STOCK MARKET FOR DUMMIES / STOCK MARKET FOR BEGINNERS

Seeking Alpha: Both Good And Bad For Stock Information

2017-11-20T06:33:00.005-08:00

Where can you go to get information about stocks? How about ideas about what stocks to buy? There is a site called Seeking Alpha that is both good and bad for each of these tasks.

Seeking Alpha is a website that has become very popular and constantly growing. But anyone can write stock articles for the site and that right there is one of the drawbacks. The barrier to entry for writers is almost nonexistent which means much of what you read on the site is just someones opinion. You, the reader, have to figure out whether the author knows what they are talking about and that can be hard (since you may know very little about the stock you are researching).

Writers get paid per the amount of clicks they get on their articles so clickbait titles are quite common. I find that the comments below each article often are more enlightening than the article itself and they can also go a long way in telling you whether the author knows what he/she is talking about or just full of shit. I also closely look at the number of followers a writer has before I start reading. Authors who have followers in thousands or tens of thousands usually are more credible than those who have only hundreds of followers.

If you are interested in a certain stock, don't just read that one article that is overly bullish on the stock and has you pumped to push the buy button. Make sure you take a look at all the other recently written articles about that particular stock to see what others are saying. I often find that writers have their point of view and depending on whether they are bullish or bearish, leave out the other side of the story. A stock that looks like a no brainer "buy" after reading that first article might quickly change in your mind to "avoid" after reading differing points of view.

Seeking Alpha can be good for getting breaking earnings news as well as some full conference call transcripts and slides for stocks. This is factual information that isn't tainted by a beginner writer just trying to get clicks by writing a controversial opinion of a stock. So, the Seeking Alpha site can be used to get this type of information which might not be readily available anywhere else.

If you use Seeking Alpha, you need to spend time to get acquainted with what types of information is available there and what can be trusted and what can not. Its a free website which is good but it means you have to be extra careful to learn how to use it properly so you are not getting fooled by inaccurate information or analysis. Go slow and use it as an ADDITIONAL source of information....not the ONLY information you use to research stocks!

I've Been Waiting For The Market To Drop For Years!

2017-08-20T05:09:00.003-07:00

You hear it all the time: the stock market will correct at some point. There will be a significant downturn. Stocks can't keep going up forever. Corrections are good and they will happen. When everyone else is panicking and selling, that is the time when you should think about buying.

And like a fool (it seems), I have been waiting for this to happen for years now. Waiting for the market to take some sort of a significant drop so that I can buy in and get a lower (maybe better?) price for the stocks I want to buy. But no.....the market seems to just keep going up.

The end result is that I have lost a lot of money. Not money I have actually lost but lost in the sense that I could have made it and didn't.

Its easy to look at any historical stock chart and point to the places where a person should have bought a stock. But in real life we don't have that hindsight. We don't know when the market is going to go up, down, keep going up, or turn around. We can only guess.

With this bull market going on 8+ years now, I have been guessing wrong for a long time and feel a bit like an idiot. There are so many stocks I could have bought and wanted to buy but held off on hoping for a better price. Hoping to get them when the market took its inevitable correction that has never come.

I have lots of cash to invest but the question for years now has been: should I buy here near or at the market's top or wait for that pullback? That pullback that never seems to come but I know is out there somewhere.

Robinhood: Free Is Not The Best Choice

2017-07-19T05:43:00.003-07:00

The Internet has created a mentality that everything should be free. People don't want to pay for anything anymore it seems, and that is especially true of millennials.

In the world of stock trading, investors have never had it so good. I guess the vast majority don't remember the time (before the Internet) when you had to physically go into a broker, talk to someone, and hand them a check to open an account. Making a trade meant you had to pick up the phone and again actually talk to a real person who would place the trade. The cost? At least $30 with the cheapest brokers and higher for others.

Full service brokers (which are still around) charge A LOT more than that per trade because you get to talk to your personal financial expert at any time plus you get access to the companies proprietary research. But I assume full service brokers are a dying industry which just caters to old, rich folk.

Online Discount Brokers Made It Very Cheap

Now in 2017 we have had online discount brokers for a good 15 years or longer and the trading fees for those keep going down. Most charge between $4.95 and $9.99 per trade which is dirt cheap compared to prices of yesteryear. Thats significantly cheaper than it used to cost and you can do it all online by yourself and make the trades almost instantly.

But even cheap isn't good enough anymore so Robinhood had to give free trading a go. Free is always better with the younger crowd and so the service is doing well I hear in getting customers. But is Robinhood a real stock broker where you would want to put serious savings and retirement money?

Robinhood Is NOT For Serious Investors!

I hate to break it to you but Robinhood is not a place you should put any real savings that you wish to preserve and grow. Its a site for beginners who want to put a few dollars into the market and who probably have zero stock market experience and want to avoid all fees. Its for people who want to play around in the stock market and buy a few shares here and there. I mean, if you only have $100 dollars to invest I guess avoiding the fees makes sense.

Anyone serious about investing should stay clear of Robinhood and go with any one of the more traditional online discount brokers (E*Trade, TD Ameritrade, Scottrade, etc). You'll get more services, access to more training, better analytics, more comfort at night knowing your money is really safe, access to more stocks to trade, and better prices with any of the mainstream brokers.

It can be looked at this way: Robinhood is for kids and the main discount brokers are for adults.

First Time Investors Who Bought Snap Are Getting Burned

2017-04-12T10:21:00.000-07:00

It must suck to buy your first stock ever and have it go down right away. But thats what happens when you buy Snap (the company that owns Snapchat) without doing some real homework to find out whether what you are buying is a smart investment.

