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Stock market for Dummies?

Posted by addictedtoroses (My Page) on
Sun, Feb 8, 09 at 18:59

I need your help here, O Financial Gurus!
I have a strong desire to play the stock market (yes I say "play", as I'm trying to approach this as one would a trip to Vegas- I'm only taking what I can afford to lose, and will see it as a great bonus if I come out ahead)
That said, I don't have much income. I work part-time so that I can be home when my children are home, and my husband is the breadwinner. I can probably afford to invest $100 a month, but that's it. I'm starting with $125, and have opened an account with Etrade. But there's a few things I'm not clear on:
How much is it going to cost me to buy stocks, given how little I have to invest?
What does "Buy to Cover" mean?
When you go to "buy" it gives you options- market, market on close, stop, limit, limit stop, trailing stop $, and trailing stop %. What do these mean?
Is there a limit minimum on how many shares I can buy? I've always steered clear of investing because I thought that the market would not want to deal with the piddly amounts that I could afford to spend, and have therefore invested nothing, and now at 33, and with the market down, I thought I'd try my luck. Please help me, all of this is a little confusing!


Follow-Up Postings:

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RE: Stock market for Dummies?

I'm with Sharebuilder and the cost to buy or sell stock is $9.95 per transaction. There is no minimum to buy stocks it just costs $9.95 each time.

Limit is the $ figure you put down if you think the stock is going up or down.

You would probably buy on market, the price it is right now.

With $100 month I keep it in Sharebuilders cash account which pays me savings interest. When I have enough 300-600 dollars I pick a company I like and then buy.

Hope this helps. Hank


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RE: Stock market for Dummies?

The Etrade website states how much it costs per transaction to buy stocks ($12.99 for small accounts I believe).
I recommend you read 'Investing For Dummies' which I haven't read but would probably answer your questions and a LOT that you haven't thought of yet.
There is also 'Etrade for Dummies' and 'Etrade for Beginners'. These and other books are found at many public libraries, as well as on-line in new and used condition.

You didn't ask, but I would not approach this as I would a trip to Las Vegas. That is 99% sure way to walk away with no money. In your place I would invest via the dollar-cost-averaging method in mutual funds.
P.S. I'm not affiliated with the website below, but he makes a lot of sense.

Here is a link that might be useful: Ric Edelman - Financial Advisor


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RE: Stock market for Dummies?

"Buy to Cover" means you agree that you will purchase the stock at the current market price; however, because there is a lag between the time you agree to purchase the stock and the actual transaction, a price difference could occur. You could end up paying more than anticipated for each stock, or a lower amount per stock, which is what you are hoping for.

I'd select the option of buying at market. The number of shares you can purchase is dependent on the amount of funding you have available in your Etrade account. If you have $125 available and a stock you're interested in costs $46.05 per share, you can buy 2.1744 shares or slightly less because of the Etrade fee. If the stock is priced at $3.50 a share, you can buy approx. 35.7144 shares.

You might do well to fund up your account for a while, then in the meantime study up on stocks you have an interest in before making your first buy.

Another good way to get your feet wet in the market is direct buy. Check your next electric/utility bill when it comes - the local power companies usually have a space right on the bill to buy their stock simply by sending in a minimum amount (usually $10). The need for energy isn't going to go away and most are diversifying into wind, etc.. Many of these energy stocks pay nice dividends - and you can opt for dividends to be reinvested to purchase additional stock shares to kind of painlessly bulk up your portfolio. Another nice thing is they don't charge fees.

It's nice you're getting your feet wet with stocks reasonably and with discretionary funds. Taking a measured plunge won't make you "nuts" with all the yo-yoing.

Whatever you do, save all the statements, confirmations, etc. back up computer files. Create a file folder, put them in a box - just don't discard. These buys will be your cost basis - and they will be needed. Maybe not today, but definitely someday.


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RE: Stock market for Dummies?

duluthinbloomz4: "'Buy to Cover' means you agree that you will purchase the stock at the current market price; however, because there is a lag between the time you agree to purchase the stock and the actual transaction, a price difference could occur. You could end up paying more than anticipated for each stock, or a lower amount per stock, which is what you are hoping for."

