Your Questions About How To Pick Stocks To Buy

Chris asks…

Is anyone else picking up great stock bargains at this time?

I get so tired of hearing all the doom and gloom with regard to the stock market these days. To a contrarian like myself, this is like Christmas!

John answers:

There are so many negative posts and questions in here that my contrarian spidy sense is going nuts. When the average Joe finally turns on his TV because their portfolio is down, listens to what the talking heads on the news are saying, decides thing are horrible, and puts in a sell order the markets are at or near a bottom. People just don’t understand that markets predict, yes “IF” there is a recession most of it is priced in right now. Historically the market bottoms well before the end of a recession.

So , yes I am buying, and in a year or two when all of the people getting out right now decide the all clear has been sounded because the market is up double digits decide to get back in, I will be smiling all the way to the bank.

Steven asks…

What are some advantages and disadvantages of investing in a stock market?

It’s for a school project.

Some advantages and disadvantages of investing in a stock market.

Thank you 😛

John answers:

Advantages: You could make tons of money
Disadvantages: You could lose all your money.

Alright, well the advantages are that in the long run the stock market goes up. If you buy all the stocks listed on the DOW, you will make a profit in the very long run almost without a doubt. There is also the chance that you can be good at picking stocks and at timing when you buy the stocks, and make a lot of money very fast.

But the disadvantage is the risk. You will not be able to buy every stock and you won’t be able to hold on to stocks long enough to definitely make money. You may need the cash before the market goes up. You also may be bad at picking stocks and be bad at timing when you buy the stocks. There is a large risk involved.

The alternative would be putting your money in something safer where you will make less money, but won’t have the risk. This would be something like a savings account or a CD or bonds or anything like that.

Joseph asks…

How do I start investing in the stock market?

I’m an absolute beginner. I only know the general concepts of stocks, but not the actual steps to get into doing it.

John answers:

Do a lot of research before investing a dime. There are plenty of good web sites to start learning. Start with yahoo finance, market watch, motley fool. Also a big help for me is the wall street journal. Start reading it everyday for awhile before making a move. The financial times is a good paper also Check out Barron’s weekly paper also. Please do your self a favor and check these out first for awhile. When you start to invest BE SURE TO BE DIVERSIFIED!!! Hold about 5 stocks and no more that 10 and don’t pick more that one speculative stock to stat with. I used Ameritrade and e-trade, Remember your going to have the buying and selling fees, and capital gains when you sell. Learn about these things. As a personal advice I would check out ETF’S their cheaper then mutual funds. Good luck, your going to need that too.

Laura asks…

Stocks to buy for the stock market game?

My class is starting the stock market game where real stocks are “bought and sold” using the real market prices. So what would be the best stocks to buy long term as of September 2012?

John answers:

Actually, Alex gave an excellent answer. Its a game. You don’t want to be in the crowd, you don’t want to be second, you want to win. The best way is to bet everything on one horse and hope the horse comes in.

Earlier this year year, a well known financial website ( think it was CBS Marketwatch ) had a stock picking contest with a prize of $500. Almost everyone picked their favorite stocks, but the eventual winner was a guy who shorted Chipolte ( CMG ) using all of his starting $100,000 virtual money. He bet everything on this one stock and won when the stock dropped by 36% or something ( I forget the details ).

In real life, you would NOT do that, since it’s your own hard earned money we’re talking about. But in a game, go for broke – literally.

Good Luck.

Sandy asks…

How do you pick your stocks?

I have my own trading system, but I would like to know how other people pick a stock from start to finish.
Oh my god, you guys are ridiculous, all I want to know is your trading system, if you don’t have one don’t write a comment. I know how to trade and yes I make money off of it, and I only have 1000 dollars in my trading account for practice, im not looking for 5% returns yearly from a mutual fund.

John answers:

I don’t look for dividends. I’m interested in technology, even though it is very risky.

I avoid sectors that I don’t fully understand (e.g. Food business)

I never buy penny stocks.

I won’t sell until I have at least a 20% gain.

I do not sell if the stock goes down.

Right now I’m watching Tesla Motors (TSLA), it’s pretty interesting.

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