Your Questions About How To Pick Stocks

Helen asks…

can anyone suggest some stock advisors online who can help investing in stocks?


I am planning to invest in stocks and would like to know if there are any sites that would sugget the best stocks etc to invest.

John answers:

Ken Lay? Thanks for the laugh, Chris. If you listen to him, that would be insider trading and you could share a jail cell with him. Oops, forgot, he died of a heart attack before he could be sentenced to his well-deserved 45 yrs in prison.

A financial advisor or planner is different from a stock analyst or market strategist. One plans for your future while the latter are stock pickers. I think you are asking about the latter.

The “experts” are great at trading the system and understanding the system, but aren’t any better stock pickers than you or I; seriously.The “experts” aren’t any better at picking stocks than a monkey throwing darts at a stock listing. “Despite what these professionals claim, it is not actually possible to predict the movement of stocks and other financial instruments. According to William J. Bernstein’s book “The Four Pillars of Investing,” market strategists have historically been incorrect about 77% of the time.”…

If you don’t want to do your own research, a good alternative would be to buy the whole market with the SPY or DIA etf’s. Or invest in a mutual fund if you want to pay someone else to do it for you.

You can also type “how to invest” in the Search Y! Answers box at the top of this screen and get lots of answers.

Laura asks…

Is it a good time to buy asiana stocks right now?

Because of the plane crash of Asiana flight 214, their stocks have dropped increasingly. Is it a good idea to buy their stocks right now because Asiana does fairly well always and is pretty consistent with their rises and falls.

John answers:

The stock fluctuates a lot.

It is not consistent with upticks and downticks (rises and falls). The only overall trend for the stock has been downward.

Your question indicates that you have no clue what is going on. Stay away from it, and stay away from trying to pick equities (stocks) yourself. Buy index funds or mutual funds.

Look at a two year chart (see my source). There are plenty of drops that look just like the most recent drop. April 18, it was even lower than it is now. Even if you had bought at that very low point, one June 25 (well before the crash), your investment would have been back down to the same price where you bought.

Carol asks…

what are some good ways to pick winning stocks?

winning stocks as good stocks that are on the rise. What are some theories on picking the right ones. I am currently playing virtual stocks and i want to learn.

John answers:

Most of the answers here will deal with fundamental analysis, which is fine but I believe technical analysis is a much better way to go. Fundamentals can be interpreted many different ways and you can spend hours researching just one stock. You may also get to the point where your research gets you “married” to a stock and you refuse to take losses.

Once you have developed a method of reading charts, one can look at a stock and form an unbiased judgment on the future direction….in a fraction of the time. Your fundamental analysis may get you into a stock that has a nice run up, but you may have to wait months before it happens. If you follow the technicals you are able to time it amazingly better. This is the best way to catch emerging trends.

Also half of trading stocks is psychological, if you don’t have a plan when to take profits or losses you will find yourself on an emotional roller coaster. Its best to keep it objective as possible.

Whatever your decision on how you picks stocks, technical analysis should be considered when placing the trade.

FYI – if most investors followed some type of momentum indicator they would have gotten out before the 2008 financial crisis and then back in Apr or May 2009

hope this helps

Ruth asks…

Does buying an ETF alter the value of the individual stocks it holds on the open market?

Also, when an ETF price is fluctuating, is it moving from two sources? ie. the underlying individual stocks and the traders bidding for the ETF. If so how do these two competing elements work out?

John answers:

Micheal K is correct, but some of the other details are interesting. To answer your question directly, “generally yes” and “yes.”

If the ETF were perfect, its share price would exactly reflect the underlying index value. The extent to which they differ is called the “tracking error.” You can look up tracking error stats for the Barclays iShares ETF’s and maybe some others.

While the average error is pretty small, there are brief periods of time where the error can be 1% or 2% even for some of the bigger funds. For smaller funds with lower trading volume you can see 3 or 4% errors. If the total asset value of a fund is less than $100M, you should be extra cautious.

What keeps the error low? It is the big banks and brokers buying and selling ETF shares on the open market, packaging them as “creation units” of 10,000 ETF shares each, and trading the creation units for the individual company stocks. Finally, the indiv. Stocks are traded for cash.

Why do the big boys do this? To make make money. If there is no tracking error, then there is no profit motive.

I own a sizeable amount of IVV which is an S&P500 ETF with total assets in the 10’s of $Billions range. In the crazyness of the last few weeks there have been rapid sell-offs in just the last 30 seconds of the market. I have seen my IVV close the trading day with a tracking error of 0.75%. Of course, the next day it will re-adjust itself.

My rule of thumb is: never buy an ETF when its price is rising, and never selling it when its price is falling. In those cases the tracking error is working against you.

A final interesting point. Suppose a Korean ETF gets hammered during US trading hours. S. Korea’s market is closed. How bad is the tracking error in this case? You might be able to pick up several percentage points of tracking error in your favor!

Charles asks…

How confident are you when your investing into stocks?

And how can you become confident about your pick, loads of research?

John answers:

You got it!! Loads of research and know the history of the stock market and how it works. Practise on one of thoseonline “Game” trading stocks where it actually follows the stock market with fake money as in u actually were doing it for real from your bank account.

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