Investing in individual comapnies

[RandomHero]

Originally Posted by AllBlackBimmer

I mean, i hear you, but don't you have to start somewhere?

I'm 27, trying to buy a house, a have other bills, like this damn BMW

I don't have a ton of money to just throw into the stock market, espeacially since I really don't know much about it.

I relate it to sports gambling... only put in what you are willing to lose, no?

I look at investing in the traditional sense more like poker than sports betting. Starting off with 7-2 off suit gives you about a 32% chance of winning head to head. Starting off with A-A pre-flop gives you about an 85% chance of winning.

Does that mean you should only play A-A pre-flop? Not necessarily, but it means that when you take out all other variables you have the greatest chance of winning after playing the same hand 1000 times. A veteran poker player might play 7-2 offsuit because they have the experience and understanding of how to play it. A novice poker player generally should play more conservatively because they don’t know how to bluff, how to bet, and how to play a 7-2 hand.

To relate that to the investing world, 7-2 off-suit is like investing in penny stocks. You may still come out ahead, but statistically, your odds are much lower. Starting off with A-A is like investing in companies such as McDonalds. You still have the potential to lose, but the likelihood of coming out ahead is much greater.

You do have to start somewhere and $2000 is a lot of money for everyone on here, I don’t care what they say. While your funds may be enough to learn to invest, I don’t think your knowledge is quite there yet, but it sounds like you're working on that

You may consider opening up a Roth IRA and managing it yourself. Roth IRA contributions can be withdrawn tax and penalty free. The gains however do not qualify for early withdrawal (without penalty). Many people use a Roth IRA as an emergency fund and it is a great investment vehicle for a new investor (or anyone for that matter). The advantage a Roth IRA has over a normal taxable account is that eventually when you reach retirement age, you can also withdraw the capital gains tax free as well.

Simply put- It can serve a dual purpose of helping you save for retirement as well as helping to cover unexpected emergency costs in the immediate future should you ever need that money.

Disclaimer- This is entirely meant as discussion. In no way, shape, or form should this information be interpreted as professional advice.

Originally Posted by Nkc

I wouldn't. I have a different approach to investing, I buy and and don't sell. Been doing this for nearly 4 years now and I have to say, I have failed lol.

A buy and hold strategy is perfectly fine, although I question if it’s the best strategy for most individual companies. Most companies evolve or devolve over time. They naturally go through the business cycle. Sometimes, a company may be right for your investment objectives at a certain time, but 5-10 years later the company may have changed and they no longer have the potential to satisfy your goals.

That’s the joy of a buy and hold strategy in regards to mutual funds. The fund manager is required to maintain the objective of the fund may it be growth, income, value, etc. Even though you may hold the fund for 20+ years, the underlying investments are constantly changing.

One of the few times I could ever personally justify a buy and hold strategy with individual equities is when choosing to invest in mega-cap dividend payers. These companies are long past the growth stage, have a significant presence, and their primary focus is to remain profitable in order to pass along profits to their shareholders. Companies like McDonalds, Wal-Mart, Starbucks, or Coca-Cola fit that bill for me.

Disclaimer- Again this is entirely meant as discussion. In no way, shape, or form should this information be interpreted as professional advice.

[Nkc]

Agree. My buy and hold strategy came after years of just random trades. In the long run, I could never really say that I won in the financial market when factoring in the time and money invested. I just know that this is not a game that I find fair enough to justify the potential losses. I generally buy and hold blue chip stocks in HK such as HSBC, Bank of China, real estate stocks, and insurance stocks that pay high interest and hope they grow in value. My best interest paying one is BOC at 6.5%. I see my investment strategy as a savings account. I keep putting money in and dont take it out. Hopefully someday it will be worth more than what I've put in with inflation and standard interest accounted for. I could never make money doing day trades like most of my friends in HK. I'd much rather trade physical products.

[Maestro]

First and foremost if you going to buy individual company either you need to know the company really well and understand the markets they play in or hire someone to help you.

Next, and this is more important than the first thing, Walls Street fucks with companies' stock prices all the time. Many time there is no rhythm or reason why a stock it at a price that is is other than wall street has some love affair with that company or just hate them.

