Starting off in the stock market
Starting off in the stock market
I have a few thousand dollars of "play" money. I am tempted to just start buying stocks and selling them the next day if they go up by a few dollars. Is that a good way to start or should I read pages after pages of literature?
Please advise
Thanks
Please advise
Thanks
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Re: Starting off in the stock market
I think that would not be a good idea. Will your gains exceed your trading costs? What happens if they go down a few dollars?bonoz wrote:I have a few thousand dollars of "play" money. I am tempted to just start buying stocks and selling them the next day if they go up by a few dollars. Is that a good way to start or should I read pages after pages of literature?
Please advise
Thanks
Honestly, you should read pages and pages of literature. Not because it's some rite of passage to be an informed member of this forum, but because you can learn how to avoid some of the most expensive mistakes a person can make in his life.
Re: Starting off in the stock market
Why not put that money away into a low-cost index fund and hold it there for many years?
Re: Starting off in the stock market
What is your goal for investing the money and when do you plan do use it? No matter what your answer to those questions are, I would not recommend buying stocks and holding for a few days as you mentioned in your OP.
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Re: Starting off in the stock market
IMO, that is a pointless way to lose money. What are you imagining you might learn from this?bonoz wrote:I have a few thousand dollars of "play" money. I am tempted to just start buying stocks and selling them the next day if they go up by a few dollars. Is that a good way to start or should I read pages after pages of literature?
Please advise
Thanks
JW
Retired at Last
Re: Starting off in the stock market
This is the third time you've posted to this forum about doing day trading. All three times, you have been cautioned against it. You have also posted in other threads about buying Facebook at the IPO (again, cautioned against) and also Apple. In the Apple thread, Valuethinker provided many fantastic reading options for you to learn about the stock market. Reading "pages after pages" is a much more cost-effective way to learn than losing your hard-earned money because you gambled it away on stocks.bonoz wrote:I have a few thousand dollars of "play" money. I am tempted to just start buying stocks and selling them the next day if they go up by a few dollars. Is that a good way to start or should I read pages after pages of literature?
Re: Starting off in the stock market
What will you do if they go down the next day?bonoz wrote:I have a few thousand dollars of "play" money. I am tempted to just start buying stocks and selling them the next day if they go up by a few dollars. Is that a good way to start or should I read pages after pages of literature?
Please advise
Thanks
If this was an successful strategy, everyone would do it and no one would read "literature."
JT
Re: Starting off in the stock market
My goal is as follows. I already have some money in a 401k. But this is money just sitting in my IRA. I could put it in an index, and I will put some amount in one, but could I not use some of it for day trading purposes?
Re: Starting off in the stock market
You can, but odds are, it wont work. Don't do it. If you want to take a risk with a few thousand bucks, put the money into something like VGPMX . It is risky, but not that risky, and I think it has a decent shot at doubling or tripling your money in the next few years. Anyway that is the maximum amount of stock speculation I would suggest to someone. That is buying a focused fund that holds a few dozen stocks, largely international, that has declined in NAV significantly recently. If things turn south, you can always hold it for 10 - 15 years. Day trading does not really give you that option as you could get stuck with the next Enron.bonoz wrote:but could I not use some of it for day trading purposes?
70% Global Stocks / 30% Bonds
Re: Starting off in the stock market
Sure you *could* and you easily *could* lose most or all of it. Of course you *could* come out ahead, just like I *could* win the lottery someday. Similarly, you *could* just send your money directly to me.bonoz wrote:But this is money just sitting in my IRA...could I not use some of it for day trading purposes?
The advice you've received here, time and time again, is that you absolutely should not do day trading. Folks have attempted to provide you with much better alternatives for your money (index funds) and I'm glad to hear that you will be taking some of that advice. That said, you keep asking the same question and getting the same answer. Are you really interested in hearing that answer or are you just looking for someone to tell you it's OK? If it's the latter, you are likely in the wrong place.