I assume that many millennials who had never bought any stock before were a decent percentage of those that chose to buy Snap. Caught up in the hype, they just couldn't stay away from putting their money down on a company who's future is very uncertain.

Anyone who bought Snapchat that first day paid a minimum of $24 and could have paid as much as $29 and change. And after that first day the stock has done nothing but go dow. It now sits at $20 and change which represents a minimum loss of at least 15% in one short month. Not a fun way to start out if you are a first time investor.

But this bad investment could have been avoided if only some research and thought were done:

1) The most fanatical Snapchat users are 12 to 14 year olds and they are NOT the target market most advertisers want because they don't bother looking at ads.

2) Snap itself went out of its way to classify itself as a "camera" company in the initial S-1 documents filed with the SEC. A camera company? I thought Snapchat was a social media company and their unwillingness to call themselves that might have put up a red flag or two.

3) There where dozens upon dozens of articles posted and easily found on the Internet prior to the IPO that detailed why SNAP was a lousy investment. These weren't written by suspect and unheard of websites but by many mainstream financial news outlets like Forbes, Wall Street Journal, Business Insider and others.

What I'm saying is that we have a repeat of what happened with Facebook, Twitter, and Alibaba which were each stocks that brought in a lot of novice first time investors. In Facebook's case, the stock went down initially but turned out to be a great long term investment. Twitter has been a disaster and Alibaba has turned to all right if you were willing to withstand a frightening ride down before going back up. But in each case, investors have had to weather some scary price drops.

Snapchat may or may not end up being a long term investment but with the short attention span and propensity to make frequent trades we see in today's millennials, it is doubtful that many of them will own the stock long enough to make money on it if the stock ever goes go back up.

Some Investors Buy Stocks Only Because They Think/Hope Those Companies Will Be Acquired

2017-02-02T06:05:00.001-08:00

Can you predict what companies will get bought out by other bigger companies? Its a hard thing to do and there is a lot of risk because without any insider information, it is unlikely that a normal everyday investor will be able to predict such things. Buying a stock just for the chance that it will get bought out at a higher price is something investors do, but with a low success rate.

Many stocks are periodically buoyed by rumors that they will be bought out and it is one of the main reasons why Twitter's stock keeps going up and down. You see, when a rumor spreads that there is a new buyout investor interested in Twitter, investors pile in hoping that the buyout price will be higher than the stock trades for currently. But with Twitter, those rumors never seem to come to fruition and alas, the stock retreats back down until the next rumor of a potential buyer surfaces.

Some other companies have a history of being talked about as buyout candidates and it undoubtedly helps their stock prices:

1) Netflix is often discussed as a target of Apple as Apple seems to be interested in getting into the content creation game. Buying Netflix would solve that problem in one fell swoop. Google and Disney are two others that could be interested according to the rumor mill.

2) Barnes & Noble is suffering, as all bookstores are, because Amazon continues to grow and gain popularity. Now that Amazon seems intent on opening real stores in select cities, might they just buy B&N and save the trouble of building their own stores? Its possible and some people think it could happen.

3) Lulumon & Under Armour are being bandied about as a possible merger due to neither doing that well on their own. UA especially, is struggling as their most recent earnings report caused the stock to drop more than 20% in one day. Could the two companies decide that together they are stronger than they are separately? (A merger might not make either stock holder any immediate money, unlike buyouts that are usually done at higher prices than the company being bought trades for)

4) Sears is struggling and has been for years. The stock is a small fraction of what it was 10 years ago. But could some company come in and try to save at least part of the very famous retailer? Obviously what Sears has been doing hasn't worked but the "Sears" name is still a well known brand that could be worth the risk for a company that wanted to save the parts of the business that are still making money.

Buying a stock in hopes that it will get bought out at a higher price is a strategy that is very hard to succeed at. Its something that only sophisticated investors should try and even then, the failure rate will be high. For most investors, sticking with picking stocks of good companies that will go up in the long run is by far the better course of action

ETF's Have Overtaken Stocks In Popularity?

2017-01-16T05:56:00.001-08:00

The stock markets in the U.S. (such as NYSE and NASDAQ) used to be where you went to buy individual stocks in the companies you wanted to invest in. While you could also buy mutual funds and ETF's, it was stocks that were the most heavily traded and took in the most dollars.

But now it seems that ETF's have pushed individual stocks aside to claim the number one spot according to this article in Bloomberg. The number of exchange traded funds have exploded in recent years and obviously people like the fact that you can buy and sell them as easily as any stock and get a bit more diversity (depending on what you buy) than individual stocks.

There are now close to 2000 ETF's to choose from and I ask the question: with that many choices, how on earth does an investor go about choosing one? I have always liked individual stocks because they are easy to understand. If you like what Netflix sells, you can buy the companies stock. If you like what Chipotle sells, you can buy its stock. Its relatively easy to figure out what businesses or business models you like and buy the stocks of those companies.

But with exchange traded funds it becomes a bit harder to identify exactly what you are getting. ETF's track different indexes or segments of the market so you will be buying something more diversified than one companies stock. If you want to buy into the technology sector for instance, you will need to decide on one of the many ETF's that track technology. But how do you decide which one to buy? Is it easy to understand the exact differences between all the technology ETF's? I don't think so.

