Hi All, I'm quite new to all of this business, I've spent the last three days trying to make sense of huge amounts of information on investing and trying to find an online broker. I've applied for test drives (virtual accounts) with genesis securities, global futures, cobra trading and speed trader. My wife is an accountant, she should be doing this but she has no time. I am a retired musician, I should NOT be doing this but I have the time. So, the first absolute beginner's question in this, I realize that low risk usually equates to low return, but for a beginner, this may be a good thing. Where do I start, stocks, futures, forex, options, other. I searched the forum for beginner's advice but I didn't find answers to these specific questions so I hope that if this has been dealt with before that some of the old timers would just be kind enough to point me toward the relevant threads. Thanks!
As a beginner and one that seems to be looking into investing/trading reluctantly, I suggest you start here: http://assetbuilder.com/blogs/capital_gains/archive/2008/04/21/couch-potato-cook-book.aspx or here: http://www.bogleheads.org/forum/index.php Most active traders, investors, advisors, and fund managers underperform the simple type of strategies that you will find at the first link. I am not against active trading and investing, I do it myself, but it has been a hobby for years, bordering on obsession. People that approach active trading casually, underestimate the difficulty, or the level of competition, will almost certainly be poorer for their efforts. If you choose to trade actively expect to spend a lot of time at it. If it's not something that sincerely interests you, don't waste your time. If you do want to learn more about active trading, there is a newbie FAQ here: http://www.elitetrader.com/vb/showthread.php?threadid=78244 And if you choose to trade, I suggest you trade small cap stocks - that is what I trade primarily. Maybe I will find myself on the other side of some of your trades ;-)
Over the last 10 years of my father's life, he had money in bonds and money in blue chip stocks... He invested in both 10 years ago, then just let them sit. The blue chip stocks account did not increase in value one cent over that 10 year period. The bonds account increased in value by 50% over that 10 year period. And he purchased actual "bonds". This was NOT a bond mutual fund. Quite a difference. A bond is a loan - to a government like the U.S. or to a corporation like IBM. A bond can pay interest - called coupons. If you have ever taken out a loan and paid interest or looked at the interest charges on your credit card bill, then you will know how much interest charges can be! It is nice to be on the receiving end of that... Then in addition to coupon payments, bonds can increase in value from what you paid to "maturity" (when the loan is "paid off" by the borrower). And a government or corporation might not be able to pay off a bond. That is called default. Just like a homeowner might not be able to pay the mortgage or car payment. Also bonds can have a "current value" for which they can be sold or purchased. This value can go up or down. So if you sell the bond early (before maturity), you could lose money or make money depending on the current value. So you could invest in bonds, then the value goes down, and your account will show a lower value. However if you wait to maturity, you will get the full loan amount back if the government/corporation pays. If you have invested in a bond "mutual fund" and the value of that fund drops, you lose period. So best to buy the actual bonds, but this takes a LOT of learning and constant work. As the coupons pay twice each year or whatever, that money needs to be invested. Then bonds have a "credit rating". Perfect credit and lower percent paid (Yield). Bad credit and high yield (but the company/government might not be able to pay.) Anyway if you go to your local book store and look for books on bonds, you probably will not find many or any. Best to search for bonds on Amazon.com or other online booksellers. Don't invest a nickel until you fully understand what you are doing. Especially important to understand the bond credit ratings. And learn how to investigate a corporation's or government's finances first before loaning them money. You might see a company which looks promising on the surface - like a solar panel manufacturer. But when you look at their annual report, you might see they lost money the year before last and lost even more money last year! Here is a "bond screener" to find bonds... http://cxa.marketwatch.com/finra/BondCenter/AdvancedScreener.aspx
Thanks for the reply. I'm off to my local library to see what I can find out about bonds. Looks like they might be good for slow but steady growth.
FYI, The forum that I linked to has a comprehensive Wiki that covers among other things, bond basics: http://www.bogleheads.org/wiki/Bond_Basics
Thanks so much, right now I'm immersed in "The Bogleheads' Guide to Investing". I certainly do appreciate those of you with so much more experience taking the time to coach a complete novice. I am taking the time to explore all of your suggested resources and your guidance is greatly appreciated. Thanks!
Where to start? Piece of cake. Buy a stock, any stock, any price, any time of day. If it goes down, write down all the reasons it went down. If it goes up, write down all the reasons it went up. Do this every day, after several years you will have a very large stack of papers with reasons why the stock went up and the stock went down. Take this stack of papers and throw them away. Stay tuned....... on why "85K books on the stock market take up a lot of shelf space"