Looking to get into buying/trading some stocks with the intent on investing a bit of extra money laying around.
Just looking for advice for beginners really.
Have no idea how the stock market works. Any good reference tools or apps that will allow me to play around with it a bit?
Google Finance: Stock market quotes, news, currency conversions & more
Lovin google finance, its easy to use for playing around with the stocks. I would create a few different portfolios with however much money you want to invest and track maybe 5 or so stocks in each over the next week to start. Things such as market cap, volume of trades, 52-week moving average are a few of the basic metrics to watch out for.
Read this and never worry about buying/trading individual stocks ever again: The Bogleheads Guide to Investing: Taylor Larimore, Mel Lindauer, Michael LeBoeuf, John C. Bogle: 9780470067369: Amazon.com: Books
Unless you want to spend all of your life doing this, take Warren Buffet's advice. When he dies, he wants 90% of his wife's assets invested in the S&P 500, with 10% in short to medium term bonds.
Pick one of these three stocks:
If you want a book on investing, I recently found this book and it's completely changed how I look at the world. Must read for anyone living in a capitalist system: The Richest Man In Babylon.
Last edited by Himeo; 07-04-2014 at 04:24 PM.
OP, find yourself some good indexed funds (lowest fees) and dollar cost average yourself to $$ is the TLDR version of most starter books. Stay away from Dow indexes IMO you get better diversification and growth in S&P or one of the many Russell variants.
So, seven months later, how did the inventing turn out? Did you make mad cash?
A lot of junior mining/exploration companies are trading for insanely cheap right now.
Bear markets are the authors of bull markets, the brutal bear markets for mining commodities is going to lead to an insane bull market and people are going to be shifting their Krispy Kreme Donut stock into companies that produce the materials that are necessary for society to function.
When will that happen? I'm not too sure, but I certainly am well positioned for it.
What are your recommendations?
I can see higher Platinum, Palladium, and Uranium prices in the future. These are commodities that the growing middle class in countries like China and India will need a lot of for their application in industry and energy production. Big money is eventually going to flow back into the natural resource sector and it's not a matter of if it happens but a matter of when it happens. Commodities are highly cyclical in nature and if you can get in somewhere near the bottom of a cycle you're going to be sitting fairly well off once sentiment changes.
dml.to and mga.to are my biggest holdings, for what its worth.
“Be fearful when others are greedy and be greedy when others are fearful”
― Warren Buffett
Personally I see a lot of these high flying bio-tech and social media stocks selling off in a big way and that money will then flow into infrastructure/energy/commodities which are going to become incredibly important over the next decade as millions of people pull themselves out of poverty and into a middle class lifestyle around the globe.
Last edited by Strifen; 08-02-2014 at 10:58 PM.
Alibaba IPO tomorrow morning. Estimates are saying it will be $68ish a share. Yea or nay to buying?
Why isn't a strictly Chinese company going public on the Chinese stock market?
PSN: Araxen, Xbox Live: Araxen II, WiiU: Araxen, Steam: Araxen
I'll open up a question that has stirred debate for ages when I bring it up to my circle of friends.
What is a stock's value, and why is it valuable?
And you must be absolutely precise. If a stock doesn't pay or likely will never pay dividends in your lifetime (GOOG never does, for example), then why would you buy this stock? You can't answer 'to sell it for higher' because that's simply passing the hot potato onward. What is the real value in a stock if it pays no dividend or will not in your lifetime? You will realize no value if the company sees more profit - i.e., you will realize none of that profit. The only thing you can do is sell it to another, who then sells it to another. On and on, like the hot potato. It's a giant ponzi scheme.
The answer to this question underscores everything illusory in our entire socioeconomic system, of capitalism.
What is the value of value?
It's only value lies in selling it to someone else, and that someone else realizes value insofar that he or she thinks it can be sold to yet another someone else. That's it. This 'market' is a complete fabrication because the good being sold wouldn't exist without the market for the damned good. I use 'good' here very loosely.
At least with dividends you get some realization, some connection to company success. Otherwise it's complete ponzi, where the only 'value' is getting a leg up on another person, who thinks they can get a leg up on another - a giant circle of people exploiting one another with an object that has no value outside of the people trying to do the exploiting.
It's rather hilarious when you think about it.
Everyone buys stocks hoping the company will buy them back or the company will be bought. Sure.
