u both ways (when getting in, getting out). I think u can better invest those $500 in other instruments like forex which has low fees. You can invest in forex long-term as well, and u get better leverage and margin options. Forex is mostly associated with short-term speculators and advertised on "scam" forums but must be considered for any investment. I mean everyone knows dollar will weaken and can invest in euro.

But bankroll management is the key. Manage ur capital well and ur 90% of the way there.

[John14789]

Good advice. I've actually traded forex and was looking to get into the stock market as well. Do you trade the forex? If so, which forex company do you use?

[PayPal]

How much of a return do mutual funds have?

How much of a return would a stock investment of 1k bring in?

But seriuosly, u wont get much freedom on $500 when investing in the stock market. Everything is more expensive. They only give as much freedom as u get on forex to customers who invest many, many k's.

BTW - I am currently using fxpro, on metatrader. I think i like it.

PS - check out this site if u havent done so already. I wouldnt advise MFs if u r investing $500. Have nothing against them, just think that u should learn something and gain valuable experience by doing your own stock-pickings and management.

[Modee]

In my opinion, you do have to be a little careful with Motley Fool though. When they first started in the mid to late 90s they came out with their "Rule Breaker" portfolio that loaded up on fundamentally unsound companies (mostly internet companies), all of which had negative EPS (companies that were losing money hand over fist) and had very poor balance sheets. Of course, back then, up until about Memorial Day 2000, the market was on a serious tear. Just plain rocketing.

You could pick almost any stock and it was bound to go up. Throw a dart at the board and it would almost always be a winner. And internet stocks were the dandies of the day, and routinely shot up like ten, twenty, fifty even a hundred points in one day.

Of course this success went to the Motley Fool's head and they started to think that conventional wisdom was no longer relevant. I was new to the stock market, but my family had a lot of experience with buying and selling businesses so, even as young as I was, I knew what to look for in a company that was worth purchasing.

I decided that I would not purchase any stock, at least long term, unless I had looked under its hood and would be willing to own the whole company. Using this philosophy I developed my "stock screen":
Stock picking - screens to find the best stocks - Free EBAY, PayPal, Business and Law Forums - Ebay Suspension, PayPal Limited
which pretty much was grounded in fundamentals, but with some charting analysis as well, to pick entry points.

In the long term - I was vindicated. The fundamentally strong stocks of that era are still around, and for the most part higher, and the garbage money losing companies of that time, if they are still around at all, are not even as high as they were then. The Motley Fool "rule breaker" portfolio failed, miserably.

In my opinion, you cannot reinvent the wheel. If a company keeps losing money, it will eventually go out of business. Of course, the key word is eventually. People can and do make money in the short term off garbage stocks - sometimes a LOT of money - but, for my thinking, I'd rather trade a fundamentally strong stock just in case it tanks, so that over time I can feel comfortable that it will go back up.

This is why I had no problem trading BAC:
Daytrading - Free EBAY, PayPal, Business and Law Forums - Ebay Suspension, PayPal Limited
even when I got stuck in a down trade, it always came back eventually - in my opinion, because it was a good (and not garbage) company.

My theory, in a nutshell, is that a fundamentally sound company's stock over time will go up. Garbage company stocks, at best - might go up.

[PayPal]

yeah, the "rule breaker" portfolio is messed up, but thats cos people want to take the risk by picking bad stocks with bad fundamentals and hence increase their rating, or get the caps "charms", whatever.

Obv u have to be careful, but since it a decent community now, u cant ignore it. I mean, at least it tells u what other people r up to, though agreed there r other ways. And mind you, there r many ways people use to increase their points and ratings on caps so fundamentals r a must.

But i like reading the blogs there, and their recs feature. Helps me to save time, and i am reading recommended blogs instead of looking for them.

Actually, i am glad u brought that up.

[Modee]

Motley Fool - proven over time to be wrong

You got me all nostalgic though, by bringing up Motley Fool. *sniff. Pass me a hanky, please!


Check out the Motley Fool's "Rule Breaker" portfolio from 1999:

The Rear-View Mirror (Rule Breaker) June 15, 1999 | The Motley Fool

06/15/99 Close
Stock Change Bid
------------------
AMGN +1 1/2 55.31
AMZN +4 1/2 96.50
AOL +4 3/8 94.50
ATHM +1 9/16 80.06
CAT -1 1/2 58.44
CHV +1 1/4 96.00
DD + 5/16 70.50
DJT - 1/4 4.94
EBAY - 1/2 135.50
GT -2 1/16 58.75
IOM - 1/8 3.94
SBUX +1 9/16 36.69
TDFX +1 1/16 15.44

I believe every one of those stocks is either lower today (most significantly lower), or completely wiped out bankrupt. The Modee rule - that fundamentally unsound companies go down over time, stands true.