Note: there is a difference between day-trading (which is universally discouraged 'round these parts) and buying and holding individual stocks (which is generally frowned upon, but can be done with a very small part, say <5% or so, of a portfolio if you know what you're doing).
Re: Starting off in the stock market
I've some penny stocks with buy recommendation sitting in my email...bonoz wrote:I have a few thousand dollars of "play" money. I am tempted to just start buying stocks and selling them the next day if they go up by a few dollars...
Very very cheap.
I can retrieve them from the trash folder if you interested.
Re: Starting off in the stock market
I got the message. Thanks for the advice. Pardon me for asking the same things again.
VGPMX sounds like a nice idea. I'll look more into it.
I guess I could put a small amount of money in stocks and hold onto them for a while.
VGPMX sounds like a nice idea. I'll look more into it.
I guess I could put a small amount of money in stocks and hold onto them for a while.
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Re: Starting off in the stock market
I think you should really evaluate just how "play" this play money is. If you've got one dime of debt you should eliminate it before playing with any money. Same thing applies to any space left in a tax-advantaged account. Once those are taken care of, I would invest it in the 3-fund portfolio in a taxable account and watch the play money grow over an extended period of time.bonoz wrote:I got the message. Thanks for the advice. Pardon me for asking the same things again.
VGPMX sounds like a nice idea. I'll look more into it.
I guess I could put a small amount of money in stocks and hold onto them for a while.
If you want to have a little fun with the money I recommend taking a vacation with it instead of getting involved with day trading. You'll incur taxes on any gains and the fees/commissions for trading are high. Other than creating more work for you accountant, little will be accomplished.
- dratkinson
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Re: Starting off in the stock market
By three methods we may learn wisdom:
First, by reflection, which is noblest;
Second, by imitation, which is easiest;
and third by experience, which is the bitterest.
--Confucius (551 BC - 479 BC) Chinese Philosopher
I lost $10K picking stocks before learning my lesson... that I needed to read the lessons of wiser investors. Every book read has become $thousands saved/earned.
First, by reflection, which is noblest;
Second, by imitation, which is easiest;
and third by experience, which is the bitterest.
--Confucius (551 BC - 479 BC) Chinese Philosopher
I lost $10K picking stocks before learning my lesson... that I needed to read the lessons of wiser investors. Every book read has become $thousands saved/earned.
d.r.a., not dr.a. | I'm a novice investor; you are forewarned.
- nisiprius
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Re: Starting off in the stock market
It is a bad way to start.bonoz wrote:I have a few thousand dollars of "play" money. I am tempted to just start buying stocks and selling them the next day if they go up by a few dollars. Is that a good way to start or should I read pages after pages of literature?
Of course you should read "pages after pages of literature." How many pages of literature do you think Warren Buffett reads? How many "pages of literature" would you read before you spent a few thousand dollars of "play money" on a camera or a computer?
Let me see if I can at least alert you to some mental traps that are easy to fall into.
One is sketched out in your phrase "selling them the next day if they go up by a few dollars." You need to outline your whole strategy. If you only think about what happens if they go up, that's making things way too easy on yourself. What do you do if they do not go up by a few dollars? It sounds as if your strategy is "sell quickly if they go up by a few dollars; if they don't, hang on until they do." What you are missing here is that you thinking only of direction and not magnitude. It is easy to devise gambling "systems" that win much more often than they lose. The problem is that when they win, they win small, and when they lose, they lose big. A strategy that wins $10.00 nine times out of ten is no good if, the tenth time, it loses $1,000.
The second is that you know, or should know, that you can't make money from a fair game that's truly random. So, for any strategy that you devise in your head, you have to ask this question: why won't this strategy work if stock prices were a random walk? You know it can't work, but if it seems, in your head, as if it ought to work for any pattern of stock price movements, then it means there's a flaw in the strategy, even if you can't see what the flaw is. It's like this classic overbalancing perpetual motion machine. It looks as if it ought to work. I'm not sure that I can explain in detail why it doesn't work. But I know that it doesn't and I wouldn't invest even "play money" in it.