You can buy controlling interest in a corporation when you buy enough stock (depending on existence of different classes of stocks and what powers they grant. But different classes dilute the price or destroy it all together). As long as that is the case, some people will want to purchase as much stock as possible in order to obtain control. And as long as there are people willing to buy then the asset has some value.
Maybe your question is why anyone would want to own a tiny share of a company. A big reason is that running a company takes a lot of time, and if all you care about is cashing in on their profits, then you might as well invest in stocks and diversify. You give up any possibility of influencing a company's direction, but that may not be what you care about to begin with.
Notably, you don't just realize profits from dividends. If Amazon invests all their money in expanding, then that means their future expected profits are going to be higher (as long as you think they invest the money wisely). You might as well ask why a company keeps investing its money in hopes of making even more money down the road, when they could just stop with the business they have and cash in on their profits (aka turning into cable companies). Paying dividends may actually signal that they don't have opportunities for growth, which may be a bad signal for the future. I'd rather invest in a company that sees opportunities for growth everywhere than one that can't find things to put their money toward and has to send it back to investors.
You can expect to sell stocks to others at any time (because there are always some who will start retirement, and others who will save for retirement -- on top of institutional investors), but that's meaningful for liquidity (the ease of selling) and has nothing to do with where stocks derive their value from. It's not like gold, where the only value is that you expect someone else to buy it from you. It really is backed by ownership of the company.
Ah I think you may have misunderstood the question. All of that is understood and a given.
Ownership of a company, unless it's a meaningful amount to influence the company's direction (and even then, you'd have to get the board to pay out dividends), is of no value to a normal trader unless the company pays dividends on the stock. 'Just owning it', even if the company grows, is completely worthless. The only way it's worth anything is if you actually sell the stock in the company to a buyer. The only 'value' seen in stock without dividends is thus realized only when sold. There's no other value in it whatsoever; you see no gains in the profit of the company, and there's obviously no use-value.
One could say the thing, the stock, only exists because the market exists for it; that is, the stock without dividends only exists because buyers and sellers try to game each other, each getting a higher and lower price, respectively. There's no other value to the stock except the buying and selling of it. There's no connection to the company's increasing or decreasing profit because it never pays dividends. It may affect the stock price, but people actually buying and selling it may and will likely affect it more.
Investors and people in finance in disagreement often say that stock would be seen as, 'the expected future value or earnings of a company, and that this future value would include the payout of dividends.' So really, you're buying and selling something with the hope that this company would pay dividends in the future. Otherwise, like I said, you're just playing hot potato with something that has no value outside of the game of hot potato.
Or the tl;dr question: okay, you have a small ownership of a company that never pays dividends - now what?
Last edited by Dumar; 09-21-2014 at 05:49 AM.
Clearly misunderstood, hopefully now that everyone's reread what you originally wrote we can make some progress on this.
The distinction between dividend paying and non-paying stocks is very confusing, because you can think of a dividend payout as a forced sale of stocks. If I have 100 shares at $100 (so $10,000) and they pay out $1/share in dividends, then I have 100 shares at $99 ($9,900) and $100 in cash. This is no different from just selling one share, in which case I'd have 99 shares at $100 ($9,900) + $100 in cash. The number of shares is completely meaningless, which is why a company can just do a stock split: if their share price is really high (e.g. $500 per share), they can just split it so that you have twice as many stocks and their value is now $250 per share.
(Incidentally, I've met people who get this horribly wrong: they bought penny stocks because they thought they'd get a lot more shares with their $1,000 than if they bought more expensive stocks.)
Whether I have a claim to this $1 in their cash account or whether they give me $1 in cash is exactly the same. It's true that in one case, I can't directly get the $1 out of their account -- but I can sell my stock to someone else and that $1 claim will be factored into the price the other person is willing to pay.
There's no "gaming" involved. You're going to have a natural turnover of stocks as people (or firms) take on different risk profiles. For example, young investors will want to buy stocks to save for retirement, whereas older investors want to sell stock to finance their retirement.One could say the thing, the stock, only exists because the market exists for it; that is, the stock without dividends only exists because buyers and sellers try to game each other, each getting a higher and lower price, respectively.
