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Author Topic: Investors club's?  (Read 3135 times)

3man75

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Investors club's?
« on: December 21, 2014, 02:29:29 am »

So I've been thinking to buy stocks ( or parts of a company) for some time now. One of which is the store  I work at and coca cola. I'm looking to keep my money their and make a few hundred dollars in dividends a year.

Then I stumbled into the idea of investor clubs from Google but the one's in my area deal with real estate and others with "CANSLIM" investing methods. That last one just sounds like a ponzey scheme.

So any helpful advice on investor clubs?

P.s I'm only 20 and still doing my aa in college so I'm not attempting anything ginormous like spending thousands on stocks.
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LordBucket

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Re: Investors club's?
« Reply #1 on: December 21, 2014, 03:42:54 am »

So any helpful advice on investor clubs?

Back when I used to daytrade I would frequent IRC. You might give that a try. Or reddit. Keep in mind that people offering advice in a daytrading situation are not necessarily interested in helping you. They might occasionally be looking to convince traders to assist them in moves they want to make happen.

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looking to keep my money their and make a few hundred dollars in dividends a year.

Checking KO dividends, it was 35.5 cents per share per quarter last year, so to make $200/yr in dividends on a long term hold you're looking at ~164 share at~$42 each, so $6846 dollars invested to make $200works out to a return on investment of about 3%. You might do better with a market index or mutual fund.

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Then I stumbled into the idea of investor clubs from Google but the one's in my area deal with real estate and others with "CANSLIM" investing methods. That last one just sounds like a ponzey scheme.

Never heard of CANSLIM, but if you mean this that doesn't sound like a scam to me. It sounds like a stock investing strategy that might or might not work, but would require a lot more time to evaluate than I'm going to spend writing this message. If they're trying to sell you a program for it, don't bother. Just buy the book. Or download it. I see over 100 seeders for it on the pirate bay.

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I'm not attempting anything ginormous like spending thousands on stocks.

Note that if thousands of dollars is "ginormous" then stock investment is probably not a realistic option anyway.

As for real estate clubs, by all means join one. You'll probably meet some good people and it will help with motivation. But that market is a lot tighter than it used to be, and ultimately you need a pile of cash to get started. Yes, it's possible to find a partner with cash if you have no money, but at the end of the day you need to bring something to the table. That can be knowledge and experience, that can be awareness of a specific deal, in some rare cases it might be excellent credit, but it's not as easy as they'll probably try to lead you to believe. Even with $50,000+ in cash and good credit it's not always easy to find real estate deals that make sense. There's a lot of competition and the old guard has the formula down very well.

Even so, it's probably a good experience to show up to a couple meetings.

Reelya

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Re: Investors club's?
« Reply #2 on: December 21, 2014, 04:13:22 am »

http://www.automaticfinances.com/monkey-stock-picking/

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Can Monkeys Pick Stocks Better than Experts?

<...>

But professional investors should have some real knowledge of beating the market, right? Isn’t that why they do it for a living?

Enter monkeys throwing darts.

The upshot is that paying a (hypothetical) monkey to throw darts at the nytimes stock pages outperforms a lot of professional investment managers. And monkeys charge less in fees. The monkey stocks actually did better over 6 months than the professional picks did, which did better in the short term, but that's attributable to a placebo effect - a pro investor annoucing which shares he's buying causes the price to spike up, but these gains all disappeared within 6 months and the picks were worse than blind chance.

Just buy a few shares in a number of reputable firms and hold onto them. Don't put all your eggs in one basket either, spread it around, and make sure you spread it around totally different types of firms, don't put it all the same sector, or all into sectors which are reliant on the same thing (like all in oil and car related stuff, or all into food related stuff). And don't panic in a crash, wait for the recovery.
« Last Edit: December 21, 2014, 04:18:36 am by Reelya »
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3man75

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Re: Investors club's?
« Reply #3 on: December 21, 2014, 05:02:36 am »

Is there a book about financial terms?

I know what mutual funds are loosely but what's a index?

Really wish I could find a book to explain this to me..
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LordBucket

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Re: Investors club's?
« Reply #4 on: December 21, 2014, 05:59:05 am »

Is there a book about financial terms?

