Stalking the stock market.

I take a slightly more aggressive approach to saving for retirement than most. For now, 100% of my retirement contributions are invested in various mutual funds. These mutual funds give me partial ownership of thousands of different domestic and foreign companies. At this stage in my life, I don’t see much of a reason to not focus exclusively on stocks. As I hit my 30’s, in a few short years, I’ll probably begin dabbling in the world of bonds.

Seeing that I have some kind of affinity for the stock market, you’d think I’d be pretty market savvy. I’m not. I picked a few solid performing mutual funds and never looked back. So far this seems to have worked out for me.

What scares the crap out of me is investing in individual stocks.

It’s like going to Vegas and betting it all on black. Okay, not really. One can chart, look at P/E ratios, and spend hours on Morningstar to get a better idea of what is going on with a specific company. But I still feel like this…

50360e401d41c87726000130

Since I know nothing about how to properly build a portfolio of individual stocks, I’m going to turn the soap box over and give you an opportunity to educate me by answering the following questions.

1. Do you own any individual stocks? (If no, why not)

2. Which ones (or how many)? 

3, What’s a good source to learn the basics of dabbling in the stock market? 

4. Have ya made a bad buy before? (WaMu, Blockbuster, etc?)

 

21 thoughts on “Stalking the stock market.

  1. Have you looked at Lendingclub.com yet? You would like it, makes making money fun. Anyway, if not back to stocks – I goofed getting FB the first day and its still down. My best buy was Time Warner years ago and now its my best performer. Visa has always been a winner. I bought a whole bunch of different ones that were priced under $0.25 each and some have really done well, others have disappeared. I use Sharebuilder as my investing vehicle. It links up to Mint.com too. Good Luck.

  2. Man I’m with you. I just opened another Roth and I have no idea where to invest. I guess I will just buy some mutual funds watch for about a year and see how it goes.

  3. 1. Do you own any individual stocks? Yes and have for years

    2. Which ones (or how many)? I have 27 different positions currently. I add to or subtract based on my research

    3, What’s a good source to learn the basics of dabbling in the stock market? The internet is chock full of good (and bad) information. If you don’t have the time nor the desire to do the work stick with mutual funds and index funds.

    4. Have ya made a bad buy before? I have made a couple bad buys, but I knew they were speculative going into it and thus a calculated high risk / high reward scenario.

  4. 1. I do own stocks in companies that I have a personal connection to. Both have underperformed the market indexes, but I maintain the small portion of my portfolio for excitement and growth potential.

    I use Finviz.com to research and screen individual stocks. I love reading and watching about investing (MadMoney fan!!). However, I too am often gun-shy to actually pull the trigger on individual stocks. Everyone is going to have different theories on individual stocks, so I think its best to determine what this money is for. For example, if its fun money and would be used on some other toys, then, yea – investing in penny stocks would make sense. However, if its part of your college/retirement/other LT goal savings – then I’d stick with known blue-chippers (BofA, Google).

    Numbers to understand for individual stocks are P/E Ratio (Price of the Stock divided by Earnings) – which tells you how long it will take to earn your investment back. Dividend Yield – the % of dividend the company pays every year. Market Cap – Size of the company.

    Hope this helps. I’m not a fan of buying/selling individual stocks unless you are completely invested in it and willing to do lots of research. The trading costs will severely limit your earnings potential.

  5. I only own one individual stock, my company’s, as part of my employer matching share program. My stocks will be matched by my company 1 for 1 after a three year holding period.
    I initially started taking out quite a percentage for this ESPP Program, but I am going to decrease it in the fall when I’m eligible to decrease it. I’m not as comfortable investing x amount of my paycheck back to my company. It makes it where I have too many eggs in one basket.

  6. No individual stocks. I’m in index funds at Vanguard. LOW FEES and I love it, plus really spread out. I own the stock market. 🙂

  7. I own no individual stocks nor would I. Doing so reduces diversification and increases risk, without necessarily increasing reward. Think if your portfolio of individual stocks included Enron, MCI, Tyco, Lehman, and other such major success stories.

    I had a co-worker who maintained a portfolio of some 30 individual stocks for many years, and finally admitted that he would have had the same or better result by holding the Vanguard Total Stock fund.

    There’s probably no harm in not holding bonds if you’re in your 20s, but it does make sense to hold them to increase diversification and reduce risk, as asset classes tend to rise and fall without correlation to each other.

