Investing 102

[GregWeld]

Originally Posted by 64G-lark

Hi Greg, First this is a great thread with some good advise. I ran across it and have been reading for days. I have not read every post but enough to know I am ready to make some changes.
Im new to stocks and tired of my companies 401k plan that invest in mutual funds that I do not even know what companies they contain. I have done some investigating and I have the option of opening a self directed brokerage account within the plan that allows me to purchase stocks of my choice. I have been looking at various stocks and looking at the long term trends. The part I dont follow completly is how to tell the dividends they pay and the frequency. Can you explain more on this?
I would also like to understand more on order types. The options are Market, Limit, Stop, Stop Limit, Fill or Kill, etc. I know these are probably some basic questions but you always seem to have a way of putting things in laymens terms.
Im ready to redirect some of my investments and put them to work for me. Thanks in advance for your help.

#1 -- If you go to GOOGLE FINANCE.... and put in a search for an individual stock... it will pull up a chart and top left promently display the current "quoted" price and whether it's up or down... if you follow across the top of the chart to your right -- you will see a bunch of info as below




Range 83.16 - 84.75 ------ This is the DAYS trading range in price
52 week 74.76 - 92.99 ------ this is the 52 week trading range
Open 84.46 ----- where it opened for trading today
Vol / Avg. 1.16M/1.49M ------ how many shares change hands on average
Mkt cap 31.72B ---- The number of shares outstanding X's the price -- ='s companies total market value.
P/E 38.86 ----- This the current stock price divided by it's earnings per share over the last 12 months... a higher number is telling you that you're paying a lot for those earnings -- lower number means you're paying less. This is just a relative number and I place very little meaning on it.
Div/yield 1.32/6.34 --- this is where you see the ANNUAL dividend and the PERCENTAGE of the current price in "yield" (think "interest rate".
EPS 2.14 ---- EARNINGS PER SHARE (used to calculate the P/E ratio (above)
Shares 380.84M ---- how many shares there are issued
Beta 0.38 ----- think of this as volatility measurement against the "market" as a whole. Another relatively useless measurement IMHO
Inst. own 16% --- What percentage of the outstanding shares are "institutionally" owned. I like a higher number here -- which means that less "retail investors" own the stock (you are a retail investor). What I like about this number is that the "BIG MONEY" likes the stock. Other than that - it's useless.



DIVIDENDS are "generally" paid per quarter... but some stocks or ETF's (exchange traded funds - which are similar to mutual funds - but hold specific stocks or bonds) pay monthly.... some pay semi-annually.

Easiest way to see this for a stock you're interested in ---- go to the CHART in GOOGLE FINANCE -- for the name you're looking at -- and expand that chart to "1 yr" ---- or "5 year" ---- and you'd see a "block" with a D in it. If you hover on that block it will give you the date and payment info. Obviously if they pay 4 times per year -- then the dividend is paid quarterly.

Companies operate in FISCAL years - not calendar years.... so it depends on when they begin and end their year... so not all companies begin on Jan 1st and end on Dec 31st. In fact - I'd say most of them don't.... you have to look at the dates they pay on an individual basis name by name.


If you want to see what an ETF looks like --- Google Finance -- JNK or HYG. These are ETF's tied to a specific bond type (one is JUNK BONDS and one is just Corporate bonds). Bonds are what companies issue -- when they don't want to borrow from the bank. They can issue a bond and pay interest on it.. but not we're getting complicated.

[GregWeld]

A separate reply to the buying terms you asked about.




A "market order" is an order that says you'll just pay whatever the seller is asking for. Kinda like going to the store and just buying stuff --- you don't dicker for the price -- you just pay whatever the seller wants. MOST people use a market order... because unless you're buying lots and lots of shares -- it really doesn't make much difference if you pay a penny or two "more or less".


A "limit order" is what I prefer to use. I buy shares 5,000 or 10,000 or 20,000 at a time. A few pennies on orders like this adds up. So ------ when you place an order -- the question will come up (in a box) what type of order you want to place. If you place a LIMIT ORDER then you must fill in the MAXIUM price you are willing to pay per share. You can match to current ask -- or you might chose to "bid" a penny or 2 -- or even 10 cents less!

Now -- you can modify your limit order with "good for day" or "fill or kill".... so if you use good for day then your bid is "open" until the market closes.... and you might sit all day -- and then 10 seconds left in the trading session and some seller decides he's going to accept your offer and fill your order (maybe only partly or in whole).

The FILL OR KILL --- means you have a very short fuse and are willing to only accept a FULL order fulfillment and it must be filled RIGHT NOW no waiting for the end of the day crap.... and if not - you want the order killed.