Company profits most certainly affect the stock price, which is often accompanied by a range of measures including the price/earnings ratio. But it's generally expected profits that matter, since when you invest in a company today, you care about its profitability tomorrow, not that of yesterday. Individual investors may not think too much about it and when they buy stocks, often pick the companies they like and do business with. That's why the average individual investor loses money in the stock market. It's not at all how the larger players (especially pension funds) act. Large institutional investors spend a LOT of money doing research on companies to predict their future profitability and invest based on that. This is how most of the trillions of dollars in the market are moved, and it's why trading individual stocks essentially means that you think you can do better than the people at all the world's investment firms. Again, explaining why people who invest in individual stocks, on average, lose money: they're not better than the professionals.There's no other value to the stock except the buying and selling of it. There's no connection to the company's increasing or decreasing profit because it never pays dividends. It may affect the stock price, but people actually buying and selling it may and will likely affect it more.
Maybe this is simply a misunderstanding about the company's infinite lifetime? We tend to think of firms as going on forever... so I don't really care about Amazon's profits 100 years from now, but I can tell you that 60 years from now, there's someone who will care about the profits in 2114 (namely the person who starts saving for retirement). There's basically no reason to "close the books" and sell off the firm with all its assets for you to cash out, because there are other people who want to take over ownership of the firm.Or the tl;dr question: okay, you have a small ownership of a company that never pays dividends - now what?
Think of someone who founded his own business and passes it on to his kid. The company doesn't get sold, but the inheritance clearly has value beyond whatever salary the kid can now pay to himself. If he doesn't want to be in the business anymore, he can sell it to someone else. The only difference is that selling a local gardening business is going to be really difficult, whereas selling stocks of a large company takes a fraction of a second.
edit: a Ponzi scheme is something in which you buy something that is inherently without value in hopes that someone else will pay you more for it. Gold is somewhat close to that for people who speculate with it (i.e. who invest in hopes of making a profit), but it has the additional property that it's historically a decent store of value. Bitcoins might be a better example, as it seems primarily an "investment" tool and not a currency at this point. Clearly, both of those are only valuable in the sense that someone else will take them in hopes of selling them for yet more. The same is not true for a stock: owning Amazon is valuable beyond the hope that someone else will pay you more to be the owner of Amazon. It's an actual company with buildings, intellectual property, inventory, employees, and so on.
The fact that, in theory, someone could buy up 50% + 1 share and take control of the company is sufficient for this to not be a ponzi scheme. You don't actually need anyone to go ahead and do that. Note, however, that it's pretty normal for a group of large investors (e.g. pension funds) to have a controlling majority at a shareholder meeting. They do, in fact, set policy there... the fact that you personally don't have enough money in it to go for anything more than the free food doesn't really matter: one of those funds will be happy to take your share if you no longer want it so that they have more say.
By the way: I highly recommend going to a shareholder meeting, if you can. Find a company that's headquartered in your city (or nearby) and buy a single share, then go to the meeting. Most firms also stream them online (and you don't have to be a shareholder to watch), but I think this is kind of worth seeing in person. Plus, free food & beer/wine.
There's a guy in Switzerland who has become semi-famous for owning a couple shares in all the major Swiss firms and going to their meetings. He's probably in his 70s and requests a few minutes of time (which he is entitled to as a shareholder) and goes on to comment about the food and the gift bag. It's usually along the lines of "much better than last year, but at company Y they had a larger selection of wines! Maybe you can fix this for next year."
Last edited by Soriak; 09-21-2014 at 06:57 PM.
Didn't realize I wrote a novel til the end!
Last edited by Dumar; 09-21-2014 at 08:08 PM.
If you put money into a savings account and never withdraw it, what's the value of your savings account?And again I'm stressing the original point: if I buy a non-dividend paying stock that I never sell, what is the value of that stock?
Sure, but now we're just adding another layer of abstraction. Think of it as paying with a credit card: the business is giving you a tangible good in exchange for a claim against your credit card issuer, who in turn provides this service in exchange against a claim on your money. No bills change hand, a few 1s and 0s get flipped on some system, and you walk out with a new chair.No, see you're missing the real point. Money is used to exchange goods and services, an abstraction of value that is quantifiable. If I want to sell this chair I'm sitting in, I'll sell it for some amount of money. If I want to buy a new car, I'll spend a certain amount of money. It quantifies and mediates exchange of tangible objects and activity.
But something did change: the thing you owned appreciated in value. Maybe because they're expected to make more profits in the future, maybe because they found $1m in a seat cushion. You don't really know why the stock price went up or down on any given day (with few exceptions) and some of it may just be random noise. But that doesn't mean nothing is going on over an extended period of time. There's a reason GM stock isn't doing so well while Google's stock is.But the process I used to gain the money was completely illusory and only existed on a market used to exchange a fabricated good, by playing hot potato with some stock. Nothing happened in the real world that provided me this money to buy a chair or car, and yet I am able to do so.
