Questions from a stock market beginner

[Garpal Gumnut]

Its lame.
How do you determine "low enough"
You need positive expectancy before you do anything.
You then need to understand risk and position sizing.
Start there.
There is much to this business and will take you years and quite possibly a chunk of your funds before you master it.

/a
mate, this is a tired old mantra of yours.

Its makes me think its not valid, a bit like Gann.

Do you have any novel ideas?

gg

 

[Julia]

lAnd yeah I think i have a rough plan about trading, mainly its just observing the fluctuations of the prices, and when I see the prices are low enough, I submit an order for that share.

Then I wait, till it goes back up a bit, not much..in Rio's case maybe a few dollars and then I execute order to sell.

Its lame.
How do you determine "low enough"
You need positive expectancy before you do anything.
You then need to understand risk and position sizing.
Start there.
There is much to this business and will take you years and quite possibly a chunk of your funds before you master it.

Is it really all that lame if Sweet Classics doesn't want to educate himself about the wider market but just wants to put a chunk of money on one blue chip company?

The $500K would buy about 5900 RIO shares. Not too hard to buy in a dip then sell when it has gone up two or three dollars. That would be a quick profit of around $12,000.

 

[Tysonboss1]

Or it could end in tears with poor old sweet cakes suffering huge speculative losses by trying to jump in and out of the market without knowing what she was doing.

It might be just me, But if I had just sold my house I would want to take a conservative approach as to where I was putting the funds. With some here suggesting she even use margin, it's just crazy, she doesn't know what shes doing. Lucky sweet cakes didn't sell her house a few years, Or the sharp salesman from storm financial would have eaten here for breakfast.

"those who fail to remember the past are doomed to repeat it"

 

[sweetclassics]

Or it could end in tears with poor old sweet cakes suffering huge speculative losses by trying to jump in and out of the market without knowing what she was doing.

It might be just me, But if I had just sold my house I would want to take a conservative approach as to where I was putting the funds. With some here suggesting she even use margin, it's just crazy, she doesn't know what shes doing. Lucky sweet cakes didn't sell her house a few years, Or the sharp salesman from storm financial would have eaten here for breakfast.

"those who fail to remember the past are doomed to repeat it"

Hi, thanks for your input. First of all I'd like to make it clear than I'm not a girl..I'm a dude bro.

Secondly, I agree about speculative losses does pose a genuine risk but I also believe by carefully dwelling on local market and global news, price fluctuations as well as all relevant news material concerning the company the risk can be minimized to a certain extent. I recall the GFC was widely and thoroughly covered from start to finish by the media, leaving the shareholders ample time to make decisions on their share holdings.

Even if I do make a lost in share value, I always have the choice of withholding the sale of shares till the situation improves. I'm just a bit clueless on your suggestions of a conservative approach, as I think keeping my margins at the minimum is a conservative approach to make a profit, ain't it?

 

[Tysonboss1]

Hi, thanks for your input. First of all I'd like to make it clear than I'm not a girl..I'm a dude bro.
?

Sorry ,... for some reason i thought your name was sweet cakes, which is a girly name.

 

[tech/a]

/a
mate, this is a tired old mantra of yours.

Its makes me think its not valid, a bit like Gann.

Do you have any novel ideas?

gg

Well if you trade consistently you'd know whether its valid or not.
You'd know your expectancy off pat.

To those who have never seen it let alone know what it means its shiny and new.
To you its old and tired as you've been around the block.

Even if I do make a lost in share value, I always have the choice of withholding the sale of shares till the situation improves.?

This is always a classic.
You haven't made a loss until you sell it!!

The situation may not improve and the stock could be de listed.

Go to a bank and ask them what your asset is when you hold a stock which was $500K now worth $100K.

It will be $100k---bet ya!

 

[Tysonboss1]

Secondly, I agree about speculative losses does pose a genuine risk but I also believe by carefully dwelling on local market and global news, price fluctuations as well as all relevant news material concerning the company the risk can be minimized to a certain extent. I recall the GFC was widely and thoroughly covered from start to finish by the media, leaving the shareholders ample time to make decisions on their share holdings.

Even if I do make a lost in share value, I always have the choice of withholding the sale of shares till the situation improves. I'm just a bit clueless on your suggestions of a conservative approach, as I think keeping my margins at the minimum is a conservative approach to make a profit, ain't it?

Sorry I can't aggree with anything you are saying about monitering the news of companies lowers your risk, it takes seconds for bad news to wipe value from your holding, and if you are limited to one company you can suffer a huge loss,

In regards to a conservative approach.

In my view a conservative approach would involve keeping some of the cash in cash investments, while dollar cost averaging a large portion of the rest into an index fund. If you wish to try your hand at investing some yourself then I would limit this to 25% of the total, and spread it accross a minimum of 5 companies that you know well and can be assured you are not over paying for.