The above is very basic..... so if you really want to dig into the nuances of trading (I do not recommend trading -- I like to INVEST).... you can find good detailed answers to just about any market info here:



http://www.investopedia.com

[CRCRFT78]

Nice little write-up Greg. Tutorials like this help to keep the spark lit and turn it into a flame again.

[sik68]

To follow up on the topic of "financing a depreciating asset" from a few days ago, I came across this really good financial blog tailored towards medical professionals. http://whitecoatinvestor.com/

Here is an excerpt that does a good job summarizing the issue.

The problem I have with people financing depreciating assets like cars isn’t so much a math issue as a behavior issue. As you mention, financing $10K at 1% for a year is only going to cost you $100 in interest plus a few hundred dollars in fees (and perhaps a few hundred dollars that you could have knocked off the price by paying cash.) Given your salary, it’s peanuts. Even Suze Orman would agree you can afford to finance this.

The issue I have with it is the habit. First it’s the car, then the house, then some nice vacations, then private college for the kids and before you know it you’re that 65 year old doc still working 15 shifts a month because he has to who seems to detest his patients, has no tolerance for new nurses and overall seems to hate his life. Financing a depreciating asset is by definition living beyond your means. It’s a slippery slope. Knowing you, I doubt you’ll go far enough down that slope to matter, but it’s worth at least recognizing what you’re doing.

- See more at: http://whitecoatinvestor.com/may-i-p....nMh0VmCa.dpuf

Another good article. Cheap financing is just leading people to finance longer, borrowing money for the wrong reasons. 10 Year car loan anyone?


I know we already closed the loop on this, but it's more food for thought.

[64G-lark]

Thanks Greg for taking the time to answer my questions. I will probably have more once I get my feet wet.

[GregWeld]

We've probably never covered SHORTING stocks.... mainly because that's not an INVESTMENT tool.... it's a "trader" tool. Personally -- I never short stocks because I'm not that smart... and there's something fundamentally wrong (to me) to bet that a company is going to do poorly. I'd far prefer to try to buy great companies that I like -- and if the stock hiccups a bit -- buy even more... but we've covered that about half a gazillion pages worth!


SHORTING is borrowing the stock from the brokerage --- selling shares you do not have --- which gives you the cash to your account --- BUT!!! BIG BUTT --- you OWE the shares... so it's called a NAKED SHORT. Now --- if you SOLD the shares at $10 ----- and can buy them down the road for $8... and repay the shares you borrowed... you made a nice profit on the trade. BUT!!! Always the big butt --- if they go UP from where you sold... eventually you're going to have to pay them back... so you could end up buying the shares for $15 and losing your sorry little (or big) butt in the process.

Here's my thing about this. #1 I don't want to go around betting that company X is going to suck. I don't have time to investigate and do all the homework that takes.

#2 -- about the time you think something sucks -- so does everyone else -- and the PROS on Wall Street have all bet the farm shorting the name... Now all of a sudden -- everyone is short --- and something happens and they're all buying like crazy to cover their short position. Guess what happens when everyone is buying.... RIGHT! The shares go UP not down.

Now --- a naked short has unlimited loss potential. In other words there's no stopping the price going UP.... so you're wide open to "whatever". At least if you just outright buy a position ---- and it goes to ZERO for a loss -- you're loss is capped at 100% --- YES -- HUGE loss -- but it's still capped at what you paid.

Below is an article --- on a very smart guy --- that has bet ONE BILLION DOLLARS on a short... and so far he's 100% wrong and his loss can go far higher provided the stock continues to go up. OUCH!

http://www.forbes.com/sites/nathanva...percent-worse/



Now -- there's another way to do a short -- and that's called SHORTING AGAINST THE BOX....

If you OWN the shares already --- and decide to sell some or all of the position "short".... you at least have your short covered because you already own the shares to replace them (basically borrowing from yourself). That's a far better way to go if you decide to be a big shot shorter. LOL

[XLexusTech]

Profit on FB today /.// Holy cow.. in the Green on FB.////

[GregWeld]

Originally Posted by XLexusTech

Profit on FB today /.// Holy cow.. in the Green on FB.////

What a ride.....




Now.... it's still priced for perfection. So you now have to hope that it's on a roll and can keep up the revenues and growth.


I'm not trying to talk anyone into -- or out of -- a holding. But I know that companies like this can be "been there done that" in an instant. When or if the "kids" decide something else is kooler. Poof! They move on like a Chevrolet heartbeat. That's the big challenge with investing in this kind of stuff.


In the meantime -- a guy can hit a home run.... So who knows!