Yet, at that time, full of himself David Gardner (The Motley Fool himself) wrote:

Investing is a different story. The stock market trades off future expectations far more than past results. It's the same sort of road, pointing ahead and rewarding those who look down it (not back up it). But because it's not tangible and physical, and because we are not using our ocular eyes but the eyes of our inner minds, the investment road frustrates and confounds many people. They are driving, looking backwards.

Who might this be? Two examples out of many come quickly to mind. One is the person who cannot understand why any company presently losing money would be lucratively valued: "It has a P/E of infinity!" This outraged fellow is confounded by -- cannot get over -- the notion that present-day prices showcase expectations of future profit streams. What a simple concept, and yet how many long-time journalists or market analysts still have their eyes on the mirrors? A second backward-looker is the momentum investor who has, say, hopped aboard "the Internets," riding their past performance. The past six weeks have her picking up the pieces of her scattered little auto. Along with many others, both of these investors lost track of the road.

Oops - sorry Charlie, I mean - David. YOU were the one who turned out to be wrong. You lost track of the road.

Oh, and by the way:

Information on Rule Breaker Stocks | The Motley Fool

[In March 2003, we stopped running a real-money portfolio using the Rule Breaker strategy, because our current stock-picking content competes with it and we were soon to unveil new content plans. The Rule Breaker strategy lives on in our articles and investing. We are editing all Rule Breaker information pages to reflect the change, but it may be a while until that's done. You can check out our reasoning here and our last words on the portfolio's stocks here.]

Big resounding buzzer goes off. -Ehhhhhhhhhhhh- If that isn't a cop out, what is?

[PayPal]

You got me all nostalgic though, by bringing up Motley Fool. *sniff. Pass me a hanky, please!

did i touch a nerve there. I hope not. (actually, i do)

The Rule Breaker strategy lives on in our articles and investing. We are editing all Rule Breaker information pages to reflect the change, but it may be a while until that's done. You can check out our reasoning here and our last words on the portfolio's stocks here.]

What the..? Rule breaker "strategy". OMG. This was never viable. I just thought it was a caps "charm" or something to tell others if this guy is "lucky" on general or not. I only lurk there to read top-recced blogs from top fools, thats it. This is shocking. Like someone said, "you take the first 20 and the last 20%. Just give me the middle 60% and I'll be happy". Or something along those lines. Cant remember .

[John14789]

How about t-bills?

How much of return do those bring. They're over all a safe investment since it's backed up by the government.

[Modee]

I have some. They start out at certain % of face value and are guaranteed to be face value at some point in the future. Currently viewed as a safe, but low return, investment. Some view T-bills as risk free because they are guaranteed by the government. Put it this way: if someday T-bills collapse, pretty much anything else you might consider as an investment would have already collapsed as well.

John, the general rule is to put a certain % of your extra money in stocks, certain % in bonds, some in T-bills, a certain % in real estate, some in FDIC insured banks, some in precious metals, some in collectibles and art, etc. etc.

But, to be honest, nothing beats investing it in yourself - in a business you start or plan to start. I invest the money I have BESIDES what I "invest in myself" in the things I mention above. If I have a good business opportunity, such as a start up business of my own, I'll liquidate most all of what I have to get into it.

[John14789]

I just found out that you need a minimum of 25k to start daytrading. Why is this so?

Any way to start without putting 25k in the brokerage account?

If you do multiple buy/sell orders then this will apply, correct?

[Modee]

The market really isn't that suited to daytrading right now. The ups and downs aren't sufficient and are less than predictable right now. Many would disagree with me, but I think daytrading today versus say in the years December 1998 - May 2000 is a waste of time. And even back then, if you had held for those two years you would have made a LOT more money on most any stock versus trading it.

No, you don't need $25K to daytrade. Sure, the more you have the more you can spread out your trades into different stocks, but I know people who have turned $5K into $100K (and...lost it all back to zero).

Right now if you do not have the patience to just buy and hold long term, POSITION trading (trades that last more than a day and up to weeks or even months) is a much better idea than daytrading. And even with longer term trades I do believe in CHARTING to find good entry points on some stocks, especially stocks that have fluctuated a lot in price (which applies to most every stock out there right now!).