Your Questions About How To Pick Stocks Books

Jenny asks…

Where do I start with learning about investing and retirement planning?

I have been an assitant to a financial advisor for 6 months and I am not satisfied with just knowing how to fill out forms and where to send them. I would like to know the meaning behind most of the financial world’s jargon (ETF’s, IRA’s, SIMPLE Plan, etc.) and also how to go about researching stocks. Where would I start? I really don’t have any knowledge of these things besides tid bits I picked up around the office. Any book suggestions for a beginner or any links?

John answers:

It’s actually a little surprising that your employer isn’t providing you with more answers. Have you asked him/her? Expressed an interest in learning more? Not only for your own benefit, but it may help you with your career in that office too.

Another place for assistance may be your own bank. Many banks have financial advisors that help their customers gain a better understanding of the programs they offer. (Granted, they’ll probably be geared toward making you a client – but if you explain how you’re looking for information before making any commitment, they’re usually pretty accomodating.)

The last alternative, which may cost you a little money, is to check your local community college or continuing education programs. Many local high schools and such will offer evening (or weekend) seminars that offer basic instruction. (Sometimes these are partially funded by local branches of various financial institutions – so be on the look out if they try to push their products.)

If none of those are options, take a look online. Some companies like Fidelity or Edward Jones may have “tutorial” sections on their website that could help give you some basic information.

Good Luck!

Joseph asks…

how to you make money?

like i know getting a job will get you a paycheck. and i kinda believe that school never really prepares you for this. schools do a good job of making great doctors and lawyers and scientist and all but they don’t really teach you about money. i took a business class in college and they didn’t really teach you how to run a business or be your own boss more like how to be an employee. and throughout history there have always been successful people that never when to school or that where college or even high school drop outs. so its kinda like this. does anyone how to make money besides a job. with a weekly biweekly paycheck. does property management work. do trading stocks work. things like that. and how do you know more about them. are they in books. and if so what are some good books to read. and has anyone ever really picked up a book and stated making money?

John answers:

There are two things necessary and important in practical life. One is education and second in experience. But education comes first as it is very essential for one to get aware about any relevant field or industry. Therefore, these educational institutions are there to first people equip with education and then later on they will be able to implement their education and enhance their experience.

William asks…

Portfolio Diversification?

Whenever I pick up a book hoping to learn about portfolio diversification, they all talk about how really great it is to diversify, how important it is to diversify, “you must diversify diversify diversify….”, some even tell you what percent of which sector you should have. They go on and on about how it is essential that you should diversify, but NOT how it is being done.

I am looking for a solution to a very simple question: If I own multiple tech stocks for example, how do I calculate the sector’s percentage in my portfolio?

I have a very strong math background, Calculus I, Calculus II, Calculus III and Differential Equations. So a smartass answer isn’t going to help me any. If you don’t know how to be specific and answer my question coherently with examples, I would prefer you don’t answer.

John answers:

First of all, diversification runs across sectors, but also across company size, asset type, and even countries.Once you decide on the categories, all you need to calcualte your diversification is Algebra I.

Example:
25 shares Microsoft @ $24/share =$600
2 shares Google @ $400 = $800
10 shares JNJ @ $60 = $600
10 shares Exxon-Mobile @$70 = $700
4 share Autozone @ $150 = $300

Total : $3000

Sector:
Tech: = (800+600)/3000 = 47%
Energy = 700/3000 = 23%
Consumer discretioanry: 300/300 0 = 10%
Healthcare = $600/3000 = 20%

Company size:
Large cap (all except autozone) = 90%
Mid cap = 300/3000 = 10%
Small cap = 0%

Location:
US = 100%
Rest of world = 0%

Also, if you also owned $1000 in US Treasury bonds and $1000 in savings (cash)

Asset tpe:
Bonds: 1000/(1000+1000 + 3000) = 20%
Stocks: 60%
Cash: 20%

You’d think someone with a strong background in Math would have figured this out on their own 😉

[edit] MVD, I agree with the Nassim Taleb recommendation. His point of view is much different than others. Ironically,he does not consider the current situation a “black-swan” event because basic analysis showed problems in housing way before the stock market actually priced it in. Sep 11 was a blackswan, because it was unpredictable (for the most part…).

Donald asks…

Black people, what do you think of this book?

I have a friend who is writing a book called “Protecting Our Economics”. It is a book that gives the black community tips on the economy. the book talks about how to avoid foreclosures, investing in the right stocks, picking the right insurance companies and how to build strong bank accounts. The book will also cover business and will give 10 fundamental tips to making sure your business(if you have one) does not go belly up. My friend says that we in the black community should shoot for new economic heights that make us wealthy, not rich. There is a difference LOL! What do you guys think?

John answers:

It sounds good

Donna asks…

Where to learn about stocks?

Where to learn about stocks?
I am very much interested in stocks and need to find a place or a book that tells about every single thing about it.. How to invest, how to pick, about what do i need to do research about the stock company, the hottiest stocks out there, any suggestions where to put money and how much money i should start to be safe that i won’t loos in case of losing anything. Most importantly i want to learn everything about stocks before i get into it… Please help me to find a place to do research and help me with ur suggestions based on ur expriences… based on ur investment history.. any stratagies, any disadvantagies i would really appreciate to know about. Open to all ur suggestions, comments, and advices.. Thank you all

John answers:

What you’re requesting can not be answered in this media, it would be too time consuming and require to much space

Start your education by learning why you should invest and the importance of being able to make your own decisions or what the pro’s make theirs. Start by reading,
What Works on Wall Street by James O’Shaunessey
Beating the Street by Peter Lynch
One Up on Wall Street by Peter Lynch
The Warren Buffett Way by Robert Hagstrom
Trading For a Living by Alexander Elder
Mastering the Trade” by John Caster
How to Make Money in Stocks” by William O’Neil
The Disciplined Trader by Mark Douglas

Get into the habit of making daily visits to some websites like MSN Money and Yahoo Finance. (http://moneycentral.msn.com/home.asp http://finance.yahoo.com/ )
While at MSN following the strategy lab analysts to get a feel for what the pros are doing and why. This site has some basic information for beginners. If any site offers free information, take it. Other website that can provide instructions and help with procedures and terminology are
Investopedia – http://www.investopedia.com/ Stock Charts – http://stockcharts.com/
Other – http://www.investorshub.com/ http://www.1source4stocks.com/

Visit some of the more professional websites like Zacks – http://www.zacks.com/
Smart Money – http://www.smartmoney.com/ Schaeffer’s – http://www.schaeffersresearch.com/
Some of these web sites will have advertisers who are worth looking into also. And remember, if they offer free information, get it.

Attend all the free seminars you can, just be careful and don’t get pressured into anything you really don’t want or need. Most schools offer courses in finance and economics, but very few will have courses on the mechanics of the investment markets, if they do try taking the course. You may want to consider on-line courses, the New York Institute of Finance use to have such courses. Try to get some fee information from the stocks exchanges they all have (had) free booklets, SIAC and some of the regulators (FINRA SEC MSRB CBOE) may provide some free literature.

What do you need to go into the market?
1 – A written sound trading/investment plan with rules that will not only help you but more importantly protect you, mostly from yourself.
2 – Sufficient trading/investment capital. Use your own money, there’s no need to go into debt so that you trade/invest.
3 – A written money management program in place. Remember never invest 100% of your capital into any one security and never have 100% of your capital invested.
4 – A full and complete understanding of the rules & regulations of the industry.

Good luck on your journey

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