I'm following the market daily and doing research but I'm still a little lost on a few things.
1. How long should I keep a stock for? I'm not aiming for maybe a 2-3 year build up, but long term investment is ok for me too since I'm only 23.
2. How many shares of a stock should I buy to be "worth it"? Lets say if I only have $1000 to start, buying 4 shares each of 2 ETF and 2 shares each of 2 index, I feel like it's not doing much?
3. Should I only need to look at the history of how much a stock was and buy low/sell high from looking at that history? Or should I just buy if I know which stock I want to get into (let's say it's SPY), regardless of the price since I'll be holding the stock for at least a year or two?
4. Is it good, when looking at a stock chart of let's say XLI, that it's always above the S&P 500? If a stock is always underneath the S&P 500 line, does that mean it's not performing well and I should not consider the stock?
Thanks so much... sorry it's long! Hi Ron! Thanks for all your answers. I go on investopedia and google finanace almost everyday. I'm tracking 2 portolios I set up so far. I guess from your answers I realize what I'm lacking is a plan and strategies within the plan. 1. Investing in the stock market should be a 15-20+ year deal.
2. The number of shares doesn't mean nearly as much as the amount of money it costs to buy them. For example, one share of Google is worth about $500. If you bought that one share two years ago when it was worth $100, you'd definately think it was "worth it", even though it was only one share.
3. When investing for the long term, you're best strategy is to buy companies that are most likely going to be around in 20-30 years (such as Coca-cola and Exxon).
For example, a share of Exxon in 1975 was worth $72. The stock has had five 2-for-1 splits since then, meaning that if you bought one share at $72, you'd have 32 shares today, each worth $81.50. Plus, you'd also have collected a dividend every three months
In 1975, one share of Coca-Cola was worth $79. The stock had four 2-for-1 splits and one 3-for-1 split, meaning you would now own 48 shares. The stock closed at $57.71 today, so your one share in 1975 that cost $79 would now be worth $2,770, plus you would have also collected all those cash dividends during the 32 years. I'll do my best to answer your Qs in the same order you asked them:
1. How long should I keep a stock for?
Answer: You stay in the trade until your target or profit goal is met OR until you decide you lost enough money and won't lose any more money
OR you think you've been in the trade long enough and its simply not doing enough for you in tyhat period of time.
Two sayings come to mind:
A] Plan your trade. THEN trade your plan.
B] Trees don't grow to Heaven. Neither do any investments.
2. How many shares of a stock should I buy to be "worth it"? Lets say if I only have $1000 to start, buying 4 shares each of 2 ETF and 2 shares each of 2 index, I feel like it's not doing much?
Answer: This is part of planning your trade.
Personally, I won't put any more than 20% of my account in any one trade.
3. Should I only need to look at the history of how much a stock was and buy low/sell high from looking at that history?
Answer: Take the path of least resistance.
Trade in the same direction as the market and that sector.
Or should I just buy if I know which stock I want to get into (let's say it's SPY), regardless of the price since I'll be holding the stock for at least a year or two?
Answer: You have to do your diligence/homework. You should check the news for splits, earnings and dividends. The news about the company may affect the price as well.
4. Is it good, when looking at a stock chart of let's say XLI, that it's always above the S&P 500? If a stock is always underneath the S&P 500 line, does that mean it's not performing well and I should not consider the stock?
Answer: What do your trading rules tell you to do? Your trading rules are your Bible. You should have different trading rules for each strategy you decide to use.
You can usually find excellent, easy-to-understand definitions of many financial and investment terms by going to this free site, recognized by Y! A as a "Featured Knowledge Partner":
http://investopedia.com
Investopedia also has a free, paper trading platform. You can set up a virtual account and almost trade as though you were trading with your own hard-earned money.
http://finance.yahoo.com is also recognized by Y! A as a "Featured Knowledge Partner"
Thanks for asking your Q! I enjoyed answering it!
VTY,
Ron Berue
Yes, that is my real last name! |
