Beginner STOCKS questions

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Beginner STOCKS questions

Postby stillthinkin » Fri Jun 28, 2013 11:46 pm

Hello im new here.
I have a lot of questions towards investing so if somebody could please help me that would be great.
First off i wanted to ask how can you make money with stocks? How does it work? And how long does it usually take to profit? Its best if someone explains it simply.
Also im really interested right now most in REAL ESTATE INVESTMENT TRUSTS but i dont get how you make money on them either i just know real estate has been really good so far. I went on the website and read and did research but i still dont get how you profit and how much if someone could give me an example and simple explanation that would be great.
Another thing im really interested in is penny stocks but i dont get how you can profit. And how long does it take to profit?
What is something really good to invest in right now and something simple and that yields fast results. I already bought gold and it goes up but not fast im looking for something like bitcoins those things skyrocketed.

Im sorry about all these annoying questions but ive done lots of research and never really understood the answers.

Thank You
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Re: Beginner STOCKS questions

Postby hoppy08520 » Sat Jun 29, 2013 12:27 pm

StillThinkin, welcome to Bogleheads. I suggest you do some more thinking and reading.

I'd start with the Getting Started page in the Boglheads wiki.

You'll find the philosophy there is quite different from everything else you've written. Everything you've written is not so much about investing but speculating (gambling). Don't expect any "get rich quick" advice from this site. Here you'll find a "slow and steady wins the race" mentality.

Good luck.
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Re: Beginner STOCKS questions

Postby Twins Fan » Sat Jun 29, 2013 12:55 pm

stillthinkin wrote:Im sorry about all these annoying questions but ive done lots of research and never really understood the answers.


It seems you didn't do a whole lot of research about the boglehead forum and investing style??

As said, the style around here is more buy and hold, long run, and limiting risk. The things you're asking about don't fit the style around here very well. Although, REITs are often added to a portfolio. So, that one is not out of line. But, penny stocks and bitcoins.... good luck with that.

In simple terms, you "make money" on stocks or funds by buying them today at, say, $15 a share. If in 5 years, that share is worth, say, $20, you have made $5 on that share. If in 5 years, that share is worth, say, $10, you have lost $5 on that share. So, if you buy 1000 shares and the $5 (rise or fall) x 1000 example, you have made or lost $5000 there just by owning those shares (if you sell at that point).

How much can you profit and how long will it take.... nobody here knows the answer to that. The market fluctuates... often... and nobody knows when it will go up or when it will go down. Over the long run, we like to hope that it will go up overall. Hence, buy and hold, and slow and steady wins the race.
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Re: Beginner STOCKS questions

Postby pkcrafter » Sat Jun 29, 2013 1:02 pm

Welcome to the forum.

You have a lot of misconceptions, so let's start here:

Investing: Money committed or property acquired for future income. A trade off between risk and reward while aiming for incremental gain and preservation of the invested amount (principal). Investing means investing in businesses, both in the U.S. and internationally. It is, by definition, a long term commitment to share in the successes of companies in businesses for profit.

Speculation: Aims at high gain or heavy loss.

Gambling: Betting (wagering) that must result either in a gain or a loss. Gambling is neither risk taking in the sense of speculation (assumption of substantial short term risk) nor investing (acquiring property or assets for the securing long-term capital gains.

Penny stocks fall into the category of gambling, they are a terrible investment.


stillthinkin wrote:Hello im new here.
I have a lot of questions towards investing so if somebody could please help me that would be great.
First off i wanted to ask how can you make money with stocks? How does it work? And how long does it usually take to profit? Its best if someone explains it simply.

Stock is part ownership in a company. You make money by profiting when the company does well and earns a profit because you then share in those profits (dividends). You can also profit by buying a small company and waiting for it to be successful and get larger. When it does, your shares are worth more and you can sell them for a profit (growth).

Also im really interested right now most in REAL ESTATE INVESTMENT TRUSTS but i dont get how you make money on them either i just know real estate has been really good so far. I went on the website and read and did research but i still dont get how you profit and how much if someone could give me an example and simple explanation that would be great.

Real Estate Investment Trusts (REITS) are also stocks, but they are stocks of companies that invest directly in real estate like hotels. Here's a good explanation:

http://www.investorwords.com/4158/REIT.html

Another thing im really interested in is penny stocks but i dont get how you can profit. And how long does it take to profit?

Don't even look at penny stocks. You'll almost certainly lose your money.

What is something really good to invest in right now and something simple and that yields fast results.

There is no such thing as something really good that yields fast results. The higher the potential return, the higher the risk of not getting it.

Im sorry about all these annoying questions but ive done lots of research and never really understood the answers.

You're doing research is the wrong places and getting very bad ideas.

Thank You
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
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Re: Beginner STOCKS questions

Postby stillthinkin » Sun Jun 30, 2013 12:08 am

Okay thank you everyone for your responses i appreciate and i get the investment style going on here and now I understand the way stocks work and i should stay away from penny stocks. Im still really interested in REIT's and i understand now that its basically a part ownership to a company that invests the money into real estate only. I read they pay a yield to the owners regardless of how the company is doing. So does this mean i get paid every month, every year?
Or is it like stocks where you hold onto it for a couple years and sell it, if its doing good. Also are they good for a beginner? I'm only 16 and just looking to make some extra cash for a jump start in life and maybe get a car later. I know its not a get rich thing. So if someone could please elaborate on the REIT's even use an example and explain how you get paid that would be great.