Maybe I am naive but I think its easier to pick one company I like rather than the ETF I want to buy. That's why I'm sticking mostly with individual stocks. Obviously though, many investors feel differently and like exchange traded funds because they are easy to buy/sell and are just as cheap (fee wise) as stocks. You can buy a whole industry and sit back and not worry about this or that particular company like you might feel prone to do with stocks. You might also fell less of an urge to panic sell at every bit of bad news. That makes ETF's a good choice for anyone who doesn't want the hassle of having to look at a portfolio every day or week just to check their stocks to see what is going on with them.

Beginner Investors Should Start By Buying SPY Or VTI

2016-12-05T06:29:00.002-08:00

For most people exploring the stock market for the first time, it is probably best that they steer clear of individual stocks. It takes time and effort to pick the companies that you think will do well in future years. In addition to that, it takes more time to monitor how your stock picks are doing. You will need to periodically evaluate whether things have gotten worse or better for the companies you choose and figure out whether you should continue to hold or perhaps sell.

In other words, learning how to successfully invest your money in the stock market by buying and selling individual stocks takes commitment and is something that is learned over years, not weeks or months.

Is There A Better Way?

I suggest a better, safer, and easier way for beginners to get started: just invest in the whole market which you can do by buying either the SPY or VTI exchange traded funds (ETF).

ETF's are traded just like individual stocks: you can buy or sell any amount of shares at any time the market is open. They cost the same to trade as a stock (there are no hidden fees like mutual funds) and give you exposure to many stocks all under one ticker symbol.

1) SPY closely tracks the S&P 500 index which is many/most of the big companies in the United States. In other words, when the market goes down so does SPY. And similarly, when the market goes up, so does SPY.

2) VTI is another ETF that closely mirrors the market. It trades just like a stock and is super easy to buy and sell.

ETF's Are Best For Beginners

These are just a couple of the ETF's you can find that mirror the market or mirror part of the market. ETF's have become so popular that there are many to choose from and you can find a lot more with just a little research. But the important thing to understand is that you get exposure to the stock market without having to fret over what individual stocks to buy. You also get instant diversity that you don't get when you buy only individual stocks.

Beginners have a lot to learn when entering the world of stocks and can often get intimidated. This leads to many potential investors quitting before they ever get started. By buying a market tracking ETF, you get a simple and trustworthy way to put your money to work in the stock market without getting sidetracked and overwhelmed. Oh, by the way, Warren Buffett (legendary investor) also recommends ETF's over individual stocks for most investors.

Trump Will Be A Disaster For Stocks! Wait, Let Me Change My Mind

2016-11-15T03:37:00.001-08:00

To most everyone's surprise Donald Trump won the election and will be the next president of the United States. The stock market clearly wanted Hillary Clinton to win as you can find an endless number of articles online detailing why Trump would/will be a disaster for the markets.

During the most tense hours of election night, when it was becoming clear that Trump had the upper hand and would likely win, the stock futures were down a solid 5%. That meant that the next morning every stock investor would likely wake up to a portfolio that was significantly smaller than when they went to bed.

But sometime during the rest of the night and early morning, investors started to rethink things and decided that maybe things weren't really as bad as first imagined. Maybe, just maybe, a Trump presidency might NOT be the end of the world after all.

What happened to change people's minds?

1) I think first of all, people started to remember Brexit which happened less than five months ago. While the stock market did dive deeply on that news, it only took a couple of days for things to shoot back up and normalize. Since then, the Brexit fear mongering news has completely died down and is hardly in our conscious anymore. There still might be some tough times ahead for the UK as things unwind and the fallout from the decision to break away becomes more clear but, so far at least, Brexit has clearly NOT been the disaster that so many people predicted.

2) Investors also began to realize that Trump is a businessman, is generally pro-business, and may in fact enact a lot of changes that will actually be good for business. We've tried eight years of Obama and that hasn't turned out so well economically for much of middle class America. Investors probably started to understand that this is the first time in a long while that we are going to have a President that understands business and isn't a career politician.

3) Finally, while the market is forward looking, nothing Trump does will happen right away. It will be two months before he is in office and probably months after that before any significant changes are made. If they ever are made. It is likely that Candidate Trump was more harsh in his rhetoric than his actual policies will end up being. After all, during a campaign, politicians say anything to get elected but once in office they calm down and rarely follow through on their most divisive plans. This will probably be the case with President Trump as well.

The stock market is a crazy place where emotions can get the best of you very quickly. Its best to never trade on fear or panic and this time it seems investors got their emotions from election night under control the next day. That was a disappointment for me because I was hoping to do some buying on the morning of November 9th but stocks never went on sale like I hoped they would.

Are You Ready For Armageddon In The Markets?

2016-09-01T09:30:00.001-07:00

This is one of the most negative periods sentiment wise I have ever seen. Every day there you can find news pieces in the financial sections outlining why someone else thinks the markets are going take a precipitous dive. We have the always negative Marc Faber predicting a 50% drop (Marc Faber Issues 50% Crash Warning on Stock Markets) and others telling you Why the Stock Market Could Be Headed for a 1987-like Crash.

Besides some quick spurts down and back up, the markets have gone up steadily from the beginning of 2009. For me, whenever the market is at all time highs, its easy to let my imagination take over and believe that things are too good and have to revert back to the mean. Its easy to see The Biggest 2016 Stock Market Crash Warning We've Seen Yet and believe it. Its easy to read about the 5 Fund Managers Expecting a Market Crash and start to get scared, which is what a lot of people are feeling now.

The word "crash" is being used A LOT now, instead of the word(s) "correction" or "pull back" that used to be bandied about. Corrections and pull backs are often thought of to be healthy for a stock market while a "crash" is, well, its a crash. Crashes are never good and UBS: Risk Of Bear Market, And Maybe Crash, Rising also thinks one may be coming our way.

