I've been toying with the idea of buying stock in a specific company, but have had bad luck with investments in the past due to fees, etc.
I'm not looking to day-trade, or buy millions, but I would like a simple way to buy, hold,and sell a stock without getting hit with fees every month.
What do people recommend? Any advice is appreciated, as I haven't really done this in the past.
The stock is VW, if that matters.
Seeking to take advantage of the hit they took after their grand deception was revealed?
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I've been toying with the idea of buying stock in a specific company, but have had bad luck with investments in the past due to fees, etc.
I'm not looking to day-trade, or buy millions, but I would like a simple way to buy, hold,and sell a stock without getting hit with fees every month.
What do people recommend? Any advice is appreciated, as I haven't really done this in the past.
There are literally dozens of low-cost on-line brokers. Normally they're fairly up-front with their fee schedules; for example, E*Trade charges $10/trade, and no ongoing fees on US stocks (but does charge a fee on foreigh ADRs). I actually prefer (and use) Scottrade to E*Trade (lower per-trade cost, but they have a minimum balance).
Here's a relatively recent comparative review/recommendation.
That said,.... My advice for a generic novice investor would be to stick with index funds. Less risk, and generally higher returns. If you have enough money to invest, for example, you can buy Vanguard ETFs at no commission and pay annual fees on the order of 0.05%, and no, that is five hundredths of a percent, not a typo.
Interesting. I too appreciate this information, I've finally reached a point in my career where i'm not longer just scraping by. So i'm trying to look forward to the future.
My parents had oil stocks, preferred, but they stopped paying dividends. After my Dad died she sold all the stocks because we needed the money. Buy technology stocks you can sell when you retire or whatever. Don't let them sell you preferred. If you get any loss insurance, make sure it covers lame excuses like "It costs so much to acquire raw materials!" or,"Our CEO ran off with the money!"
That said,.... My advice for a generic novice investor would be to stick with index funds. Less risk, and generally higher returns. If you have enough money to invest, for example, you can buy Vanguard ETFs at no commission and pay annual fees on the order of 0.05%, and no, that is five hundredths of a percent, not a typo.
This is good advice. You almost certainly shouldn't start out your investing career trying to pick one or two winners. A managed investment of some description will give you both diversification and access to research. You won't make millions overnight, but you (probably) won't lose a chunk of it on a couple of bad choices either.
Buying individual stocks is gambling, pure and simple. Do it with money you can afford to lose.
If you want to SAVE...the above noted index funds or etfs are the best, first way to go. And if possible you should put them away before taxes, in an IRA, or a Roth IRA if not.
Trader and financial planner in real life, btw.
==Aelryinth
Buy technology stocks you can sell when you retire or whatever. Don't let them sell you preferred.
Not to put too fine a point on it, but this is not good advice --- and advice like this is often why novice investors gets burned.
There is no such thing as a good investment or a bad investment in the abstract, since half of what makes a good investment is the price you pay for it (and the other half is the price you sell it for). Focusing on one specific sector (like technology) is highly risky, because neither you nor anyone else knows what the that sector is going to do over the next two years -- or two days. Even the people who analyze tech stocks for a living, as a full time job, do no better than monkeys throwing darts at the financial page, and I doubt you have their training, their connections, or their time commitment.
Similarly, there's nothing wrong with buying preferred stock a) if if fits into your overall financial plan, and b) if you can get it at a decent price. Preferred stocks have some very nice risk-management characteristics over either bonds or common stock. But if you don't know what I just said or what I'm referring to, do some reading before you plunge. (Buffett: "Buy what you know.")
As both SG and Aelryinth pointed out, stock picking is both hard and risky (which is another word for "hard" in this context). It can be great fun and very educational, but so can the poker table on Thursday night. ("Community math lessons! Pay what makes you comfortable! If you're not comfortable, bet less!") Similarly, trying to guess which sector will do well over the next two years can be an interesting adventure in futurism -- but I still recommend the index funds.
If you get any loss insurance, make sure it covers lame excuses like "It costs so much to acquire raw materials!" or,"Our CEO ran off with the money!"
Alternatively, if you feel you need to get loss insurance, you shouldn't be investing your money.
No, seriously. Insurance of any kind is, by design, a bad deal. The insurance company knows roughly how much loss a generic you is expected to incur, and charges you that much in a premium -- and then enough money to pay the insurance salesmen, the office rent, and a profit for the owner of the company. Insurance, as a product, is designed to move money from your pocket into someone else's.