So you have to know the company and what they do and you need to understand how Wall Street views them and why the are promoting the stock or kicking it in the ass. Grant not all stocks are that interesting to Wall street, some just move up and down with the market and their real value, but those are not the ones which will make or break you.

So if you want good old reliable stocks like a GE or Proctor and Gable or something similar there is not much you need to know or watch you will get your dividend ever quarter and a nice single digit value increase ever year.

However, if your goal it serious growth then you need to chase the stocks which are most interesting to the market. I give you 3 example of ones I play in and have made lots on, First Apple, everyone know apples, but I been buying and selling it since the 90's and never took a loose on it. But I know the company and how the market has a love hate relationship with Apple and Steve Jobs. The other two are more recent which is Green Mountain coffee and Rack Space. Both of these company have it stock going up and down all the time for various reasons, rumors of buy out, or they going to corner the market or they did not make as much as wall street thinks they should make, or issues with how they recorded earnings. All the things drove these stock up and down.

If I did not buy and sell them as these things happen, I would not be ahead in the stocks.

BYW, I have been working with a private broker for years, he is the source of information on what driving the stock up and down, i.e. he has a direct line to the traders on the floor of the exchanges who see transactions and see who buying and selling and he also has direct line to the analysis who follow these companies all the time.

My last piece of advise and this is the one I can not believe people do not do. If you're going to have someone invest your money make sure you talk to them all the time. I hear this all the time people send their money to a broker and then never talk them and then they are surprise they lost money. I talk to my broker all the time, sometime 2 or 3 times in a day depending on what is happening in the market or as information is coming out about a particular company.

[RandomHero]

Originally Posted by Maestro

I talk to my broker all the time, sometime 2 or 3 times in a day depending on what is happening in the market or as information is coming out about a particular company.

2-3 times a day? I would hate you as a client, lol. 95% of my clients never call me. I'm the one who calls them at least once a month or more frequently if there is a need for it.

I will say that communication is the number one reason why clients are unhappy with their financial advisor. Finding someone you trust and someone who will call you at least once a month are two of the most important qualities to seek in a Financial Advisor.

[Maestro]

Originally Posted by RandomHero

2-3 times a day? I would hate you as a client, lol. 95% of my clients never call me. I'm the one who calls them at least once a month or more frequently if there is a need for it.

I will say that communication is the number one reason why clients are unhappy with their financial advisor. Finding someone you trust and someone who will call you at least once a month are two of the most important qualities to seek in a Financial Advisor.

Yeah most Financial advisers do not like me, most want to take your money put in what they think is a safe place and never look at again let alone talk to you but once a year or so. I get calls from these guys all the time, they some how get my name. As I tell them, it is my Fucking money and if I want to call you everyday or you call me everyday you will do it. Because when I loose money it far more than they lose. They only losing a fraction of their commission or fee when I loss 10's of thousands because their failed to see that the stock was not coming back.

My financial guy likes me, I am a source of information, he actually bounce ideas off me once in a while since I have some market insights myself. There has been times I told him to hold or dump a holding based on what I believe was really happening and if played out well for us. Also most Financial advisers do not like to deal in individual stocks, they want to put the money in bonds, mutual funds or ETF.

[RandomHero]

It sounds like you and your advisor have a strong relationship which (in my opinion) is the most important quality to seek in a client/advisor relationship.

As far as the rest of your comments, there are good and bad people in every profession. That’s why it is so important to find a good advisor, lawyer, doctor, etc. Those are the people you trust with your wellbeing.

The best advisors are the ones who always put the needs of the client before their own. Everyone has different needs and some require more attention than others. The joy of this business is that you can choose who you do and do not want to work with both as a client and as an advisor.

I have worked with people who had less than $20k in their accounts because I knew they appreciated my help and I felt like I was making a difference in their lives. I’ve also turned down $150k+ accounts in the past because the relationship wasn’t a good fit. I knew that there weren’t enough hours in a day to make these people happy and no matter what I did they’d still be asking more.

Again, it sounds like you’ve found a good fit for your situation. Appreciate the fact that many people aren't as lucky as you.

[PSUSMU]

1. It takes money to make money
2. Scared money don't make money