Why do you guys buy stock?

[walk066]

The way I look at stock is to buy low and sell high (which I know doesn't always happen). Why would you hold onto stock for years?

[domafia]

Simple answer. To make money.

Over time the stock market has always gone up. If you find a good company that continually performs, you are rewarded by holding its stock. There are countless examples of companies whose value (stock price) has increased significantly over time. As an example, why would I sell a share of Microsoft tomorrow for a 50% profit if I could hold onto it for ~3 years and then sell it for a 2,000% profit?

[walk066]

Originally Posted by domafia

Simple answer. To make money.

Over time the stock market has always gone up. If you find a good company that continually performs, you are rewarded by holding its stock. There are countless examples of companies whose value (stock price) has increased significantly over time. As an example, why would I sell a share of Microsoft tomorrow for a 50% profit if I could hold onto it for ~3 years and then sell it for a 2,000% profit?

Gotcha. But how do you determine what companies are worth investing? I am pissed because when I looked at my companies stock about 5 years ago it was at $30.00, but now it's close to $70.00. I also looked at ING Direct a few years ago and it was in the 20.00 range and now it's 40.00+.

Does buying a companies stock at let's say $40.00 have any value? Or it is better to buy a stock that is $10.00 range?

[Romanowski]

Originally Posted by walk066

Does buying a companies stock at let's say $40.00 have any value? Or it is better to buy a stock that is $10.00 range?

there are so many variables that apply that buying a stock in a certain price range means nothing

what if a stock was worth 50 and tommrow was worth 25 (after a split)

does that make it less attractive? no


as far as why hold..

go look at what your bank is offering as incentive to hold your money

5% is about the max on money market (and thats if its a small overhead or online bank only)

the stock market offers more...look at the S&P 500 Index (overall market share) and what it averages..

obviously not all stocks are worth holding

which stock are worth holding? Blue Chip (are 'established")

or you may have a hunch on a idea or service that may be hot in the future

for example the self service banking like ING

a hunch that a particular company seems to have a competitive advantage over its competition

problem there is unless you are nose deep into the business world and understand what businesses (not consumers) need, want, and demand

you may be one of the last to know...hence you buy when its almost at its peak rather than the beginning of its acsent.

either way it takes balls, theres no end all be all...

psychologically similar to gambling in a way...(depending on your inovlvement)

the balls to push the button when your gut says so, and brains to cut losses and move on to next day (rather than chase)

[walk066]

Thanks Rome. I just want to get a few idea's about the stock market. I want to invest, but unless I'm 100% into it, I'm not sure. I'm not trying to get burnt if I don't pay attention for a few days.

[domafia]

walk, for someone just starting out I would ease into it with mutal funds. a little research and some tips from people in here can present you with some good funds to start with. have a professional pick the stocks for you until you have done your homework and have a good idea that you can do better picking your own.

[Romanowski]

Originally Posted by walk066

Thanks Rome. I just want to get a few idea's about the stock market. I want to invest, but unless I'm 100% into it, I'm not sure. I'm not trying to get burnt if I don't pay attention for a few days.

then take a diffent approach

less risk

even buyiung the S&P index is better than holding your money in the bank (over time)

but it wont be liquid so to speak ( you cant withdraw it and hold those bills in your hand)

just something u tuck away and forget about, out of sight and mind

start a roth IRA..so many ways to invest limiting risk

its not glamorous nor get rich overnight thing..

but bottomline is its better than a simple money market

gl

[dhunter]

stock price has nothing to do with the value. it's all about where you think that stock is going to go in the future. hell i would have love to have gotten google stock at $200.

[walk066]

Originally Posted by domafia

walk, for someone just starting out I would ease into it with mutal funds. a little research and some tips from people in here can present you with some good funds to start with. have a professional pick the stocks for you until you have done your homework and have a good idea that you can do better picking your own.

I did open mutual funds about a year ago with an investment rep through my bank. The problem is I told her to give me the best possible mutual funds, but understand nothing of where my money is. I do know that some of my money is in Amercian and foreign companies.

[domafia]

Originally Posted by walk066

I did open mutual funds about a year ago with an investment rep through my bank. The problem is I told her to give me the best possible mutual funds, but understand nothing of where my money is. I do know that some of my money is in Amercian and foreign companies.

Do you at least know the names of the mutual funds?

[NY Mane]

I only buy Exchange Traded Funds and mutual funds.

Walk, I'd make sure your banker didn't invest your money in a high expense ratio fund. Expense ratios take money out of your gains. I had a broker invest in a mutual fund for me when I was 22. Once I realized and understood the markets I found out the fund had an expense ratio of +1.50%.

[NY Mane]

Listening to advice and talking to people about investing is fun and interesting BUT DON'T GET CAUGHT UP IN THE NEXT TRENDY THING. It is a good way to lose money and fall off track of your investment goals. I've been to plenty of happy hours where the loud smart guy has a hedge fund or he has a relative who helped him make +200% on a stock. Just sip your 22oz and nod your head and smile. Sticking with an S&P 500 ETF or mutual fund is not glamorous but that account will grow nicely. The law of compounding is a wonderful thing.

[walk066]

Originally Posted by domafia

Do you at least know the names of the mutual funds?

American Capital Income Builder CAIBX
Amercian Investment Co of America AIVSX

[Bosanac]

Originally Posted by walk066

The way I look at stock is to buy low and sell high (which I know doesn't always happen). Why would you hold onto stock for years?

<p>
I think the reason you buy stock and hold on to it has been pretty much explained by people above, but another BIG REASON TO HOLD STOCKS is to not pay taxes. Example, if you live in United States, all the gains from sales of stocks have to be reported to IRS or income taxes. But if you dont sell the stock and wait till you retire or when your income is lower, then you pay lower taxes, since you are in lower income bracket. Picked this tip up from my economy professor. Usually when you retire your income tends to be lower, so selling your stocks at the time your income is lower just makes sense.

[bja]

remember that over time dividends reinvested account for roughly 30% of your total return!! That is a huge reason to HOLD stocks. This practice done inside of a tax deferred vehicle just makes this case even stronger!

I always look at stocks that can essentially buy themselves with the cash they currently have. This means looking at the Enterprise Value (which adds back in debt) and then taking a look at there yearly cash flow from operations (which is a tough # to fudge) and companies that can buy themselves for 5-12 years of cash is pretty darn good.

Obviously the company needs to have an advantage. That is why Warren Buffet buys companies with strong brand names...ones that can reinvest his cash year after year.

Just take a look at MO ...this is the #1 performing stock ever! Believe it or not Tootsie Roll company is in the top 10 or so. Don't get caught up in the hype...works sometimes but over long periods of time not so much.

Cheers