Actually, most people don't sell stocks because they think the value will be lower in the future. Most individuals buy stocks as part of their retirement savings, with money they don't need right now but will need in the future. When they do sell, it's usually because they need that money (or will need it soon and therefore put it into something less risky).Well, we can use euphemisms or other words to describe the process of someone wanting to get a great price vs wanting to sell at the maximum price. Whatever verbage you'd like to use, you're certainly welcome.
You can rationally expect someone to buy the share from you, because the ownership represented by that share has some value. You don't know for sure whether it will be more or less than what you paid, of course. But as long as the company has some value, someone will be interested in buying it. If, in the last case, only to liquidate the company and sell off all their assets. But given that there is someone who will do that, the share has intrinsic value (of at least as much as the company's assets are worth), so ownership becomes rational. You can think of this like the principle of backward induction in game theory: you never need anyone to actually do this, but the mere possibility makes it work.But why do they care? What can they do with AMZN shares? Most tech companies never pay dividends, so what value is their stock to me as an investor unless I sell it, passing along the hot potato? The only argument one can make is that possibly at some future date the firm will pay out dividends, and the present value of the stock price is thus reflected in that expectation. But to me, that sounds like a bogus claim used to explain why a non-dividend stock has any value at all.
What if Dumar's chair business is growing quickly and you currently don't even take a salary for yourself, just so you can reinvest all the money to keep up with growing demand? You wouldn't argue that the company was worthless just because the owner doesn't get paid immediately. There'd clearly be some value in owning a company that is selling ever more stuff.If I sell Dumar's chair business to Soriak, some tangible product or activity gets bought or sold.
Earnings calls are pretty different; wouldn't do that to myself either.I've sat in on ORCL earnings calls. Talk about a waste of time!
To you as an individual investor? Yes, the value of the stock is what you can sell it for. But to the market as a whole, there is very tangible value to the stock. You might call it individually irrational, collectively rational -- but again, the fact that it makes sense for the whole market means it also makes sense for you as an individual. You're not buying on blind faith, you buy with the understanding that there exists a market that manages the property rights for the company.There's no value in buying fractional ownership unless you're planning to sell that fractional ownership to someone else at a higher price. Hot potatoes, everywhere!
Let's take an example where it doesn't quite work so smoothly: the recent IPO of Alibaba. There, you don't actually buy even fractional ownership of the company, because Chinese law doesn't allow foreigners to make those investments in internet companies. Rather, you buy fractional ownership of a fund based in the Caymen Islands. Now that's a leap of faith I wouldn't be willing to make... See here: When Investors Buy Alibaba Shares, They Wont Get What They Paid For | Public Radio East
Now you cannot rely on market forces and instead need faith that (a) Alibaba is going to honor those outstanding claims, (b) in the event that they don't, a Chinese court is going to require them to do so, and (c) a Chinese court is not going to invalidate the whole agreement as illegal to begin with. The whole investing in stocks thing breaks down when you don't have fractional ownership, so that the IPO may well be a Ponzi scheme. It may be one that never ends and the Chinese government may reform their laws and transform those claims into real shares (in which case the problem is resolved)... or not.
Why even engage Dumar on this of all topics? Dirty commie fuck hates everything about our economy.
Market economies don't work because of magic and people really should question things a lot more. Otherwise, you get politicians who think they should open up energy markets by letting consumers choose among suppliers and the market will make things cheaper. Alas, not at all how it works -- and you end up with a perverse system where state-owned utilities raise their prices in an effort to get people to choose from private suppliers, who in turn use nebulous contracts to outright scam people. You just have to look at reviews of energy suppliers in New York and Pennsylvania (the two states I'm familiar with, and where I know this happens) and you'll be hard pressed to find a positive one. It's largely people saying they signed up with a supplier for X rewards program (e.g. frequent flyer miles) and after 2 months, the supplier doubled their rate. (Which, incidentally, is exactly what an economic model with inattention would predict. How many people call up their supplier to ask about next month's rate and cancel if they can find a lower one?)