Probably. But you have the internet. Try google. Or wikipedia.

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I know what mutual funds are loosely but what's a index?

http://www.investopedia.com/terms/i/index.asp

http://www.investopedia.com/terms/i/indexfund.asp

Translated:
A stock "market" is a market for stocks. Kind of like a fruit market is a place where you would buy and sell fruit. But with a stock market, it's not necessarily a physical place you go to trade, so much as a loose collection of stocks that are grouped together for one reason or another, sort of how you might casually refer to "the textiles industry" even though the industry itself is not a building or place you would go to buy textiles. Or you might casually refer to "the energy market" including oil, has, solar, geothermal, etc. even those those things are not necessarily associated by  physical location or ownership.  You can very easily casually refer to any arbitrary grouping of industries regardless of the actual physical location(s) or natures of those industries. A stock "market" is kind of like that.

Stocks themselves are typically trade on an exchange, which is somewhat more like a physical market or bazaar where people actually trade things. Except that in this case it's not a physical market, it's electronic. Like amazon or ebay are "markets" where goods are exchanged.

An index is an arbitrary way of measuring the performance of some subset of market(s). For example, imagine if you owned a physical market with thousands of goods. You might track the buying and selling of every type of good on the market. But you might also want to track specific subsets of goods. For example, if your market sold both fruit and fish, it would be reasonable to track the fruit trade and the fish trade separately. An index is any arbitrary grouping of market trades tracked together for whatever reason. So you might have a "total market" index that tracked everything. And you might have a "fruit index" that only tracked fruit. But, there's no reason for you to necessarily track exclusively fruit or exclusively fish or exclusively anything in your index. You could, for example, track track saltwater fish from freshwater fish separately. Or both fruit and fish from California separately from fruit and fish imported from Hawaii. Or whatever you wanted. That's an index.

Now, there are stocks. And you can buy and sell stocks on an exchange. (And in some cases maybe commodities, options contracts, or whatever. But for the moment we're talking about stocks.) But if you buy only one stock, you're "putting all your eggs in one basket" and if that particular stock plummets, then you've just lot a lot of money. So, one solution to this is to diversify, by investing in a bunch of stocks. Historically it's been a trend that even though individual stocks or industries might die, generally the overall trend of the market as a whole is to rise. Kind of like people. Individuals are born and die, sometimes wars or famines happen and kill entire local populations, but the overall total human population has tended to rise. But it's difficult to predict where the wars and famines are going to happen. If you just guess where to put your roots, you might guess wrong. And if you buy exclusively one stock, you might also guess wrong and lose everything.

So, some people invest in a bunch of stocks rather than just one, figuring that even though any one single stock might crash, the overall market will tend to rise.  But this introduces certain practical difficulties. For example, let's say you want to invest equally into IBM, Microsoft and Google. Well, IBM is trading for $158/share right now, Microsoft for $41/share and Google for $516/share. So if you buy one of each, that's not equal. Your investment in Microsoft is $41 out of $715 and your investment in Google is $516 out of $715. Making it all even requires buying more shares of Microsoft. Well, doing that requires you to spend a lot more money. One share each of Microsoft, IBM and Google is $41+158+$516 = $715. If you buy, say...12 shares of Microsoft for $492, three shares of IBM for $474 and one of Google for $516, your ratio is at least approximately even, but you also had to spend twice as much money as when you only bought one of each. And in the case of a large index, like the S&P 500 that has 500 different stocks in it, buying even one share each of all 500 of those companies, let alone an equivalent dollar amount of each, would probably be a lot more money than you have. And worse, it would be a horrible thing to do because buying one share each of 500 different stocks would mean that you'd be paying brokerage fees on every single one of those 500 transactions, spending a lot of time and energy, and generally losing a lot of money in the process.

A mutual fund is basically a pooled group of money from a bunch of different investors, managed by one person or company. Maybe it's impractical for you to personally buy ~$500 each worth of IBM, Microsoft and Google, but if 100 people each put in $600, that's $60,000 that the fund manager can use to buy $20,000 worth of each of those three stocks. Less hassle for you, and less money lost to broker fees. Though the fund manager takes a cut generally whether or not the fund itself makes or loses money.