Thanks again
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Re: Beginner STOCKS questions

Postby nisiprius » Sun Jun 30, 2013 8:30 am

stillthinkin wrote:Okay thank you everyone for your responses i appreciate and i get the investment style going on here and now I understand the way stocks work and i should stay away from penny stocks. Im still really interested in REIT's and i understand now that its basically a part ownership to a company that invests the money into real estate only. I read they pay a yield to the owners regardless of how the company is doing. So does this mean i get paid every month, every year?
Or is it like stocks where you hold onto it for a couple years and sell it, if its doing good. Also are they good for a beginner? I'm only 16 and just looking to make some extra cash for a jump start in life and maybe get a car later. I know its not a get rich thing. So if someone could please elaborate on the REIT's even use an example and explain how you get paid that would be great.

Thanks again
I'm going to keep it simple--so this is going to be opinionated, just my $0.02.
  • REITs are a kind of stock investment.
  • They are an example of a high-dividend stock.
  • Stocks that pay dividends pay them "regularly" (on a schedule) but the size of the dividend is not guaranteed, and can change or be eliminated, and does depend on how well the company is doing. Usually the schedule is quarterly (1/4 year = every 3 months).
  • No stock investment, REIT or otherwise, is suitable for money you will need in less than ten years. They should be long-term investments. Even ten years is a little short--2000-2009 were "a lost decade" for stocks, for example; over that period of time, savings bonds (!) did better than stocks.
  • Individual stock investments are definitely not for beginners. They are probably not for anybody.
  • A close friend of mine lost $50,000 in an individual REIT that his broker at Merrill Lynch had strongly recommend to him.
If you have decided that you are going to invest in REITS, which I do not think is a good idea for you, you could use a mutual fund like the Vanguard REIT Index Fund (VGSIX).

I STRONGLY recommend going to the Morningstar website and poking around a bit. Type VGSIX, wait for the dropdown, pick the fund, click "quote", click "more" on the chart. Then under "event" click "dividend."

You see this:

Image

Here's what this means. As you see from the little symbols, this fund pays out dividends every quarter.

Here's how it could work. I DO NOT RECOMMEND THAT YOU DO THIS, I THINK IT'S A BAD IDEA FOR YOU, just explaining how it works. I'm giving a Vanguard example but it works pretty much the same everywhere.
  • You could open an account at Vanguard.
  • You could mail them a check or, more likely, link it to your bank account.
  • You could buy $3,000--that's the minimum starting purchase of VGSIX.
  • Every quarter (1/4 of a year, 3 months) it pays out dividends.
  • You decide when you make the purchase what to do with the dividends. Typically an accumulating investor like you would decide to "reinvest" them--they automatically get used to buy more shares of the fund. The blue curve on the chart shows what would have happened to a $10,000 initial purchase if you had done that ten years ago and never bought or sold, except for the automatic buying from reinvesting the dividends. $10,000 grew to $28,000 :D but there would have been a point in 2008-2009 when you would have been watching your money grow for years and then suddenly over a few months it would drop all the way down to $8,000, less than when you started. :(
  • You could also decide to have the dividends paid out. This would be a typical choice for a retired investor who needed income from his investments. In this case, depending on the setup, one possibility would be to arrange to have the quarterly dividend paid directly into your bank account. So, every three months, you would see an automatic deposit of money into the account. Because you are not buying new shares with the money, your account would grow only as a result of "capital appreciation" (stock prices goes up--OR DOWN) and would grow more slowly because of the money you are taking out of it. At the end of ten years, I find (by using Morningstar's price chart instead of their growth chart) that you'd have had $17,400 instead of $28,000, because of all the dividends that were taken out instead of being reinvested to buy additional shares.
Last edited by nisiprius on Sun Jun 30, 2013 1:27 pm, edited 1 time in total.
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Re: Beginner STOCKS questions

Postby fulltilt » Sun Jun 30, 2013 10:16 am

stillthinkin wrote:Or is it like stocks where you hold onto it for a couple years and sell it, if its doing good. Also are they good for a beginner? I'm only 16 and just looking to make some extra cash for a jump start in life and maybe get a car later. I know its not a get rich thing. So if someone could please elaborate on the REIT's even use an example and explain how you get paid that would be great.

Thanks again


Congrats on thinking about your future & welcome to the forum.

Warren Buffett says that his favorite holding period for stocks is forever. In other words, he doesn't buy stocks and hold them for a few years and then sell them if they are doing well.

Investing in the stock market CAN be a get rich thing, it just isn't a get rich *quick* thing. Instead of thinking about investing as a way to MAKE money, think about investing as a way to GROW the money you already made. So, when you're 16, you need to think about ways to make some money so you have something to grow. Usually, that means a jobby job.
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