Even ignoring the whole thing about shady contracts and all the opportunities to scam people, it fails the common sense test: with a state-owned utility company that buys electricity on the market, you have many suppliers and one buyer, known as a monopsony (sort of the opposite of a monopoly). That gives the utility company all the market power, and since it operates as a non-profit, in turn the consumers (aka all residents) get the lowest possible rates. There's just no way a mechanism that introduces profit-maximizing middlemen into the process is going to do anything to drive down prices.
Quite a tangent, to be sure, but I think it goes to show that questioning why markets work (or whether they work at all) serves a useful purpose.
Last edited by Soriak; 09-22-2014 at 04:08 PM.
Any thoughts on Alibaba stock? It's basically the Amazon of China. They had their IPO recently and shares were selling for 92$, now down to about 70$ a share.
Maybe, just once, someone will call me 'Sir' without adding, 'You're making a scene.'
My thoughts are if you bought it at $90+ a share you are an idiot.
That's a roll of the dice stock. It does have tremendous upside, but you are invested through a holding company into a Chinese company so there is a bit of added risk there. I wouldn't recommend a personal investor to get involved with it.
I've been on hiatus due to RL issues and would like to come back to this topic if there's still interest.
Cad: I'm not talking about the definition of what a stock is - everyone already knows this; I'm talking about how it's used in reality. People rarely if ever buy stock for actual fractional ownership of a company.
Soriak: If you're still here, I'll continue. Otherwise I'm not typing another novel!
An investor never buys stock for the purpose of owning a fractional part of a company. There is no upside to purchasing stock if no dividend is paid out because they realize neither current or expected profits paid out from this company. What they do realize, and the only way they can realize it, is if the stock is sold at a higher price because it ticked up, possibly due to that increase in current or expected revenue. That is to say, again in precise language, this investor did not purchase the stock for any ownership - he purchased it only because he could sell it later at a higher price, and that higher price was possibly due to revenues or by something else (media hype, a Goldman bubble, etc).
That is different than what you described. What you described is someone purchasing a stock for the ownership fact itself, when no one ever does this. The stock is bought simply to be sold again at a later date. The stock price may go up or down based on company performance, but the stock itself has no concrete relationship to company earnings as realized by the owner of the stock outside of selling it.
There's no reason whatsoever to purchase non-dividend-paying stock unless you sell it again. This arrangement purely benefits the companies that issue this type of stock - it's an engine for capitalistic growth that's entirely one-sided, outside of the selling of the issued stock on the secondary market once it's been issued (which again, has no concrete relationship back to the company).
Again I ask the same - how is that not a game of hot potato? Or rather, as Taibbi describes, throwing a melon out the window and getting out before it splats.
Last edited by Dumar; 11-12-2014 at 01:47 AM.
I still agree.The stock price may go up or down based on company performance, but the stock itself has no concrete relationship to company earnings as realized by the owner of the stock outside of selling it.
There's no reason whatsoever to purchase non-dividend-paying stock unless you sell it again.
This doesn't follow. The underlying asset that is being traded (the company itself) does have value. It owns, if nothing else, all the machinery, infrastructure, inventory, patents, etc. that keep it going. There's nothing wrong with investing in something where I don't get the payoff, but someone who will buy my share gets it -- and the same logic applies to that person.Again I ask the same - how is that not a game of hot potato? Or rather, as Taibbi describes, throwing a melon out the window and getting out before it splats.
A Ponzi scheme fails because the underlying asset has no value, and the only thing keeping it going is to find new suckers to get into the game.
How does a higher stock price benefit the company?This arrangement purely benefits the companies that issue this type of stock - it's an engine for capitalistic growth that's entirely one-sided, outside of the selling of the issued stock on the secondary market once it's been issued (which again, has no concrete relationship back to the company).
By the way: it's also worth noting that every company pays dividends at some points (or buys back shares), which people generally use to buy more stocks. The number of stocks you hold is completely meaningless... whether you have 100 stocks at $10 a share or 10 stocks at $100 a share makes no difference. Why is this different than not paying dividends in the first place?
Looks like U is on the move, hit $28 over this summer and has rebounded over 50% to $43.5. UXX14 | Commodity Futures Price Chart for Uranium November 2014
Possible it might spike to $100+ over the next 3-4 years in which case a lot of the leveraged miners are going to be 10 baggers.
NDIR.com Average return 48%. I've been doing this since 2003.
Ben Grahams formulas using data miners. simple.
"Woman have the right to understand that they are not to be treated as though they are not understood by those who have great understanding of things like these" -Hillary Clinton
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