Now, there are some unavoidable risks that you need to insure against because you can't afford to take them. I can't afford to rebuild my house if it burns down, so it gives me peace of mind to pay a few hundred in insurance against the one-in-a-zillion chance that I will find myself homeless. I can't afford to pay major medical bills, but I can afford the insurance and pay State Farm to take the risks on my behalf.
But if you're talking about investments, all of the risks are avoidable -- if you don't like the idea of losing $1,000 (or $1,000,000) in the market, don't invest the money. (See Aelryinth's advice above -- only invest money you can afford to lose.) The only reason that you (should) invest is because you think you will make money in the long run.... and so you shouldn't put money into something (like loss insurance) that you know will be a long-term loser. Far cheaper, if you want to reduce your potential losses by 50%, to only invest half as much money.
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The stock is VW, if that matters.
My advice: Don't.
Within the next ten years the introduction of autonomous vehicles will hit automobile manufacturers with an ongoing decline in sales which will last for decades.
As a fair portion of their current stock price is based on projections of ever increasing future sales (due to rising populations and standards of living), this will result in large decreases in stock values and many companies folding entirely. At this point there is no reason to believe that Volkswagon will weather these changes better than the industry in general.
I would say a good reason to buy stock in a company is because you want that company to do well. If more people did this, ethical companies would skyrocket. Of course, it is money you must afford to lose, but really, how many people buy lottery tickets? With stock, you at least have mathematics on your side: A surviving company gets, on average, a profit. With lotteries, you KNOW you will lose money on average.
I would say a good reason to buy stock in a company is because you want that company to do well.
That's.... misguided.
Companies don't do well because their stock is overbought. Companies do well because their products are overbought. A company never sees a dime from when you buy a share of stock from me on the secondary market.
So, for a company, having its stock at a higher price is useless? That is very interesting. I would have thought it gave them more options, more attention, etc. I could be wrong.
A friend of mine was trying to buy stocks the same way you mentioned, Sissyl. If you want a company to do well, you'd be better off finding a way to donate directly.
Perhaps. But that would mean not getting anything back, which was sort of the point. Now, I know the effect of my buying would be small, but so would the effect of buying more of their products. Not to mention it can be hard to buy more of their product.
My advice: Don't.
I think that is a very valid warning. I don't pretend to know where the industry is going to be in ten years, and I think autos are not a good fit for the future. On the other hand, I know a few engineer and auto types who pick Audi, VW, Porsche, and Ducati, and they seem to have a strong reputation. I think the diesel scandal is holding the stock price down, but I don't think there will be the political will to really hammer VW when other manufactures have problems that are resulting in injury and death. The sad truth is that I don't think regulators are going to cause financial harm to a major manufacturer. They are just too greedy, and I'm guessing other brands are not exactly free of scandals of their own.
Sissyl, I would rather put my money into companies that produce more then fossils fuel burners, but I have found that it is very difficult to predict their financial futures. Those companies often rely on subsidies, tax breaks, etc. and I'm not inside that world at all. For example, I have done some solar installations, and every panel or two requires an inverter. My boss has used several different brands of inverters, and the company enphase seem to make the most reliable models. However, subsidies for solar are going up and down all over the place, and these companies are too difficult to predict (for me anyway.) I plan on doing more research, but I don't plan on being able to have enough information. VW is at least held to German corporate laws, which seem better then their US counterparts.
In all honesty, this is closer to gambling, then investing. I had some good luck picking some companies in the past, such as Ford during the bailout. I'm thinking that VW will probably be better then the .02% interest my money gets at the bank. Also, f!*# First Union. My plan is to buy under $100/share, and hold the stock for about a year.
So, for a company, having its stock at a higher price is useless?
Basically, yes. The company gets money in two ways -- from selling products (on an ongoing basis) and from creating and selling shares to the general public. Once those shares are sold, the company isn't really affected by who owns them. So if I own one tenth of one percent of a company, and you buy it from me, you now own one tenth of one percent of the company, irrespective of the price you paid.
I would have thought it gave them more options, more attention, etc. I could be wrong.
There are a few extremely minor secondary effects. Many stock exchanges have minimum stock prices to be listed, so if my stock is selling at a penny a share, it won't be on the NYSE. If the stock zooms, the financial press may tell people about the company, which is a form of advertising -- but unless they hear about my stock, but then buy my products, it won't actually help me. (And who goes out and buys an iPad because they've heard that AAPL stock is doing well?)
Now, I know the effect of my buying would be small, but so would the effect of buying more of their products. Not to mention it can be hard to buy more of their product.