Where on earth did you ever come up with that???

That is not anywhere close to being correct!

That's not even in the same neighborhood of correct!

"Buy to cover" has to do with closing out a short position in a stock, it has nothing whatsoever to do with any so-called time lag between the time an order is placed and then closed.

OP: You don't need to be concerned with that phrase; it is not something you will be doing. In fact, based on your limited experience, I doubt that your brokerage firm would allow you to trade options even if you wanted to.


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RE: Stock market for Dummies?

investopedia.com has a fairly good online dictionary for investment terms.

I agree with bethesdamadman about buying to cover being applicable to covering shorts....except buy to cover can apply to any short position, not just one that's in stocks.


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RE: Stock market for Dummies?

Yes, sorry to the OP that I really was wrong on that one. Thanks for hitting me over the head with it, though.


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RE: Stock market for Dummies?

I do not think it makes sense for you to invest in stock of individual companies. You make money in the stock market in the long term by investing in a DIVERSIFIED instrument, so you do not suffer a big loss if a company you have invested in takes a hit. It is not realistic for you as an inexperienced investor to figure out what companies to invest in. Even the experts can't "pick the winners" all the time. For this reason, you are much better off to invest in something called an index mutual fund. That puts your money in the whole stock market (or a part of the market like big companies or small companies), and how your money is invested is determined by mathematical formula, so you don't have to worry about whether the fund manager knows how to pick winners. The other advantage of index funds is that they are cheap, so more of your money gets invested and less goes to pay expenses.

If you are interested, you should check out the Vanguard and Fidelity Mutual Fund companies. They are the two biggest in index funds. Remember, in the long run, nobody can beat the averages, so with index funds you get the averages, which is pretty good.


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RE: Stock market for Dummies?

My take is similar to haus_proud - invest in good diversified low-cost no-load mutual funds if you want to make some money over the long run.

If you want to throw money away, you might as well save up for a splashy casino and showtime roll in Las Vegas, or a round-the-world cruise on the QE2. You're trying to run before you can walk....money isn't a god to be worshiped, but if it takes you effort to earn it, then treat it with respect and learn how to handle it properly.

The small investor already is handicapped when competing against the 8,000-lb gorillas of professional and institutional investors. These people are paid to live, eat, and breathe the financial world. It's like driving your personal car onto the Formula One racing track and expecting to make it into the top ten. You might, but only if there were only nine pros in the race!

There's a minimum for investing in most funds, so check that out before you start. Some brokerages will lower the minimum if you sign up for automatic monthly minimums transferred via ACH from your checking or savings acct.

And be aware that there is a difference between the "suitability" standard of brokerage advice, and the "fiduciary" standard of advisor advice. Learn the difference so that you can put all advice into the proper perspective - which is, what works for your individual risk profile and financial situation.

Good luck to you going forward.


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RE: Stock market for Dummies?

You make money in the stock market in the long term by investing in a DIVERSIFIED instrument, so you do not suffer a big loss if a company you have invested in takes a hit.
Also known as not putting all of one's eggs into one basket.

I for one am going to buy a few stocks with some extra money that have historically paid good dividends and have a good rate of return, among other things.

By reading you too can learn in time how to pick some winners. Some will likely 'win' more than others and there will also be some losers, but the main thing is that you are diversified, besides not 'needing' to sell them anytime soon.

As OJ says, stocks are now on sale.

Sue


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RE: Stock market for Dummies?

Yes, stocks are on sale right now. But the blood letting is not over. we could see a further nose dive before the dust settles. I for one am staying in the sidelines until I see a sustained recovery taking hold.


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RE: Stock market for Dummies?

Vanguard Treasury Inflation-Protected Securities (VIPSX) mutual funds look good (safe?), but you still might want to look before you leap into the market....

Stocks to fall AT LEAST another 40%! Here’s why …
by Martin D. Weiss, Ph.D. 02-09-09

A link that might be useful:

www.moneyandmarkets.com/stocks-to-fall-
at-least-another-40-here%e2%80%99s-why-29613


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