If A Stock Market Crash Is Coming, These Ominous Technical Signs Reveal and there is No Clear Path To Avoiding The Bear, then what are investors to do? If you pull all your money out of the market just because a lot of pundits tell you to be scared, what if they are wrong? Then you will lose a lot of money trying to get back in at even higher prices. And if you decide to leave your money in and the market does crash, then you will lose a lot of money too.

Seems like either way you will potentially lose and that is the reason for all the tension on Wall Street. There are a lot of investors out there that are scratching their heads trying to figure out what to do or not do during this historically ugly month of September for stocks.

This HAS To Be The Top Of The Market!

2016-08-05T11:26:00.003-07:00

The stock market can make fools out of investors. Just when you are sure that things can only get worse, the market will reverse and head back up. That is why trying to time the market is so difficult and most people who try it end up losing or severely underperforming.

Many times in my life I have thought the market was at its top. Its easy to get worried about the economy, political events, terrorism, and a host of other things. Those can all cloud your view on the future and make it easy to believe that the stock market will head down. "How on earth can things get better?" "Surely there will be a multi-year depression or recession." Thoughts like that can lead you to prematurely sell your stocks which may result in losses or at least severely underperforming the market.

For more than 100 years, as the humorous chart below depicts, just holding and staying the course would have gotten the job done: (Click on it for a better and bigger view)

Holding on to stocks when the market is tanking is one of the hardest things an investor can do. After 30 years I still fail to do it all the time. Its just too easy to get swept up in the negativity and when your dark imagination takes over, selling seems like the smart thing to do.

But when the market stabilizes and I fail to recognize it and fail to buy back in, thats when I feel silly and know I have made a mistake. Some experts recommend only looking at your stocks periodically (every month or every quarter) in an effort to suppress that urge to sell. If you spend less time monitoring your stocks, the thinking is that you won't be as tempted to sell.

The chart above shows that buy and hold has worked for more than 100 years. Yet many will have you believe that you need to be an active trader to make money in stocks. But the simple truth is that the longer a time period you have to invest, the greater your chance of outlasting any protracted downturn....if you can resist selling when everyone else is panicking. Its extremely hard to stick with the "buy and hold" strategy but it is something that you should get better at if you are young and have many years ahead of you.

Outrageous Titles Are Now The Norm In Finance Journalism

2016-06-20T11:17:00.001-07:00

As more and more people turn to the Internet for their business and investing news, the fight for eyeballs has become intense. The most popular places to find news about your favorite stocks are websites such as Seeking Alpha, Motley Fool, Business Insider, TheStreet, Forbes, Barron's, and The Wall Street Journal. You can add in a handful of others but in total, there are probably between 10 to 15 websites that pump out hourly stories on any and every stock that might be of interest.

Wth such a competitive environment for your attention, writers have figured out that the more outrageous and provocative they can make their article titles, the more click throughs they can get from readers. And you should know that many of these writers either get paid solely based on how many clicks their articles get or on some sort of combination of base salary plus clicks. The bottom line is that they want you to click on their articles, no matter what and in some/many cases are willing to put suspect titles up just to entice you to do it.

Here is a sampling of a few articles with titles that are nothing more than click bait:

4 Stocks That could Make You Rich
Apple: Is iPhone 7 Already Doomed?
Is Apple Truly Rotten To The Core?
Why Snapchat Will Take Over The World

In each case, the title is just plain silly and pure sensationalism. Of course, that is the plan because such titles are hard to ignore and most likely get substantially more clicks than titles that are less provocative.

It must be remembered that what you read on the Internet, in most cases, is free and when you have so much free "information" to choose from much of it is going to be untrustworthy. Online journalism can hardly be called that anymore as it is often freelancers pumping out words on a page hoping to get clicks. You really need to consider the source now days and over time decide which publications have the more reliable and accurate writers. Anyone who does a lot of stock research online must pay particular attention to the source in order to decide what is worth paying attention to and what should be ignored.

A Silly Question I Get All The Time

2016-05-18T13:27:00.001-07:00

The most common question I get goes something like this: How much money can I make buying and selling stocks?

You can substitute any individual stock in that question as well. In case you don’t know the answer, how much money you can make or lose buying stocks depends on 1) what stock(s) you buy, 2) what price you pay, 3) how many shares you buy, and 4) how much the stock(s) you buy go up or down during the time you own them.

If you can’t understand my answer then you are in trouble. I think it is safe to say that anyone asking such a question understands absolutely zero about the stock market should NOT even think about buying stocks until they learn what it is all about.

Unfortunately with the way the media portrays investing in stocks, beginners often come away believing that frequent trading is the best (and only?) way to make money in the market. From watching CNBC and other financial networks, novice investors might deduce that the correct way to “play” the market is to keep your money moving in and out constantly. But it isn't.

Buying and holding for more than a year not only reduces your tax rate on any gains you may have, it also prevents you from making knee jerk reactions and selling a stock whenever any bad news is announced. There are always instances when something good or bad happens to the companies whose stocks you own. You just simply can't expect to make money by trading individual stocks every time that happens.

For most investors, simply buying an ETF (Exchange Traded Fund) that mirrors the market is probably the best way to put their money to work. Bought and sold just like a stock, ETFs are easily traded and you can find a good summary of some of the main ones here. If you have money to invest, you might consider putting some of it into one or more of those ETFs every month. Buying consistently whether the market goes up or down insures that you have your money in at an average price that isn't too high. And keeping your money in those ETFs over a long period will be a winning strategy as long as the overall market goes up.

