Your Questions About Good Money Making Stocks

John asks…

How much money from investments can you make before paying capital gains tax?

For example, I make an investment (stocks, gold, etc.) and end up only making 5 dollars, do I need to pay capital gains (which in my case would be 10% on short term investments)? How much would I need to make to file for capital gains tax?

John answers:

Depends on your other income.

Paul asks…

How do I take advantage of a rising middle class in china? What stocks would do well, domestic and foreign?

What stock would make money with more Chinese having more disposable income? Cell phone companies in China I would guess and maybe some high fashion. For this you would need to know a little about chinese culture too. I know they probably like to gamble a little more than people in other parts of the world.

John answers:

There is no rising middle class in China, only the rocketing price of estates. And due to the later one, the middle class actually stops growing if not declining. Most of their income are sucked by loan repayment. The stock market in China is full of craps. So the only thing you may take advantage of, is the rocketing price of estates in China. However, with the money for a decent apartment in Shanghai, you probably could buy a house in a decent area in California. And a bubble always bursts at the end, you just don’t know when it will.

Maria asks…

How does one determine which stocks will be profitible and which ones will not?

I am vastly interested in the stock market, yet know little about how one chooses the best stocks and how one determines which will be a total loss. Is it even a good idea to get involved with the stock market since many seem that many of the richest have a monopoly and use computer programs and such to determine the best stocks. Can a little guy which little seed money actually make a lot off the stock market or are the odds against me? thank you

John answers:

It depends on
1) Luck
2) Insider news
3) Knowledge of company or stock profiles
4) How much are you investing?
5) How long can you stomach the weather or prolonged drought?

1) Luck
Luck or to put it better way, people’s emotion fluctuating towards your favor. The stock you invested might be overhyped or trending for a couple of weeks while people are investing that stock.If you could make a profit during that period, of course you’re lucky. But who knows? Everybody’s waiting and speculating if the stock price will go up tomorrow. It is basically greed vs reality check.

2) Insider news
You’d never know what’s happening inside the company whose share you invested. They might be developing new technology or new products. Or they might be laying off employees. Only inside people know the company best. If they’re buying their company stock a lot, there’s common perception that there might be major progress in the company or brilliant performance of the company over the years.

3) Knowledge of the company
You can invest in IT, Warehouse, Transportation, Minerals, Mining, Wire, and such. How much of shares are being traded each day and which area of the business the company serves? Basically companies providing or manufacturing products tend to fluctuate price within a range. For eg. Apple, Google, Verizon, Star Bulk Carrier and such. Their prices do fluctuate, mostly depending on products and how good their products are. Some stocks tend to fluctuate widely, relying much on investors emotion. For eg, Zynga and Facebook. They don’t manufacture products. They provide entertainment.

4) How much are you investing?
If you’re investing a lot, you must carefully choose which stock to hold and their future prospect. You don’t invest in just because the company and stocks are popular, but you don’t see any prospect in them. That is not to mean you shouldn’t be careful when choosing cheap stocks.

5) How long can you stomach the bad weather?
Normally you must be able to withstand the prolonged drought for at least 3 months; the reason being companies announce their quarterly profit and if they don’t make the cut, the stock price goes down until they update another quarterly profit. This could go for years until their price come back to where they were before. Everybody’s speculating.

Here comes a complicated scenario. Some are said to manipulate their stock prices. They let their stock plummet where they can buy with cheaper prices. Then they announce higher profit returning and stock price goes up and they sell it. Although it is unethical, you never know if there has ever been such a practice. For major investment banks, even a slightest changes in stock price to cents can render a huge profit or loss to them.

Steven asks…

How much money can i make from stock, if i invest?

I have $500 I want to invest in stocks. If the stock goes up one whole point how much would i make?

John answers:

You calculate your earnings based on the difference of the amt you brought & sell the stocks.
Example: Let’s say current market value for AMD is $15.00 per share and you want to use all your $500 to buy AMD’s stock. That means you can own 33 stocks total of $495.00 . If by tomorrow, the stock went up a $1.00 meaning AMD is worth $16.00 then your earning is calculated as : 33 shares times $1.00 difference increase = you earn $33.00 (of course this if you sold all your 33 share stocks at the market value.)
Remember that when you join a stock trading company they charge you for every trades. From $4.00 and up. TDAmeritrade has good deal right now.
And also keep in mind, that there is also a possibility of loosing money for any stock investments.

Lisa asks…

how do i successfully research stocks for myself?

I wish to start testing the stock market waters because I know being a young investor can be beneficial.

At this point, I’m only slightly familiar with ‘volume’, the three types of stocks (penny, growth, blue chip), and the two general methods of making money (dividends and stock prices rising).

But everything else — especially detailed researching is extremely foreign to me. I’m tempted to just take internet advice, but I know that is not the most secure way to decide where to place my money.

Yet besides reading opinion articles, I don’t know which pieces of information about the company to search for, and furthermore, I have no idea about how to put these pieces of information together to form a comprehensive opinion about a stock.

Any tips about researching stocks — especially how company history etc– plays into the mix are welcome.

Thank you all in advance!

John answers:

I hate to bring you the bad news but, it is very hard to SUCCESSFULLY research stocks by yourself. Unless you have a degree in finance; like I do. The best thing you can do is to invest your money in a DIVERSIFIED PORTFOLIO. Don’t try to buy one stock because you’ve heard some news of it and it seemed interesting, or if the stock was recently upgraded by big name investment banking firms like Goldman Sachs, Morgan Stanley, or Bear Sterns.

The fact of the matter is that it is VERY RISKY to do that. You can lose a lot of money that way. It’s too risky and not worth it. Imagine how you would feel if you invested $5000 in a stock and then it drops down to $2500 in a week.

Best thing to do is to build a portfolio of stocks (using several industries) which are diversified and carry a very low risk. There should be at least 14 stocks in your portfolio. Ideally, there should be 30, but not many people can have enough money to buy 30 different stocks.

However, if you really want to learn how to research stocks, then I suggest studying applied equity valuation methods such as the EP or the DCF models.

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