An index fund is a mutual fund that specifically attempts to buy the same things tracked in an index.

mainiac

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Re: Investors club's?
« Reply #5 on: December 21, 2014, 12:08:27 pm »

There are two reasons to buy stocks.  The first is as an investment, you want to have that money later.  If that's you reason then put the money in a stock index and forget about it.  I give my money to vanguard: https://investor.vanguard.com/mutual-funds/stock?WT.srch=1

They do a good job tracking the market without high transaction costs and their management fees are low.  That's exactly what you should look for in a stock index.  I dont know any that appreciably beats vanguard in those regards.

The second reason is entertainment, i.e. recreational gambling.  Put a little money on the market and have fun trying to guess things.  It's a gamblers paradise because with all the financial instruments available, any bet you could possibly want is available.  But this important thing is that you DO NOT confuse this with investment.  It's a game just like a table game like a casino and just like a casino, the house takes its cut.  The average small investor loses a lot of money compared to putting their money in a stock index and the more they trade, the more they lose.  So only gamble for fun and only gamble with what you can afford to lose, I imagine even a couple hundred bucks is plenty for you.  If you think you have a gambling problem or if gambling addiction runs in your family, stay away.  But if you are gambling for fun you can stay away from mutual funds and pick your own stocks.
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3man75

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Re: Investors club's?
« Reply #6 on: December 21, 2014, 03:02:05 pm »

I don't have any gambeling addictions and i'm actually always super cautious when doing risky things. More often than not i opt out of them.

Anyways i think mutual funds look fun so i'm going to shop around for some via google. By the way, stupid question but does the U.S Government tax your stocks or earnings from stocks? I can't find anything too concrete and i'm not good with financial law.
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mainiac

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Re: Investors club's?
« Reply #7 on: December 21, 2014, 04:13:29 pm »

Capital gains, the increase in value between when you buy and sell, are taxed in the year of sale.  However if you do your investments through a 401k they are tax free.
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« Last Edit: February 10, 1988, 03:27:23 pm by UR MOM »
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Frumple

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Re: Investors club's?
« Reply #8 on: December 21, 2014, 04:24:55 pm »

... it's possibly worth noting capital gains taxes are notably lower than the income tax rate, in most cases. At their worst, from what I understand, they only match 'em (and that'll only really happen in the lower brackets for some ungodly reason). So... not the biggest of worries, I'd say.
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LordBucket

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Re: Investors club's?
« Reply #9 on: December 21, 2014, 04:34:08 pm »

does the U.S Government tax your stocks or earnings from stocks?

Generally yes. It's considered capital gains, not wage income, and the rules are little bit different. If you hold an asset for under a year it's treated like ordinary income and taxed at whatever rate you pay on the rest of your income. If you hold for more than a year it's considered a long term asset. Long term capital gains are taxed at a lower rate.

Here's a chart

So if you're in the 10% or 15% tax brackets and you hold a stock for a year then sell it for a profit, you would pay no tax on that profit (unless it's over some amount that you probably won't have to worry about.) If you're in a higher bracket, you'd pay 15% or 20%.

As an aside, next time you hear somebody whining about how the rich pay less tax because of this, remember that if you're making less than ~$36,000/yr you pay no taxes on capital gains, while they pay either 15% or 20%.



if you do your investments through a 401k they are tax free.

That's not correct. They are tax deferred, meaning you pay the tax when you withdraw the money rather than when you put it in.

3man75

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Re: Investors club's?
« Reply #10 on: December 21, 2014, 07:18:27 pm »

Interesting.

By the way, I think the right phrase is that rich people try to avoid taxes via making all their profits in another country. I know that some of them are smart enough to donate to the.red cross or other organizations for tax deductions. I don't fault them, in reality people just need to know how to play the game better, which is what I'm trying to learn.

Problem is that there are a lot of get rich quick books that are 110 % scams. Which makes it hard to learn.
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FearfulJesuit

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Re: Investors club's?
« Reply #11 on: December 21, 2014, 10:18:12 pm »

I'll have about $2500 saved up by the end of the year I want to put to work making more of itself, so I'll be watching this thread.
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3man75

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Re: Investors club's?
« Reply #12 on: December 24, 2014, 10:19:51 pm »

So are there any fee's when buying/selling stocks or transferring money from your bank account?
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LordBucket

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Re: Investors club's?
« Reply #13 on: December 25, 2014, 01:11:10 am »

So are there any fee's when buying/selling stocks

As a general rule yes, but it's easy to find flat rate self-service online brokerage firms. Etrade, Ameritrade, etc. There are a bunch. $5-$10 flat rates are common, but check the fine print.