Understood. I'm not going to help out Honda by buying a fourth car -- that's just not going to happen. But if I really wanted to help Honda out, I'd do more for them by wearing a T-shirt with a Honda logo and by telling friends about how much I liked Honda and recommending that they get one if they find themselves in need of a replacement for their first and only car.
In all honesty, this is closer to gambling, then investing.
As long as you know that going forward, and you're not gambling with the rent money or your kids' college tuition, have fun.
I'm thinking that VW will probably be better then the .02% interest my money gets at the bank. Also, f#!@ First Union.
I'd just like to point out that there are other banks besides First Union.
If you don't like First Union's service and you don't like their interest on savings, that doesn't mean you have to dive into the stock market.
Sounds like good advice!
My primary advice for buying stock online is not to buy stock online based on RPG message boards.
What, next you'll be suggesting I don't go for charop advice to my broker-dealer?!
So, Duiker, how should I decide on what stock to buy? :-)
In my town, it is basically Bank of NY Chase, and First Union Wells Fargo. Both of which I've had bad experiences investing with in the past (back when they were BNY and FU). Both resulted in class actions, and both banks now have binding arbitration in their contracts, even for checking accounts. I have found that I don't have enough to keep in a separate account without getting hit by fees every month. Between the fees and ~0% interest, it is a great way to end up with less then you started with.
Keeping a checking account at Wells Fargo is tolerable (especially because it is so close to home), but I would not use them for anything else.
Note also that I'm more looking for advice on what online service to use for buying and selling, then advice on what stock to buy - although any thoughts on that would interesting to me as well.
So, Duiker, how should I decide on what stock to buy? :-)The same way one should make major medical decisions: consult a carnival psychic.
Who in Off-Topic Discussions hasn't spent a few years in a job like carnival psychic?
When I had a full time job, I had to invest in an IRA or something. I had to roll it over into something. I had to spend it on nasal polyp removal and dental work, ect, so I could get -social security and medicare part A and B for my handicap that I have to take medications for the rest of my life.
My condition involves spirits or the delusion of them constantly bugging and undermining me. The spirits told my Mom she would live to 120. She didn't.
I am almost always wrong about the future. That's why I couldn't see that I should have concluded don't invest in any one stock or type of stock. You might be better off considering what happened to me and just ignoring my conclusions.
I'm better at games because in reality the rules cannot be trusted.
Stocks represent ownership. A company like, say, VW, profits not at all from a high stock price. The OWNERS of the company do.
A stock price is based on past performance and expectations of future performance. A 'high' stock price means people have been buying it expecting the company to do better in the future. A 'low' or falling stock price means people expect the company to do worse in the future then right now.
A company only makes money off stock when it goes public. This is why a standard target of takeovers is to buy off the stock and then take it private, do whatever you want to do, and then go public again, hopefully at a much higher price then what you bought it at so you make zillions (and has been done many, many times successfully, and not so successfully).
It can also make the owners happy by going out and buying stock with its own money, effectively shrinking the number of owners. The outstanding shares then increase as ownership condenses on the remaining shares adn go up in value. this is what Icahn is trying to force Apple to do with its billions of cash. The purchased stock can be held in reserve, and then possibly resold in the future at a higher price, giving the company its money back plus a profit.
But, no, VW isn't going to get any richer from anyone buying or selling its shares at all. Stock markets help out the owners of a company that way, not the companies themselves. They are basically just convenient ways for the owners to buy and sell their interests in a company, they don't do anything for the company itself.
Now, it is ENTIRELY possible for a company to get in major trouble if its stock price tanks, especially if it has outstanding loans, as its financial backers might come calling for their money. Likewise, low stock prices invite those with money to do takeovers, and takeovers mean current management tends to get booted out on their ass.
So, managers watch stock prices very closely, trying to manage expectations and encourage slow, stable growth that keeps them in their jobs and the owners happy. Unfortunately, the stock market has tons of speculators with trillions of dollars waiting to swoop back and forth over the slightest bit of news, so they don't get to have safe, boring lives.
It's a truism that private companies are managed much more stably for the long haul then public companies are. Companies today largely go public to reward their founders. Mark Zuckerberg was worth almost nothing until the moment Facebook went public, and suddenly he was a billionaire. He's had to do a lot of legal stuff to keep absolute control of his company since, something most founders don't get to do.
==Aelryinth
Who in Off-Topic Discussions hasn't spent a few years in a job like carnival psychic?So, Duiker, how should I decide on what stock to buy? :-)The same way one should make major medical decisions: consult a carnival psychic.