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I am a newbie to say the least.
I have a 401k at the moment though I am Pissed a bit at the lack of stock options.

I am reading that buying stock that pays dividends is probably the best idea at the moment.

So how do I go about buying stock?
I have a Etrade savings account though I am very flexible if you guys think another service is better.

A standard 401k should have no individual stock choices, other than possibly the employer's stock.

Individual stocks are for somewhat advanced investors only. Inside a 401k, this should be available only in self-directed 401ks, a choice not offered in most plans, and should be off limits to beginning investors. This sort of investing is best done outside of 401ks, in your own personal account (usually taxable, but possibly in an IRA), completely divorced from your employer.

The financial markets have many pitfalls, and employers really shouldn't take on the liability of pushing these potentially harmful tools on to the many financial neophytes in their employee base. That is why 401k choices tend to be fairly simple.

Read everything you can here. (http://www.daveramsey.com/etc/investmentcenter/)

Generally, I agree with Dave Ramsey. The main point where I disagree is that you should buy Index funds and not actively managed funds. History shows that about 7/10 of active funds fail to even match the performance of similar index funds.

You would need to establish a brokerage account to be able to trade individual stocks. But, after nearly 50 years of trying to pick good stocks, I don't recommend the practice. Fidelity, Vanguard, eTrade, TDAmeritrade are all low cost brokerages.

Andrew has it right. Stick to index funds and Exchange Traded Funds (ETFs). You'll get low cost and diversification that way. Andrew says 70% of active managers fail, I thought it was closer to 80%, but it is a high number regardless.

All that said, this is not an ordinary recession. Go slowly and keep your eye on what is happening in the economy. Spend an hour or so each day with CNBC so that you can get a view of what is happening to the economy. One method to help protect you from large timing errors is to spread your purchases over a long period of time, called dollar cost averaging.

Good luck - you'll need it ;-)

sorry, i am so broke that the only stock i can buy is LIVEstock.....and what they eat is, well.......chicken feed......:p

I'll 3rd the index fund recommendation, low fees and over time few "managed" funds beat the indexes.

sorry, i am so broke that the only stock i can buy is LIVEstock.....and what they eat is, well.......chicken feed......:p

Now that's a good one!!:D kevin

Buying stocks:

It may be because I'm young, but I really don't have much interest.

When you are young is precisely when you should have interest. Compound interest, that is. At 10% annual gains, waiting 5 years is equivalent to losing 60% growth.

If I was in my early 20's again, I would buy with every cent I could get my hands on. Speculate on some large companies or on some new high risk start ups.

I have always used the "Rule of 72" demonstration.

If you have 1000 dollars yielding 3%, it would take 24 years to double your money. If you had the $1000 yielding 12%, it would double in 6 years.

What would you rather have in 24 years? $2000 or $36,000.

12% average yield is not out of line for stock or mutual funds. It can be much more.

Hi Mike:

___WRT 12%, look back over the past 10 years and 12% is completely unrealistic. Even back 80 years, from 1929 through today, we are now under 6% including dividends! This is using a conservative initial DJIA of 200 vs. the 391 high it reached that year. At 6%, the DJIA would be around 20,000 vs. the 8,000 it is today. This includes the Nifty 50, Go-Go 60's and 80's Tech revolution. We have nowhere near those kinds of growth rates left in this country. China maybe but not here anymore.

___Just placing some realism into the current situation and I am not saying there will not be those 30 to 50% years to the upside but history is showing us like every economy in the history of the world that nothing continues to go straight up and we have not even come close to factoring in the future cost and availability of energy in the next 10 to 20 years.

___Dollar cost averaging is indeed the way to go but expectations of 10% over the long run has now been proven unattainable.

___Good Luck

___Wayne

Still if a person has money they are willing to invest and the possibly for 12% return is low its still better than sitting in your checking account earning no interest or a money market account earning 2 or 3%. At least if a person invests that money its tied up for a period of time and the likelihood of them spending it on stuff they don't need is low.

btw dont invest in anything called Madoff Securities, ;)

Hi Aether Glider:

___Indeed. I have no doubt we will see 4 to 5% returns including dividends long term but is it worth the risk? Look at the S&P the past 11 years as an example of money going nowhere other than down. Nasdaq? Even worse. Japan’s Nikkei? That one was destroyed 20 years ago and it is still down over 75% from its highs.

___WRT the S&P 500, a long and very painful wait the past 10 years vs. that all but guaranteed 2% in the bank. Both were absolutely obliterated by inflation which just goes to show everyone that there is no free lunch except for those that make money selling us the financial services we so desperately believe will let us retire someday.