Also, general tip: don't even bother unless you have at least $2000 to work with. $5000 would give you more wiggle room. And be sure it's money you can afford to lose. Stock trading is not a guaranteed deal. Every dollar somebody walks away with more than they showed up with is a dollar that somebody else lost. Actually, more like $1.06 somebody lost. Stock trading is a zero sum game with frictional losses.

Also remember that you need to make transactions at least twice: once on the buy once on the sell. So imagine that you have $2000 and you want to buy STCK which has a bid/ask spread of .98/1.01. That means if you buy at market, you'll pay $1.01, but if you sell at market you'l receive .98. Let's say placing a buy order costs you a flat rate of $10, leaving you $1990, which is enough to buy 1970 shares of STCK at 1.01 each, leaving you with 1970 shares and 30 cents left over. Your portfolio now consists of 1970 shares of STCK worth .98 each, and 30 cents in cash, for a total value of $1930.90. You lost a couple percentage points of value simply by making the trade.

So let's say you wait a month and the market price increases roughly 4%. Wow! 4% increase means you'll make 4% of your $2000 investment, minus the $20 in brokers fee, so about $60, right? If you can do that every month, that's $60/month, $720/yr, which is 36% return on investment! Wow, you'll be rich in no time, right?

Wrong It is crucial that you understand how the spread works. Also, don't follow the above example and do market trades. There's no reason to place market orders. Place limit orders. Maybe they won't be filled, but if not it's because they couldn't be filled at the price you wanted.

A 4% increase from .98/1.01 works out to roughly 1.02/1.04. You bought at $1.01, and you can now sell at $1.02, so that's higher than when you bought in, but it's not enough. If you sell your 1970 shares at $1.02, that $2009.40, and you then pay the broker's fee of $10 leaving you with 1999.60, plus the 30 cents you had left over after the purchase, for a net total of $1999.90.

The stock increased in value by 4%, but you lost money on the sale.

Do not engage in stock trading until you understand how that works.

Also, Mainiac, that's your cue to tell everyone to not waste your time with this and to simply buy and hold long terms funds instead.(Mainiac and I go go way back in investment threads. :) )

Not that Mainiac is necessarily wrong. It's not a bad strategy. But the market only really climbs the way it does because of people like him. People investing long term are basically putting their money on the table and leaving it there. And the more people who follow his advice and do the same, the more the pile on the table increases thereby driving everybody's portfolio's up. His advice is good public service. But there's no magic that makes stock values always go up. Only the fact of more people putting their money on the table. But you can't eat stock certificates and for them to have any value, eventually you have to sell them. So for possibly decades at a time as more people put their money on the table, there will be more money on the table. Until people pull it out, and then the money is gone.

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or transferring money from your bank account?

Depends on the bank. Ask yours.

mainiac

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Re: Investors club's?
« Reply #14 on: December 25, 2014, 10:51:47 am »

Not that Mainiac is necessarily wrong. It's not a bad strategy. But the market only really climbs the way it does because of people like him.

Stocks have real value, the corporations they grant partial ownership of have assets and revenues.  When passive investors like myself put money in the stock market it doesn't increase the capitalization of the stock market very much, it mostly crowds money from active investors out of the market.  Because they cant get the returns they want in stocks, they seek alternative investments like construction, bonds or preferred stock to fund expansion, startups, overseas investments, etc.  Some of these investments go bust, others have high returns and increase the amount of real capital available for ownership.

It might be possible that if passive investors become a large enough part of the market there wont be enough active capital to crowd out and channel money into real capital investment.  But if it is we aren't at that point yet.  And I'm pretty sure that some savvy mutual fund investors would have an easy time figuring out how to correct for such a failure and make a ton of money doing it if it ever came to that.
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« Last Edit: February 10, 1988, 03:27:23 pm by UR MOM »
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