May I also such before you invest you $500K, that you invest some time and money into education, not expensive seminars just some good books, the Intelligent investor is good start,

Please watch the below two videos of warren buffetts view about index funds and novice investors, they only go for 2mins

http://www.youtube.com/watch?v=e_WF1NhSGIc

http://www.youtube.com/watch?v=rEX81lGhMwM

 

[burglar]

Hi, thanks for your input. First of all I'd like to make it clear than I'm not a girl..I'm a dude bro.

FWIW If you were a girl, chances are you would be listening!

 

[sweetclassics]

Sorry I can't aggree with anything you are saying about monitering the news of companies lowers your risk, it takes seconds for bad news to wipe value from your holding, and if you are limited to one company you can suffer a huge loss,

In regards to a conservative approach.

In my view a conservative approach would involve keeping some of the cash in cash investments, while dollar cost averaging a large portion of the rest into an index fund. If you wish to try your hand at investing some yourself then I would limit this to 25% of the total, and spread it accross a minimum of 5 companies that you know well and can be assured you are not over paying for.



May I also such before you invest you $500K, that you invest some time and money into education, not expensive seminars just some good books, the Intelligent investor is good start,

Please watch the below two videos of warren buffetts view about index funds and novice investors, they only go for 2mins

http://www.youtube.com/watch?v=e_WF1NhSGIc

http://www.youtube.com/watch?v=rEX81lGhMwM

I agree with spreading out the funds but I think that might be worthwhile once you got a few million in your portfolio, but for an investment of half a mill bucks it won't give any more annual returns than my bank does in interest payments lol.

 

[Tysonboss1]

I agree with spreading out the funds but I think that might be worthwhile once you got a few million in your portfolio, but for an investment of half a mill bucks it won't give any more annual returns than my bank does in interest payments lol.

over time cash at bank will get eaten by inflation, buy owning real assets you wealth is protected from the inflation of the money supply.

By investing in shares you will be earning dividends + growth + inflation hedging.

I recommended an index fund for you because it is easy and safe, and still generates a credible inflation hedged return.

Plenty of people with more experiance and education than you in relation to investing in the share market have entered the market and dedicated hours of study and work with the hope of beating the market ( index funds ) only to lose money or under perform the index.

That is the one virtue of the market, It is very easy to invest and earn a credible return by simply taking a passive/defensive approach, It takes much work and dedicaton and training to be able to safly beat the market using a focused approach, ( any idiot can fluke a year or two of spectacular growth, but eventually it catches up to them)

 

[luke256]

Is it really all that lame if Sweet Classics doesn't want to educate himself about the wider market but just wants to put a chunk of money on one blue chip company?

The $500K would buy about 5900 RIO shares. Not too hard to buy in a dip then sell when it has gone up two or three dollars. That would be a quick profit of around $12,000.

Yes its a lame and immature plan. I wouldn't even call it a plan.
1. Entry Signal: buy when i think its low
2. Profit target: mmmhh just wait til it goes up a few bucks


Rio dropped about $3.5 in the last three days or a quick loss of 19K on a 500k purchase. IMO thats a decent amount of money to throw at a trade with no proper plan.

Sweetclassics your considering being a short term trader (80 - 90% lose). Why bother investing in something you dont know about when the odds are so heavily against you? 500K will buy you a ferrrari with some change left over.

 

[Julia]

I agree with spreading out the funds but I think that might be worthwhile once you got a few million in your portfolio, but for an investment of half a mill bucks it won't give any more annual returns than my bank does in interest payments lol.

Yes its a lame and immature plan. I wouldn't even call it a plan.

The above statement by sweetclassics does show his inexperience and lack of education. And correct, too, that he doesn't have what most of us would call a plan.

However, a glance at RIO's chart shows plenty of opportunities where one could have bought in a dip such as you've mentioned, then sold when the SP rebounded.

Agree that sweetclassics' inexperience could well land him in trouble, but the principle of what he's suggesting is feasible.

Isn't this what most traders do all the time with much smaller amounts, i.e. in at $2.20 then sell at $2.70 etc?

What's the difference other than the bigger dollars?

 

[WaveSurfer]

Hi guys, I'm new here too and got a few questions in mind. I sold my house a few months ago for half a mill, and currently I'm keen to invest back that amount into shares, preferably as short term investment for probably a year or two....

Sweet classics, like sweet classic cars? I have a couple of sweet classics

Keep your money, put it in a high interest savings account and study the markets before you play it with that sort of cash dude. Unless you're a punter and don't mind donating your hard earned to the market.

If you're going to play it, play it small to start with. Odds are that you'll turn 500k into 20k in a year or two if you don't. Study for a year and throw 10k in for a punt if you're game. Chances are you'll lose that too, but you'll have some fun and learn a lot on the way. Come back here and thank the ones who told you not to give your 500k away :

Or go with an index fund, but don't expect it to out perform in just a year or two. It's a long term strategy and trying to pick it for a year or two with your limited experience is going to be very, very hard.