The third is the "argument from humility." The stock market is a zero sum game. For every buyer, there is a seller. (Actually it's worse than that because of transaction costs, brokerage fees, etc.) Why, exactly, do you think you are going to get the better in a competition with the professionals who do this for a living and the computers that are looking for arbitrage opportunities that exist only for milliseconds? For that matter, even if you believe you can sense the pulse of the market and outpsych other investors just by watching price moves, surely you must be aware that hundreds of thousands of other people with "play money" are trying to do exactly the same thing. What is your evidence that you, personally, have special talent at this?
Bogleheads do not believe in "trading"--making money by snatching it away from someone else who is trying to make money by snatching it away from us. What we believe is that securities--stocks and bonds--constantly gain value from the success of the businesses that issue them, and that we can be guaranteed to get our fair share of that value by investing in the total market through the use of index mutual funds and ETFs that capture the total market. Some of us would adjust that view to believe there are small but important market inefficiencies that can be captured through strategies based on the "Fama-French" factors and such, but it is still a patient, long-term, "passive" approach, not a quick killing by outsmarting another trader.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
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Re: Starting off in the stock market
Speculating in the stock market? why stop there? proceed directly to the futures exchange and take a hand in gold,silver,oil,copper,pork bellies, orange juice futures, palladium, copper. No quicker way to burn your hard earned money than to just toss it into the wind with the hopes of catching on to a high flyer.bonoz wrote:I have a few thousand dollars of "play" money. I am tempted to just start buying stocks and selling them the next day if they go up by a few dollars. Is that a good way to start or should I read pages after pages of literature?
Please advise
Thanks
You should read the wiki on asset allocation. Better yet, pick up one of the books - Boglehead Guide to Investing, The Four Pillars of Investing - after reading those books, decide if you really want to play at the table - you vs. every large institutional player with very deep pockets out there.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
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Re: Starting off in the stock market
Don't buy 'em! [1]bottlecap wrote:What will you do if they go down the next day?
1. Thanks Will Rogers!
Brian
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Re: Starting off in the stock market
If one invests in pork belly futures, it's best to diversify the portfolio with onion futures, at least in the US.Grt2bOutdoors wrote: ... pork bellies ...
PJW
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Re: Starting off in the stock market
Just my two cents. I think your biggest danger from doing such risky "playing" is becoming totally turned off with the stock market because of big losses. That happened to a college friend on mine in the early 70's. He got all excited about stocks and invested near one of the highs, then sold at one of the lows so "he wouldn't have to think about it anymore". He told me decades later that he never invested in stocks again.bonoz wrote: I have a few thousand dollars of "play" money. I am tempted to just start buying stocks and selling them the next day if they go up by a few dollars. Is that a good way to start or should I read pages after pages of literature?
Please advise
Thanks
JW
Retired at Last
- nisiprius
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Re: Starting off in the stock market
Alas, pork belly futures are no longer traded. We must seek some other amusingly rustic-sounding commodity for our droll hypothetical examples. "Rough Rice," perhaps?Grt2bOutdoors wrote: ... pork bellies ...
Frank Norris, in 'The Pit' wrote:There in the centre of the Nation, midmost of that continent that lay between the oceans of the New World and the Old, in the heart's heart of the affairs of men, roared and rumbled the Pit. It was as if the Wheat, Nourisher of the Nations, as it rolled gigantic and majestic in a vast flood from West to East, here, like a Niagara, finding its flow impeded, burst suddenly into the appalling fury of the Maelstrom, into the chaotic spasm of a world-force, a primeval energy, blood-brother of the earthquake and the glacier, raging and wrathful that its power should be braved by some pinch of human spawn that dared raise barriers across its courses.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.