Don’t Sell Your Stocks First Thing In The Morning!

2016-03-08T15:11:00.000-08:00

We’ve had some panicky days in the stock market in the last six months. Panic is contagious and when you see that ticker going down day after day, its easy to get caught up in all the negativity. It is understandable that you might decide to sell a stock or two but one thing you should try to avoid is selling first thing in the morning.

Evenings are when a lot of people come home, read or watch the news, look at their portfolios, and make decisions to sell. They often don’t have time to make such decisions at work or have time to execute the trade. That is why they do it in the evenings when the markets are closed. The overnight hours often see the sell orders pile up, especially in times of high market volatility and that will drive stock prices even lower in those first minutes of trading.

If you must input a trade while the market is closed, you might think of putting in a limit order. That way you will never find out later that your stock did sell like you wanted but at an alarmingly low price because of so many sell orders caused by panic in the opening minutes of the market being open.

The best example of this we have seen in a long while was August 24, 2015 when the Dow dropped a breathtaking 1100 points within five minutes of opening. Called a “flash crash” it was a real life example of how panic can get out of control and anyone who sold in that fist 30 minutes Monday morning lost more than they needed to as the market rebounded throughout the day to “only” lose about 500 points.

I used to sell right at the open just like I described above but don’t do it anymore, choosing instead to wait a while to see how things go in the opening hour. That way my sell orders don’t get caught up in any silly selling frenzy and cost me more money than need be.

Fitbit: Great Earnings + Bad Future Guidance = Stock Down 21%

2016-02-24T05:51:00.001-08:00

Beginner stock investors often don't understand why a stock can go down after a company announces great earnings. It happens all the time and it has been happening a lot during this just completed earnings season.

For instance, Apple reported the best quarter in the HISTORY OF CAPITALISM last month and the stock went down! How can that be?

The reason is that investors care more about the future and less about the present and the past. A great example of this is Fitbit (FIT), the maker of wearable fitness devices and a new smartwatch called "Blaze". Fitbit has, by all accounts had a great Christmas quarter: its earnings beat analysts estimate by 45% and its revenue was up more than 92% from the year before. With numbers like that, you would think that the stock would jump up nicely in price the next day.

But in the end, investors only care about the future and on that front Fitbit might have a bit of a problem. Fitbit's guidance was substantially lower than those same analysts had projected and that alone caused the big 21% selloff. You see, who wants to buy into a company that might be slowing down or is projected to do worse than you had hoped? THAT is why the guidance numbers companies give during their earnings call are often more important than the actual numbers from the just completed quarter.

Fitbit is a good company with a some good products but the important question is whether fitness bands with limited functionality have staying power. The company makes a great fitness band but if you need more, is the Blaze enough to lure customers who might just decide to buy an Apple Watch or a Samsung Gear that can do a lot more? Maybe not and that is the concern of investors, especially since the Blaze looks like a cheap imitation of the Apple Watch.

2016: Lots Of Doubt And Pessimism For Stocks

2016-01-05T08:05:00.001-08:00

2016 is here and we started the first day of trading with the biggest loss since 2008. At one point the Dow was down over 400 points before recovering slightly. Now as I write this on 1/5/2016 in the morning, the major markets are slightly in the red again as investors are obviously reluctant to step in and buy with conviction.

2016 is widely being reported as a year where the stock market is going to do much the same as it did in 2015. That means it is going to be volatile with sharp ups and downs and often lacking direction. The narrative being written right now from many sides is that 2016 will be another losing year.

Its never easy to make money in stocks and especially difficult with the whole market going down. The best way to invest from my perspective is to try to always pick companies with solid balance sheets and good products that people like to buy. Then hold those stocks no matter what the overall market does. You may not make money in that type of stock every year but over the long haul, that type of company will win out.

Years like 2015 and now perhaps 2016 will test your mental strength. Many investors just don't have the inner fortitude to hold on to their stocks when the market starts gyrating. The modern investor seems to focus more on short term gains and lacks the risk tolerance to stay strong when things don't go their way. That means the short term losses pile up and they get more involved in a guessing game that they are sure to lose.

Please do understand though, that buying stocks and holding them does take some work in today's quickly moving business environment. New industries and new ideas are constantly popping up that may challenge the companies you own. In other words, you don't want to be the investor who bought Kodak or Nokia only to find after sitting on the stock for 10 to 20 years that those companies are nearly bankrupt, both in ideas and in real dollars. You need to keep abreast of the industries and companies you own to make sure everything is going smoothly.

2016 probably won't be the year investors would like it to be and it may turn out to be one where a lot of defense is needed. But that means you might start searching for those companies that you think will do well in the next five years and see if you can pick up some of their stock at a discount, or at least at a price lower than they were selling for in 2015.

Wall Street: Always Be Skeptical Of What You Read

2015-11-23T11:07:00.001-08:00

With the stock market exploding in popularity, you can now get an almost unlimited amount of stock opinions and recommendations from television, radio, magazines, newspapers, and the Internet. No matter what stock you may be interested in researching, you should be able to find lots of differing opinions.

But always remember, free opinions are usually worth what you pay for them. Nothing!

Take a look at the screen grab I took below of two stories, back to back on the same day about the possible future valuation of GoPro. Apparently one analyst thinks GoPro stock can go down to $15 (from about $20) and another things the stock might go all the way up to $90! Could there be two opinions that are more different than these two? Hardly.