 

[nomore4s]

Isn't this what most traders do all the time with much smaller amounts, i.e. in at $2.20 then sell at $2.70 etc?

What's the difference other than the bigger dollars?

Julia, the issue isn't so much the fact he/she wants to do it with RIO or the bigger $ amounts, it is more the lack of position sizing or risk control that is the issue.

I tend to trade RIO, BHP & the banks a fair bit as they do provide good swings that I can trade with tight stops giving me large position sizes. But I don't trade them with all my capital and I have stops in place but even then these stocks can have large gap down days which can really burn the account.

 

[sweetclassics]

The above statement by sweetclassics does show his inexperience and lack of education. And correct, too, that he doesn't have what most of us would call a plan.

However, a glance at RIO's chart shows plenty of opportunities where one could have bought in a dip such as you've mentioned, then sold when the SP rebounded.

Agree that sweetclassics' inexperience could well land him in trouble, but the principle of what he's suggesting is feasible.

Isn't this what most traders do all the time with much smaller amounts, i.e. in at $2.20 then sell at $2.70 etc?

What's the difference other than the bigger dollars?

hmmm excuse me but i actually go to uni, so you guys could lay off calling me dumb a lil you know.

And for those saying I'm going to lose everything by putting my money in Rio, well why are so many people buying its shares in the first place if the company's destined for ruins? The mines certainly aren't drying up, and with high rates of industrialization happening all over Asia, I don't see the demand for materials going down either.

One more thing, I'm not against diversification at all, I'm just suggesting I trade one company at a time. Maybe if Rio's experiencing a slump, I'll look into other companies whose prices are actively fluctuating.

Anyways just my two cents, tho I'm still keen to hear any constructive arguments and advices. Thanks

 

[Tysonboss1]

hmmm excuse me but i actually go to uni, so you guys could lay off calling me dumb a lil you know.

Firstly, nobody called you dumb I think the quote was "uneducated" in the area of investing or Trading.

Secondly, just attending uni (even if you have a super IQ) does not mean you have an edge over people across fields you have no experiance in or are un educated in.

For example, People in the medical profession have prooven to be terrible investors over time. Even though they are very intelligent and have strong abilities in the area of research and fact finding. Generally they are let down on the emotional side of trading and investing.

 

[burglar]

hmmm excuse me but i actually go to uni, so you guys could lay off calling me dumb a lil you know.

Anyways just my two cents, tho I'm still keen to hear any constructive arguments and advices. Thanks

I didn't actually hear anyone calling you dumb, ...
I think some said inexperienced. (ouch that's still got to hurt!)
You are surrounded here at ASF by millionaires and retailers, traders and investors.

Just work out who is who, filter their advice, then go buy RIO

 

[Tysonboss1]

And for those saying I'm going to lose everything by putting my money in Rio, well why are so many people buying its shares in the first place if the company's destined for ruins? The mines certainly aren't drying up, and with high rates of industrialization happening all over Asia, I don't see the demand for materials going down either.

One more thing, I'm not against diversification at all, I'm just suggesting I trade one company at a time. Maybe if Rio's experiencing a slump, I'll look into other companies whose prices are actively fluctuating.

Anyways just my two cents, tho I'm still keen to hear any constructive arguments and advices. Thanks

Rio may very well be a great business (I don't follow it, so I don't know). But this doesn't mean you can't lose money by over paying.

Diversfication protects you from suffering big losses when you get one idea wrong, putting all your money in one company offers no protection through diversification.

But look, I have no vested interest in the safty of your priciple. I just offered my ideas about how you could have a decent return while also having safty of priciple. It's your money do what you like.

In grahams words,

"Out right speculation (gambling) is neither Illeagal or Immoral, Nor in most cases fattening to the pocket Book".

As I said earlier, It is possible for you to have healthy returns doing what you intend to do. But it is at the expense of taking larger risks, which sooner or later will catch up with you. only then will you realised what you don't know.

Untill then feel free to spin the roulette wheel and scoff at me when you win, just don't blame the market when you loose. Because it won't be the market that cause's you to lose, But you lack of understanding and proper analysis, along with the lack of wise risk management.

 

[burglar]

...I'm unemployed, ...

Hard to keep your creds if you contradict yourself.

 

[Market Depth]

Of course you can throw 500k at a large Cap stock, it'll just swallow it up no problems at all. The Large Cap stocks are the 'BIG' sharks of the stockmarket, they need constant regular feedings to keep moving, I'm sure a 500k lunch for RIO would be just what it wants.

So lets just say that you ignore all advice and RIO is indeed the 'One you Want'. What have you noticed about how RIO trades? Have you taken any Notes? Why is it a 'Good Buy' when the price moves down a bit? What postion sizes have you noticed being traded with RIO? Do you plan on buying in one lot? or many smaller lots? How are you to manage your trade? Many other questions I could ask. Learning Observation along with notation well before taking any action is a good starting point. You'll either make allot of money, or your 500k will become expensive fish food I won't speculate on which one you'll be, I'll let you decide.