  8. I’m on the same page as Larry (regarding the stocks and bonds). I dabbled in individual stocks a little bit in the late 90’s but luckily I didn’t have enough into it to lose anything big when the tech sector blew up. I wouldn’t do it again. I figure I would have to own so many stocks in order to diversify the way a mutual fund does that it’s not worth it.

  9. I have some money in individual stocks. I just started investing, too, so I am getting my feet wet with a few thousand dollars. My plan is to buy and hold stocks that produce a dividend and are undervalued. I do research all over the internet (msn, yahoo) and I really like the motley fool. I am part of the CAPS community there and the articles and comments are interesting to read. I currently have 3 stocks— NSC, FAST, and MPW– NSC and FAST have been around for a long time and produce dividends. MPW produces a dividend and I picked it because I think the healthcare REITs are undervalued. Oh, and I DRIP, of course 🙂 I use Fidelity because it lets your DRIP and they have been great to work with…hassle free!

  10. I only hold a few at a time. Some have been great, while others had minor losses.

    Right now i have the company I work for, cbsh, and aapl. All have been in my portfolio for years, and all have substantial unrealized gains.

    The 15% discount on my company’s stock purchase plan, plus around 20+ percent gains have helped a lot.

    Aside from knowing what to pick, is knowing where to put it. Growth stocks in taxable accounts. Dividend stocks in your roth. And so on.

  11. 1. Yes
    2. Used to be up to 10, I’ve consolidated down to 5. Big name companies include Ford and Apple.
    3. I like the Motley Fool.
    4. Yes, I made a speculative move and bought into an oil and gas trust. I didn’t do my own research and bought into hype.

  12. 1. Do you own any individual stocks? (If no, why not)
    Yes.
    2. Which ones (or how many)?
    Kellogg Co, Kraft (now Mondolez, spelling might be wrong), Brunswick, Volkswagen, Hershey, General Electric
    3, What’s a good source to learn the basics of dabbling in the stock market?
    I read just about everything I can get my hands on and pay attention to the small paragraphs tucked in the nooks and crannies.
    4. Have ya made a bad buy before? (WaMu, Blockbuster, etc?)
    Topps was sold to some other company right after I purchased a couple shares. Nothing too horrible (loss was only about $30).

  13. 1. Do you own any individual stocks? – Yes
    2. Which ones (or how many)? BofA (been my best ROI of them all), Future Fuel, Cisco, General Electric and some stocks from my company ESP Program – Each of them I only have a handful of them though because I decided to do this as an experiment with some extra-extra money I had.
    3, What’s a good source to learn the basics of dabbling in the stock market? I just read a lot and hemmed and hawed over each purchase before I made it. I made sure that they were companies that had staying power, and have been around for some time (though one of them was just a whim, I’m hoping it’ll do something for me). I also wanted ones that paid dividends so I could participate in the ‘DRIP’ (dividend reinvestment) with them.
    4. Have ya made a bad buy before? – So far my only “bad” buy has been the Futurefuel. But I knew that one would be highest risk of them all. It hasn’t been around the market for too long, and I didn’t do too much research into it, but I thought I’d give it a whirl. So far I’ve pretty much just kept my investment on that one. But all the others are up!

  14. 1. Yes

    2. A bunch, and pretty evenly distributed: HIINX, IVR, IVW, IWM, KYN, NMMEX, PTTDX, YAFFX

    3. I use my man. He’s an economic analyst for a firm that advises large companies on how to distribute their 401k plans. He gets paid to figure out what’s coming down the road and what stocks/mutual funds to buy to make $$. For example, you know the housing boom between 2003-2006ish? They all installed new water heaters. Water heaters last, on average, about ten years. And apparently there is only one major manufacturer of water heaters (or some crucial part of the heater or something). Since we’re coming upon replacement time, my man is having me and a bunch of his clients put $$ in that company. I’ve got about a 10% return since he’s started managing my stuff. YAY!

    Oh! And since he makes more money than me, he can afford to take more risks. I’m a bit of a junkie when it comes to the business side of fashion. After hearing me gush about the strategic moves that specific brands make, he looked into it and kind of took my lead. He’s taken stock in the luxury market, namely Coach and Louis Vuitton. Both companies are making huge strides in the Chinese market, with no signs of stopping.

    4. Not that I can see. YAY!

  15. 1. Yes
    2. Just my company for now (mainly because of stock awards and ESPP)
    3. Along with what everyone else recommends I highly recommend trying out a simulator so that you can practice with.
    4. Not with real money, but with the simulator I lost out on one call option trade thinking that AAPL would fall and then recover a bit. (As it happens it was a wash as I straddled it allowing me to make up and exceed the purchase price of the call option with what I made on the put option). All virtual but the experience shows me that unless I want it to be my full time job, just stick with long term investing.