These two headlines demonstrate the wide variety of advice you can get almost daily from the Internet and other sources when you set out to research a stock. It is up to you, the investor, to carefully navigate the waters and decide who and what you believe and why.

Unfortunately, it is often very difficult to figure out which scenario is correct and if any are correct at all. This is because analysts and other "professionals" sound so convincing. It is their job to sound like they absolutely know which direction a stock is going to go and the reasons they give usually sound plausible.

But honestly, many stock market pundits are not much more than glorified salesman trying to drum up sales. That is why you should always be skeptical of everything you read and hear whether it be on TV or the Internet. Don't get too enamored with any one analyst or TV personality because in the end, it is your money you are buying stocks with and not theirs. They are in the business of creating hype and sales in an industry that is always looking for new blood.

Anyone Will Soon Be Able To Invest In Startups And That Is BAD News!

2015-11-09T11:43:00.001-08:00

One thing everyday investors can't do right now is get in on the ground floor of new startups. They also can't get the IPO prices that all the bigwigs get before the companies stock actually opens on that first day of trading on an exchange. Most investors are relegated to buying stocks only when they open up for general trading, often when the first price available is much higher than the insiders got.

But with a new recent ruling from the SEC, opportunities to invest in some startups may soon be available to everyone early on in a companies history. It will sort of be a Kickstarter for startups and honestly, that might be a bad thing for investors who don't understand the risks.

Kickstarter started out as a site where you could go to fund cool new products that needed money to get off the ground. Usually helping them fund their product meant that you were promised the item when and if it was ever finished. But over time the site has had to deal with a lot of fraud, projects that never got off the ground, products that were inferior to what was promised, and a whole lot of other things.

The bottom line is that if you decide to back a Kickstarter project, you should fully be prepared to get nothing back for your money. And that will be the inherent risk anyone takes when investing in a startup as allowed by this new SEC ruling.

Think about this: most people have a hard enough time learning how to manage their portfolios and beat the markets that are full of established companies with long track records and extensive product portfolios. How on earth will investors be able to correctly evaluate new startups where information is limited and there is no history to base any decision on?

Crowdfunding has taken off in recent years and it looks like it is spreading to the investment world. For many, it will mean taking shots and hoping for a miracle. It will also mean that you will open yourself up to potential fraud and other shenanigans. It just seems to me like another way to play the lottery and that many investors will think of it that way. I think this one will fall under the category of "investing for dummies"

Did You Panic And Sell Your Stocks?

2015-10-21T10:06:00.003-07:00

We are not out of the woods yet but the stock market has bounced back from its lows two months ago. Things were admittedly scary from the middle of August to the end of September. A solid five weeks of high volatility with the strong bias to the downside - enough to make an investor of any experience level sick.

It is times like that where you really have to dig deep and make some decisions. Are you a long term investor who trusts that the market will bounce back with time. If so, do you have the conviction to wait things out? Or are you losing too much sleep to hang on to your stocks and feel better selling?

Many Investors Make This Mistake

Too many beginner investors have that get rich quick, make money now gleam in their eyes. They lack patience and have a very low tolerance for risk. They think/hope every stock they buy should go up right after they buy it and when that doesn't happen they get frustrated. Most importantly though, they panic easily and sell at a loss way too often.

In a market correction like we just had (are having), many of the weak investors get flushed out of their stocks. They can't take the pain of losing money and they sell, most often for a loss. To put it very bluntly, these are the people that perhaps shouldn't be in the stock market in the first place.

That's a hard generalization to make but it is true because any time the market goes steadily up for a long period of time like it has since 2009, many people buy stocks because they think it is easy money. They hear about this or that stock in the media, from friends, or somewhere online and they get excited about stocks but they don't do any research. They never learn how the stock market works and never fully comprehend what they are doing.

Short Term Investors Often Lose And Quit

Many of the "investors" who just panicked and got flushed out of the market will quit and never come back. They will think it is too risky, that it is all rigged against them, that it is just gambling, and/or that it is way too hard for them to ever understand. They are likely frustrated and many will stay away for years or even for the rest of their life.

Now that they are gone, the market is slowly coming back. But they are out. Their losses are booked and they have lost. They never made the effort to try to understand what makes a successful stock investor as they were, undoubtedly more concerned with the short term gain they thought they could make. They never bothered to take the time and realize that stock investing is hard. There is a lifetime of profits out there for those who are a little less short sited.

Investors Love Tech IPO's - Here Is A List Of Potential Offerings For 2016

2015-08-17T10:49:00.002-07:00

One thing is for sure now days and that is that tech IPO's are hot and get a lot of media coverage. There is something about technology companies that take hold of investor's imaginations and make them see the future as being extremely bright....often a lot brighter than the reality.

How else do you explain Amazon, Tesla, Netflix, and a host of other tech companies that have valuations bordering on stupidity? Look at the astounding hype Alibaba received leading up to its IPO and then look at the stock's price today. BABA opened for trading on day 1 at $92.70 and sits at $75.06 as I write this. Definitely NOT a good investment so far!

Some other recent (within the last few years) tech IPO's include LinkedIn, Facebook, Twitter, Box, GoPro, and FitBit. Many of these stocks started off strong but have come down measurably from their highs. If the market hits a much anticipated correction, I fear what may happen to stocks like these with their inflated P/E ratios.

It seems fair to say that future technology IPO's in 2015 and 2016 will continue to garner more than their share of hype and interest, just because that seems to be what captures investor's imaginations. Potential IPO's coming in the months ahead include Spotify, Airbnb, Snapchat, Pinterest, Uber, and maybe even Xiaomi in a year or two. Here is a list of potential IPO's from the tech world that you will want to keep your eye on if that is what you like to invest in.

