Your Questions About How To Pick Stocks To Buy

Sharon asks…

How do you know which stock is a good stock to invest in?

i’m in a business class and the professor wants the students buy two stocks with $5,000. I don’t know which one I should pick. which one will bring in the most money? if you catch my drift…

John answers:

Given your assignment, I think your attempts at getting an answer within this forum is much like most investors. Many would rather ask for the advice of strangers than do a little research on their own. Don’t get me wrong; I don’t mean to be rude or hate on you, however I do think sometimes it’s best to invest a little time and do the “fundamental” research (look at P/E ratios, cash flow, ROI, ROA, % of ownership between institutional and management, etc…).

I can assure you there are a lot of individuals out there including Warren Buffet who still believes in fundamental analysis. Being a “technician” isn’t a bad thing, however it has its downside. In fact, studies have shown that over time, trying to time the market is a losing proposition.

As to how you know which stock is a good investment; consider looking at companies that have shown a steady growth in earnings over a 5 – 10 year period. The companies should be innovative in its product offerings and considered a great place to work. In other words, the company should have a good track record.

Please note “good” companies will not manage to their stock price. In other words, their intent is to provide steady earnings not produce numbers that will cause their stock price to pop every quarter. Therefore, your efforts to invest in a company whose stock will go up in a short period of time may not be as successful as you may hope. However just because the stock does not go up in the short term, does not mean the company is a bad investment for the long term.

If you have a moment, consider picking up the newspaper – Investor Business Daily for some insights on using both fundamental and technical analysis when considering stock investments. Best of luck on your assigment.

Ruth asks…

How to invest now to setup decent future?

Im pretty young 23. And I want to start investing now so that when im older i’ll have some decent size investments to help supplement my income. Right now im just a amateur buying stocks for dividends 🙁 . I’m sure thats not the way to go but at least im picking companies that I feel are going to last. So any tips could help me alot! I have 0 clue about mutual funds and bonds so I could really use the help.

John answers:

This is a great time to get started! There is a lot of good free education out there. I recommend you take the free online courses at Morningstar.com, and look for others.

As for your investments, I would start out with a good, well-managed mutual fund that concentrates on mid-sized companies. A good example is ING FMR Diversified Mid Cap S (IFDSX). This is one of many inexpensive funds that let you start with a small investment, and Morningstar gives it their highest, 5-star, rating.. You have a long time for your money to grow, so I’d recommend concentrating on mid-sized companies that have room to grow. A mutual fund will provide instant diversification for a small portfolio.

I’d later add a similar fund that concentrates on large companies. That provides another aspect of diversification, which reduces your risk.

I’d also set up a plan that automatically adds money to your investments every payday. You can have the fund automatically draw from your checking account, or you may be able to arrange to have part of your paycheck sent to the account automatically. If you make it automatic, you won’t forget, and that makes a HUGE difference over time.

As you learn more about investing, you might want to buy individual stocks yourself, but I would start out by letting an expert with a good track record do it for me. And, as someone else said, maximize your contribution to a ROTH IRA, and to a 401(K), if that is available to you.

Another great trick that works wonders is to devote half of all raises to your investment program.

Good luck.

Donna asks…

Is this program just another scam? ( just out of curiosity to see if anyone has used it and has had success)?

How to Pick New Profitable Hot Stocks to Buy NOW -Traders Course from www.momentumstocktrading.com

John answers:

Don’t
hot stocks can’t be bought now when you want it, if it is already hot, you’ll lose

Sandra asks…

Best website to buy ETF’s for a newbie?

I want to start investing online. I have a small amount I’m willing to ‘play’ with to begin with and see how things go.
Since I don’t have much knowledge, I thought ETF’s or maybe MTF’s that pick stocks for me would be a good place to start.
Are there good websites for that, who also have reasonable (low) commission fees?

John answers:

“I don’t have much knowledge” Begin by learning. Investopedia is a good source. Link below. If you “play” without knowledge you are likely going to lose.

You can invest in ETFs at any broker. I use Scotrade and think they are very good. $500.00 to open an account, $7 per trade and no hidden fees, and excellent customer service.

Donald asks…

I have a few questions on stocks?

Ok so lets say I have a brokerage account with vanguard and I stock pick with some extra cash I have, and lets say I buy 5 shares of a stock at $20 per share and in one month it turns into $40 per share and want to sell or get out of that stock so how would I get the money for selling those 5 shares for $40 per share? Would the people through I have the account send me a check or automatically put it in my account? Also if I have a brokerage account with vanguard can I also have a retirement fund with them?

John answers:

The proceeds would go into a “Core Money Fund”,..

And you call them If it’s a Taxable account, you could write checks on the account for a certain minimum, like $250(a checkbook)…If there ever was a need to withdraw money,..or just call them to send you a certain amount.

Also if I have a brokerage account with vanguard can I also have a retirement fund with them?..Absolutely,..an …IRA,..or Roll-Over IRA, from a previous employer

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