Your Questions About How To Pick Stocks To Buy

Helen asks…

What are the different ways to buy and sell stock?

I have been thinking about investing in the stock market. I don’t really need information right now about which stocks to pick, but I do want to know how you buy the stock.

Does it have to be through a broker?
Do you recommend any of the online buying tools (etrade, scottrade)?

John answers:

Go to top10traders.com it is a free website great way to learn about investing, they give you 100k of fake money to invest and you get ranked against the other investors.

Ruth asks…

how do you read stocks??

Ok so im in college (woo hoo) and im doing a stock report chart. I’m supposed to pick three stocks and buy a certain amount of shares each day. Now im looking in the newspaper, in what column does it tell you how much per share the stock is. There’s “high, low, close, change, Div, Yield, PE, Vol, High, Low” which one is it!! Please help 🙁

John answers:

HERE YOU GO… GOOD LUCK!

Http://www.investopedia.com/university/stocks/stocks6.asp

Richard asks…

if we enter a bear market is it risky to buy stock?

how do you pick a stock that will be bull if your in a bear market? is day trading made tougher by a recession or is it still just as risky when its a bull market?

John answers:

When stock prices are depressed, there are more opportunities to buy shares of good companies where the share price is a good value. For example, during the worst of the dot.com meltdown, eBay and Amazon.com were ‘on sale’ because of investor over-reaction. In general, with lower prices there is less down-side, hence lower risk.

Day trading is always risky. In bear market, you have the additional risk of chasing down a stock, which can wipe you out pretty well.

Consider finding a few mutual funds that have good track records in bull and bear markets. If you consistently make better stock picks than the best mutual fund managers at the equivalent level of portfolio risk, then you should go be a mutual fund manager — the best are highly compensated. If not, picking high quality funds and investing very consistently (buying steadily regardless of whether the market is up, down and sideways) gives you benefits of lower average cost of fund shares.

Ken asks…

How do I pick a stock?

I’m a novice investor and I’ve decided to take advantage of the “buy low” times and buy some stocks. I’m having trouble deciding on which companies to buy mainly because I’m finding the research difficult. I want to know things like who the CEO is, what are their future and present projects, and are they in debt? I’ve found Stockwatch to be useful, but are there any other sites that can help me? How do you pick your stocks?

John answers:

Picking very profitable stocks is extremely difficult, but it is much easier to pick slightly profitable stocks. I would recommend reading the classic book by Benjamin Graham and David Dodd called Security Analysis. You can pick it up for about $50 on Amazon, and it will really walk you through prudent “stock picking”.

Professionals use prime brokers and have access to databases such as Bloomberg Terminals and can screen stocks to purchase based on Income Statement, Balance Sheet, Cash Flow Statement, and market information.

You can do your own screening at finance.google.com or finance.yahoo.com; find “Stock screener” somewhere on the page. The Graham and Dodd book should walk you through what’s important to screen on.

Picking stocks really comes down to what you believe, or what school of thought you subscribe to. You may pick stocks that you suspect will grow rapidly in the future (Growth Stocks). You may pick stocks that you think are undervalued (Value Stocks). You may stick with only big companies (Large-Cap Stocks). You may stick with companies that are relatively small (Small-Cap Stocks). Most likely you’ll want a portfolio of different types of stocks.

If you want to take advantage of the “buy low” times without really wanting to do any real research, then just buy an S&P500 ETF (I invest in ticker: IVV ; iShares S&P 500 ETF; ETF stands for exchange traded fund and is just like a mutual fund, but you can trade it on an exchange). This way you can just buy and sit on it, enjoy life for years and then sell it later for a profit (assuming the market will go up from this point, which is not always a good assumption)

I hope that helps.

Carol asks…

Does anyone know the actual win or loss record for Jim Cramer’s stock picks on CNBC’s Mad Money?

Jim Cramer of CNBC tv’s Mad Money makes a ton of stock picks, both buys and sells. Does anyone know if the stocks he recommends are actually making money overall? I’m not intersted in answers like “yes i made money buying one of his picks” or “no, i lost money on a couple of his stocks.” I want to know how well his stock picks and sell advice is doing as a whole. In other words, is he for real or just a lot of noise?

John answers:

Information is usually worth no more than what you paid for it. Ask yourself why Jim Cramer would give you money-making advise for free.

A stock analyst is basically a salesperson who works for the brokerage houses (typically) but is paid to do favors for the investment banks to butter them up for favorable terms of business. Mr. Cramer on the other hand works directly for one of the investment banks, Goldman Sachs.

Would you take investment advice from Goldman-Sachs? That’s called a “conflict of interest”.

Here is Mr. Cramer’s rank of right vrs wrong calls:

http://www.cxoadvisory.com/gurus/

Unfortunately that says nothing about actual returns, since one could be wrong most of the time, but make such high returns when one is right as to make up for the large number of mistakes.

There used to be a number of independent blogs that tracked Mr. Cramer’s actual performance. They have been sent “cease and dissist” letters from CNBC and as far as I can tell every one of them is offline or is being blocked (try www.booyaboyaudit.net). Why do you suppose that is? If he’s doing well, wouldn’t he want others to help spread the good news? Why does his network threaten blogs that attempt to discuss his actual investment performance?

His official track record at your money watch . Com shows him fairly consistently performing worse than the Dow (so they highlight that he’s doing better than the S&P). Notice that they took the website www.booyaboyaudit.COM; doesn’t that seem rather close to the critical (and apparently defunct) website www.booyaboyaudit.NET?

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