  16. I do own many individual stocks, one of my favorites is TM, Toyota. When they first starting doing recalls, and the stock fell, i knew they’re a solid company and would bounce back and THEY HAVE! They’re up 42% since I purchased them! Also like EPD, Enterprise Products. They’re up 48% since purchase. I have 70 shares of TM and 25 of EPD.

    I’ve made a few bad buys, but nothing devastating. One stock that has never been in the green is DVY, but they give a dividend yield so it’s balanced out.

    Here are some basic rules for getting started with all the stock stats. For more information on what these mean and easy ways to access them, check out my blog post this week.

    BUY
    Buy below 52 week average
    Buy stocks that pay dividends quarterly or monthly
    Buy stocks that payout less than 60% in dividends
    Buy before ex-dividend date
    Check financials for positive cash flow
    P/E<20
    Beta <1.0
    Positive growth earnings
    Debt/Equity <1.5

    SELL
    If earnings and dividend yield both declining
    Sell half @ +100% value change – take profits
    Or look for fair value calculation & sell @ fair value

  17. I own about 15 individual stocks. (I do have IRAs, a 401k, and a brokerage account too.)

    The purpose is not (necessarily) to buy low and sell high. These all pay dividends, and they all have DRIP plans. Until I retire, they just automatically purchase more share at each quarterly dividend.

    Once I retire, and when I need the money, I will stop the DRIP plans, and get the dividend income. So as you can understand, these will become another income stream, aside from Social Security (whatever is left by then), savings, IRAs, etc.

    Therefore the ups and downs of the stock market do not phase me much. As I (hopefully) have picked stable long-term dividend payers that will be around a while, I am doing well. Yes of course everything is a risk, but having some equity that buys me more equity every quarter is gratifying.

  18. Awesome picture!! 🙂

    You nailed the most important part of investing: finding what you’re comfortable with and sticking to it.

    There is no “ultimate investment vehicle.” If you go by what the uber-rich invest in, their portfolios are dominated by bonds. Many people I know prefer rental homes. So individual stocks is not the holy grail of investing — it’s only one of many options.

    I like individual stocks because I’m a geek and accounting major, so I’ve learned how to look at individual stocks, and I enjoy doing it. The bulk of my portfolio is in two dividend stocks, a MLP (master limited partnership) owning oil/gas pipelines, and preferred stock in a hotel REIT that pays a fixed 8% per year. I also own a more speculative Chinese real estate stock. What fun is it to go to sleep peacefully every night?

    I learned about the stock market through Motley Fool and AAII (aaii.com) and by reading Warren Buffett’s annual reports. AAII has a geek’s delight of mountains of data for every company listed. Like a geek, I love having it, but haven’t used 1% of it… yet 🙂

    Bad moves – only a liar or a fisherman will claim to never have had “one get away,” or never to have caught a piece of seaweed. It comes with the territory. Rental home owners get one bad tenant among many good ones. It’s life. The good news is most investment vehicles are robust enough that the good far outweighs the bad.

  19. 1 & 2. Do you own any individual stocks? (If no, why not) – A lot. Probably 20 or 30 different companies in my dividend portfolio. Just 2 or three in my “trading account” which is now just a shadow of what it used to be and 4 or 5 in my IRA which I use for options

    3, What’s a good source to learn the basics of dabbling in the stock market? Investopedia and blogs that share your specific investment mantra. There are some amazing dividend growth blogs out there.

    4. Have ya made a bad buy before? (WaMu, Blockbuster, etc?) – Yup. Can you say Lehman? But at the same day I made that trade I picked up Citi which is up a couple hundred percent.

  20. Utility stocks are a good way to go and a good start. I buy directly from my local electricity provider. They usually earn good dividends and you can reinvest them making them effortless. The prices are relatively stable.

    You could also buy stock direct from http://www.amstock.com/investpower/new_dp.asp allowing you to buy a few at a time and not having to bother with a broker. There are lots of good stock to choose from here…railroad stock is a fav.

    I bought some penny stock back in my early 20s and will never do it again.

    I try to pick stocks I don’t have to watch so much but lately I’ve been reading info on seekingalpha.com

    I love your blog!! It’s fun to read and makes me smile:)

Comments are closed.