___Good Luck

___Wayne

ETF's FTW. Buy and sell like stock. You can even buy/sell options. Selling out of the money covered calls gives you cash to buy more.

Read up all you can. Remember most 'experts' are wrong just as often as they are right. They just manage their risk. 2009 will be a great year to buy. We will go up and down all year. so don't feel the need to rush in all at once - That's a piece of advice I need to remember also!

Indeed, read up all you can. But don't just read the pablum that the investment companies and the rating services publish from their self serving viewpoint. Read some serious criticism. Listen to some of the CNBC cynics and ask yourself what you think of their views. Read the blog of Paul Krugman, a nobel prize winning economist, at:

http://krugman.blogs.nytimes.com/

Wayne is offering some real good perspective, IMHO. The case for stocks going forward is pretty weak, if you also consider the risk. I've been trying to invest for a long time and I'm backing away, not loading up.

One serious problem that deserves serious thought is the energy situation. I think we can see from very recent data what happens when growth bumps against peak oil. That is going to limit growth to much less that robust levels, again IMHO.

The market spazzed 2 days ago when State Street announced it didn't see $6.3B in losses coming (their stock dropped 59% yesterday). State Street is a pretty under the radar company that behind the scenes manages most all mutual funds. The funds they manage are sold by other big name fin svcs companies.

This news means that they can't 'unwind' many of their assets; how many and how badly, they obviously don't know. That kind of news freaks out the market because it indicates fundamental financial system problems remain.

We need to see corporate earnings recover in order to sustain any form of real market rise, and those seem far away right now.

Just got some interesting investment "pablum" from Dryfus where I have a stock fund. It is pep talk kinda stuff, the purpose being to encourage folks to leave their money in Dryfus funds.

For starters, just remember how incredibly hard it is to recover losses. For instance, and to make the math easy, note that some current investors, in some vehicles, have lost about 50%. It takes a 5% return for 15 years (law of 72), or 15% for 5 years, JUST TO GET BACK TO BEING EVEN. Neither possibility is very likely. And that would be with lots of volitility and risk along the way.

Now for the Dreyfus pablum. They try to make the case that in just three years after most of the post 1956 recessions, there has been a wonderful recovery in just 3 years. Typically, they just ignore the fact that the recovery phase starts with a lot smaller pot. Looking at the dot.com bust starting in 3/2000 and ending in 10/2002, we find that the bear phase loss left $.51 of the initial dollar. In the three years 10/2002 to 10/2005 there was a gain of 54%, restoring the original dollar to $.78. Some great investment huh. This old guy suffered mightly through that. Not only did I have my own money at stake, I put my daughter into the same situation.

During the 8/87 recession, the results weren't much better. One dollar on 8/87 was worth $.66 in 12/87. In the subsequent 3 years, there was an increase of 46%, restoring the original dollar to $.96. Again, not to great.

I could go on with the other recessions, but I think I've made the point. If you get any gain in stocks, most of it is going to come from dividends, not growth.

And finally, if anyone thinks the current situation is anything like the garden variety recessions and panics we have had since 1956, then they aren't paying attention, or don't have much in the way of analytic skills. Sorry to break the news, but it ain't as easy as just buying cheap, you gotta be smart enough to sell dear - very few being able to demonstrate those skills ;-(

You have to consider the source of the "advice". The newsletters I get from Ameritrade, I glance over and then throw out. They make money when I buy and sell, whether or not I actually profit. So of course their advice is about tailoring your "trading strategy" and not about making good investment choices. Always follow the money.

I am a newbie to say the least.
I have a 401k at the moment though I am Pissed a bit at the lack of stock options.

I am reading that buying stock that pays dividends is probably the best idea at the moment.

So how do I go about buying stock?
I have a Etrade savings account though I am very flexible if you guys think another service is better.

Been dollar-cost averaging in mutual funds for almost 15 years, almost exclusively through Vanguard. I will never go with anyone else, and I always roll over my 401k's into my Vanguard IRA's. I like that they have very little advertising, and thus very low fees. I refuse to deal with any company that buys Superbowl airtime to advertise with celebrities or barfing babies.

A few years ago I started dollar cost averaging in individual stocks using DRIP/DSPP accounts (rather than online trading). Many of these accounts lets you buy a fixed dollar amount on a monthly basis, often with little or no fees (varies by company). The main disadvantage is that it is not instant-trading, so you won't get the instant gratification or the emotional highs and lows of buying and selling stocks online. In fact it can sometimes take a couple weeks for a buy or sell order to be executed. But that's fine with me. I buy through computershare.com, bnymellon.com, and some foreign stocks through adr.com.