Investing In Mutual Funds May Not Be The Best Idea

2015-06-01T11:59:00.002-07:00

Conventional wisdom has often taught that mutual funds are the best place for investors to put their money. It doesn't matter whether you are a beginner just getting started or someone who has been investing for years, the thinking is that you will do better when a "professional" manages your money. This is because mutual fund managers study the stocks for a living and you, the common investor, surely don't have the time or the knowledge to do that.

But new research shows that fund managers aren't that great after all. Many, if not most of them can't even beat the market averages and when you add to that the fees they charge, it becomes clear that mutual funds should be bought with extreme caution. Perhaps, if individual stock picking isn't your thing, you should dollar cost average into an ETF that mirrors one of the major averages.

I have long avoided mutual funds because to me they seem as hard to pick as individual stocks. The proliferation of funds, all holding 20 or more stocks within them, make differentiating the good ones from the bad ones extremely difficult. At least for me.

Exchange traded funds have boomed in recent years and replaced the popularity of mutual funds for many investors who like the lower fees and the fact that you can trade them just like stocks. Additionally, in many cases it is easier to understand exactly what you are investing in because you can pick ETF's that encompass just certain industries, averages, or other things like high paying dividend stocks. If you want to invest in one specific area of the market, there is probably an ETF for that.

Mutual funds will probably be around for many years and the industry itself will fight tooth and nail to keep them alive. Wall Street will always try to convince you that the professionals know more than you do and that you should trust your saving with them. Commissions are what fund managers feast on and they don't want to lose your money.

But maybe you should think seriously about whether mutual funds are the right place to put your money. Those fees add up quickly and you should closely monitor the performance of your fund(s). Warren Buffet has said many times that just putting your money in an ETF that tracks the market is the best place for most investors. Whether young or old, beginner or experienced, rich or poor, it might be time to reevaluate your investment strategies.

Millennials Are Being Taught To Trade Stocks Rather Than Buy And Hold

2015-04-05T06:42:00.001-07:00

It used to be that buy and hold was king. Now that stock investing strategy is pretty much dead, if the powers that be have any say in it.

Take a look at sites like GetBucks.com, Kapitall.com, and Invstr.com and you will see what the younger generations are being sold. Those sites are teaching young investors to trade stocks on their phones and trying to get them excited about the thrill and rush of being in the stock market game. You can start with a free account and free virtual dollars in each of them but clearly, the hope is to get you to load up real dollars and trade for real.

The stock market and investing in stocks isn't a game but increasingly the industry wants you to view it as such. The deep discount brokers, CNBC, Bloomberg TV, and all the other heavyweight industry titans hope to get you excited about trading stocks. Buying and holding is boring and extremely "hands off". The only way to be "hands on" with your investments is to buy and sell on at least a relatively frequent basis. That what they want you to believe.

Have you watch Cramer lately on CNBC? Now thats the biggest hype guy out there. For the last 3 months or so he has repeatedly stressed that with AAPL you need to buy and hold that stock and NOT trade it. Stressing the "buy and hold" is apparently so different than what you would do with other stocks that he needs to continually make a big deal of it.

In today's society, so many people are addicted to their device screens and this is especially true for 20 to 40 year olds. Instant gratification is what everyone craves and demands. That is why trading stocks is so popular. You get in, you get out, and you see a result right away. EXCITING!

Buy and hold? Thats old school now and not the way its done anymore. Its too bad because in my life I have made most of my money by buying good companies and holding on for a year or more. I take those dividends and put them away for retirement or use them to buy more stock. Buy and hold isn't dead with me but to new investors they might never have a chance to even understand that is even an option.

CNBC Is Losing Popularity And That Is A Good Thing

2015-02-20T06:39:00.001-08:00

CNBC for a long time now has been the most popular network for investors looking to get non stop coverage of the stock markets. They have the fancy sets and the pretty anchors who make the network look like it is right out of Hollywood, not Wall Street. They parade a constant stream of guest analysts before the cameras who are more than willing to give their opinions and stock picks while giving their firms some free publicity.

But recently it seems, CNBC's popularity has been declining and I have to say that that is very good news. That is because I think watching that network day after day is a total waste of time that will hurt your ability to think clearly and make the best stock decisions you can.

One thing that CNBC does is give the viewer the impression that you've got to be an active trader to be a good investor. You have to be making moves all the time, buying the good stocks and selling the bad ones out of your portfolio. Just sitting and doing nothing is boring and the industry makes more money when you are active and paying fees and commissions.

CNBC is a constant barrage of information that is overwhelming when you watch it for any length of time. It makes you want to get on your computer and push the "buy" and "sell" buttons just because this or that pundit told you he/she thinks that is the right move.

Investors of most levels are too easily swayed into buying stocks just because they see someone on television recommending them. Analyzing a company and trying to figure out the future prospects of a stock is difficult and beyond the ability of many investors. Thus they watch CNBC and do as they are told by the so called "experts" who most often have no skin in the game.

I suggest you turn off CNBC or severely limit your time watching it. Instead spend that time reading all you can about the economy and thinking about what industries will have a strong future in the coming years. Learn what companies are the leaders in those industries and find out all you can about those companies. Pay keen attention to what people are wearing, doing, eating, and how they are spending their time. Try to identify the companies that are growing or will grow as they satisfy future customer demands. Those are the stocks that you might think about buying.

