Your Questions About How To Pick Stocks

Helen asks…

What books would you recommend for an intro to the stock market for an inexperienced person?

I am 20 and I am studying sciences but I am fascinated by the stock market. I love numbers! Who knows, maybe I could be quite good at picking stocks someday …

John answers:

Unfortunately, there are many books out there that make great reading, but promote investment systems that don’t work. Finding good investment books is difficult.

One excellent book is Burton Malkiel’s “A Random Walk down Wall Street.” It discusses how to build a safe, balanced portfolio. You can find it in most libraries.

Other good books are:

The Bogleheads’ Guide to Investing

The Investor’s Manifesto: Preparing for Prosperity, Armageddon, and Everything in Between

The Four Pillars of Investing: Lessons for Building a Winning Portfolio

The Only Guide to a Winning Investment Strategy You’ll Ever Need: The Way Smart Money Invests Today

The New Coffeehouse Investor: How to Build Wealth, Ignore Wall Street, and Get on with Your Life

This website gives a list of good books and websites too read:

John asks…

Is it better to invest in stock or real estate?

I pick stocks, because I don’t feel like maintaining a house

John answers:

That’s an age old question. There are probably more mega-rich individuals that made their fortunes in real estate than in the stock market. Today, however, I would pick stocks as the better option for the foreseeable future. The amount of foreclosed residential properties on the market represent a glut of inventory that will take years to work their way through the real estate market, and until they do, there can be no meaningful appreciation in the value of residential real estate that is not otherwise distressed, so building equity through real estate will be difficult for a number of years to come. In addition, the usual costs associated with owning real estate ( real estate taxes, insurance and maintenance) will further limit the potential returns from real estate as an investment until the distressed properties are worked through the system and demand returns for new construction in a meaningful way. This whole process may take 5 to 10 years. That’s more than enough time to see a correction in the stock market and another big recovery in equities, so stocks seem like the preferred way to accumulate wealth for the time being.

Linda asks…

What’s a stock that’s going to do really, really badly in the next few weeks?

I know nothing about the stock market, but for my gov. class we’re picking stocks and the people who make and loose the most get a couple bonus points. I figure it might be easier to go for the bad, so any ideas? Please and thank you!

John answers:

I will give you two stocks that will soon be worthless, and for a bonus, two stocks that are performing well

Stock symbol KSBI.OB (KS Bancorp) is losing money. It was trading at $5.00 today, down from it’s 52 week high of $21.00 Symbol METR (Metro Bancorp) is trading today at $11.04, down from it’s 52 week high of $30.00. Both are banks that are losing money, and when they are taken over by the federal government when they fail, their stocks will be worthless.

The two stocks to own in your portfolio are:

Symbol SXCI (SXC Health Solutions) closed today at $46.72 just off it’s 52 week high. It’s low was $13.32.

NEU (Neumarket Corp) is trading at $100.32 today, just under it’s 52 week high. It’s low was $23.37.

Both of these two stocks have the momentum to go much higher based on their most recent earnings estimates.

Good luck in you government class! I hope you win the contest.


Jenny asks…

Is it ok to invest with a friend by forming a general partnership and getting a partnership account together?

We plan on picking stocks together and getting a partnership account.

John answers:

Worst thing one can do is become a partner with a friend or relative. 99.99% ends up in bad bad times. Try picking stocks together for a whild BUT do not combine monies. See what happens after six or more months. If one of you has done better than the other that should help U make decision. Be careful and study the situation thouroughly

Robert asks…

Is it ok to invest with a friend by forming a general partnership and getting a partnership account together?

We signed a partnership agreement and plan on picking stocks together. What do you think?

John answers:

My opinion is that

a) Although you may think you are doing well at certain points in time, you will likely lose money over the long run. Buying individual stocks is high-risk and may take a great deal of time to settle out to profits.

B) Yes, when you mix money and friendship, it is asking for trouble, for rifts to form, for disagreements, for arguments, etc.

C) Why on Earth do you need such a partnership agreement? Sounds like one of the two parties is already probably getting more out of the deal than the other and likely trying to soothe the other’s concerns with this agreement.

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