Or you can just put your money every month into index funds which have been proven to outperform most professional money managers. The important thing is though, to stay away from frequent trading based on what you see the "pros" recommending on CNBC.

WHERE TO GET GOOD STOCK MARKET INFORMATION

2015-01-06T05:45:00.000-08:00

If you are a beginner just getting interested in the stock market, you need a good place to go to get quality information all in one spot. And preferably it should be free!

That is what you have with Morningstar.com which is a website where you can sign up for free and get just about all the news stories and stock information you would ever need as a beginner. They also have a premium account for about $15 a month which has a lot of added features but there is no real need for that if you are someone who is just starting out.

The Morningstar company has been around since 1984 and it is one of the all purpose investments firms on the Internet that provides a wide array of services. They are well known for their stock analysis (which you only get with the Premium account), but with the free account you get all sorts of useful things that will help you get on your feet and on your way to understanding the market.

All Your Financial News In One Place!

Morningstar is great for the stock news they put out and that is why signing up for free seems to be a no-brainer. Rather than scouring the Net everyday for your stock and business news, now you can get it all in one place. My favorite is the section they have every week which takes you directly to their most popular articles which sometimes includes videos.

If you are saving for retirement (you should be!) then Morningstar has frequent news and reports on how to better do that. Saving and growing your money in today's world is big challenge and harder than ever with interest rates so low. Having access to reliable and trustworthy news from Morningstar is great to have and most of that information is available with the free account.

Other Morninstar Features

Are you interested in tracking some of your favorite stocks? You can do that for free by creating your own portfolio and that gives you access to all the latest news for each of those stocks.

Are you a social person who wants to talk and read about what other members are saying? They have a large, active forum that comes with the fee membership where you can connect with other like minded investors.

Do you want to know what the Morningstar analysts are saying about your stocks or industries? There is an absolute ton of analysis available on the site but most of it comes with the Premium membership.

Is Morningstar Good For Beginners?

Yes it is because with all the dubious websites on the Internet today, you can rest assured that Morningstar is a reputable one. It is a great site for beginners who want to begin learning how to buy stocks. The news and information you get there will help you understand what is going on in the market and be your daily learning center. Even if you never pay mre for a Premium account, the easy access to all sorts of business and stock news will help you reduce that learning curve.

Of course Morningstar is also great for established investors as well who want stock analysis from one of the leading online investment websites.

DON'T GET FOOLED BY THESE INTELLIGENT SOUNDING (but mostly meaningless) STOCK PHRASES

2015-01-06T05:44:00.001-08:00

One of the things that makes it hard for beginners to get started buying stocks is the intimidation factor. Just watch an hour of CNBC and you will hear all sorts of stock market terminology bandied about by anchors and guests all wearing fancy suits who sound educated and extremely knowledgable.

Its enough to stop a beginner in their tracks and make them give up before they ever get started.

Some of the fancy verbiage you will hear time and time again but may wonder what it really means. It all sounds intelligent (and even seems to make sense) until you really break it down and analyze it. These "sayings"/fancy words include:

1) "The easy money has already been made"
2) A stock is "overbought" or "oversold"
3) "You should buy on weakness"
4) "The market is in a bottoming process"
5) "There is a lot of cash on the sidelines"
6) "We are constructive on the market"
7) "Cautiously optimistic"
8) "Its a stock pickers market"
9) "Stocks are down on profit taking"
10) "We are taking a wait and see approach"

You can find more silly stock phrases in this very well written article that also explains why they are so meaningless. These phrases / words are used to make the analyst sound smart without having him/her commit to any real opinion.

The stock market has its own language and those in the industry who are out there on all the different media are good at using it to convince you, the homegrown average investor, that they are smarter than you are. In many cases they may be (about the stock market) as it is their job but I hate the fact that they often use such meaningless jargon while trying to make themselves look more "in the know" than they really are.

Is Dow 18,000 Just A Matter Of Time?

2014-11-03T09:41:00.001-08:00

If you've been waiting for a significant pullback in the market to buy stocks, you have been waiting a long time. The market continues to defy gravity and that quick 1000 point drop we had at the end of September into the beginning of October seems to be long forgotten. Its amazing how stocks have kept going up since 2009, no matter how much uncertainty there was/is in the world.

For all those years, it has been quite easy to make money in stocks as so many of them have gone up. Tossing darts at a stock board really would have worked! But that can't last forever.

I think 18,000 on the Dow will happen, if not this year then real early next year. I just have the feeling we will get there. But after that, the hurdle over 18,000 might take a while to get over.

Take a look at the Dow chart below and see that every new 1,000 point hurdle is taking longer and longer to get over. 13,000 to 14,000 was real quick. 14,000 to 15,000 took a bit longer but still took very little time. 15,000 to 16,000 took more than double the time of the other two and 16,000 to 17,000 took even longer than that.

Depending how the elections go November on 4th, Dow 18,000 will probably come quicker if Republicans win both the Senate and House. That is because they are seen as being friendlier to business and lower taxes. But no matter who wins, I think Dow 18, 000 WILL happen within the next 4 months.

After that though, the euphoria may really wear off as investors decide to take gains and wait to see what the new year has planned. Nothing in world seems to be going to smoothly right now and fear about the economy (in many countries) as well as terrorism and wars may finally get the better of investors's unbridled optimism.

Disclaimer: Please remember, this is just my opinion and I hope I'm wrong and the markets continue to go up. But before you buy stocks or open any broker accounts, make sure you consult a financial planner or at least do your own homework so that you understand what you are doing.