If there's a particular company you're interested in buying stock in, go to that company's website and look under Investor Relations, then look for their Transfer Agent. If they have it listed, it will say whether they offer a Direct Stock Purchase Plan (DSPP), and which broker to go through.

Thanks to dollar-cost averaging, my overall portfolio lost about 12.5% last year...as opposed to the S&P 500 which lost 37.5% last year, or to many people who were heavily invested in stocks who lost more than half their market value.

By the way, I did start trading stocks online last year using tradeking.com, because I got foolish and wanted to buy stocks that weren't offered through a DSPP. They charge only $4.95 per trade. But this means you'll naturally want to buy more shares in each trade so as to make the $4.95 seem like even less. So when the share price goes down, you lose more with each lot purchased. My Tradeking account lost over 40% last year.

So I'm going back to dollar-cost averaging in individual stocks with DSPP's. Has some of the freedom and sex appeal of buying stocks online, but without all of the burdensome fees and life-draining emotional peaks and valleys. I'm buying stocks I already own in slightly larger lots now that they're cheap, so that if/when they do go up, it will help offset some of my losses on earlier lots.

Regarding dividends, you're probably right, but it's not a hard and fast rule. I hate to admit it on a website that dedicates itself to reducing fuel consumption and carbon emissions, but I own a lot of oil company stocks, including ExxonMobil, BP, and Sunoco. My rationale was to try to get back some of their profits to offset some of my fuel consumption costs. They do still tend to pay good dividends and have good P/E ratios.
*** DISCLAIMER: THIS IS NOT A RECOMMENDATION !!! ***

I carried that idea of buying dividend-paying stocks a little too far when I bought IndyMac a couple years ago. They paid good dividends and had an excellent P/E ratio, but they were just a bad business. When a company you own stock in makes the evening news, it's not usually a good thing.

Best Regards,
-Raj
:Banane35:

leading indicator of whether the fortunes of a company are about to turn for the better can be found by watching for insider purchases. Senior management and directors are usually the first to know that operations are improving and earnings may be rising. If they begin to buy stock in the open market, it is a safe bet that things are getting better.

Sorry for the newbie questions so I do I find these Index funds?

Hi Kurz:

___The lowest cost of the bunch in terms of expense ratios and probably the best given they practically invented index funds is Vanguard (www.Vanguard.com). They literally "beat" 80% of everyone out there and it is simple dollar cost average stock investing at its finest.

___Although Jack Bogle does not run Vanguard anymore, he still keeps his fingers in the pie and if there were ever an investor you can trust, he ranks right up there with Warren Buffett. He also invented the index fund in 1976.

___Watch this interview for his take on the “State of the Union.”

John Bogle Says Capitalism `Discredited' After Bailouts (http://www.bloomberg.com/avp/avp.htm?N=av&T=John%20Bogle%20Says%20Capitalism%20%60Discredited'%20After%20Bailouts&clipSRC=mms://media2.bloomberg.com/cache/vwIasW5WQiLA.asf)

___Good Luck

___Wayne

That's an interesting video. Thanks.

Still, and Bogle admits this, everything is different this time around. There are some fundamental questions to which I have to gain some visibility before I'm again willing to own stock. Any stock. Even Index funds.

How about:
- How can we invest when there is no trust left in the investment environment?
- How do we regain a sensible regulatory environment?
- When can we gain some visibility to the depth of the recession/depression?
- When will individuals again be the majority owners of stock?
- When will company officials stop "raiding" their companies(i.e. Exec. compensation?)
- When can we say that the market has turned from speculation to ownership?
- When can be reconsile the tension between growth and peak energy?
- When can I be sure I even know the right questions to ask ;-)

Hi Jim:

___Here are my thoughts... Worth all of $0.015 ;)
Even if you do not invest yourself, you invest. Banks you keep your money in either loan it out or invest it themselves attempting to beat the return that they offer you.


We will not as Wall Street regs are lobbied to benefit themselves in many cases.


If you knew that, you would be a very rich man indeed.


With the advent of the 401K, never. Mutual funds are less expensive to purchase and own than a group of stocks you purchase directly.


See #2.


Why do you purchase stock? Is it investing “for” the future or “speculating” on the future? Both are one in the same in the bigger scheme of things.


See #3.


Your caution tells me your approach is the right one.
___All this being said, the market is down almost 43% from its highs and if you were going to invest in Mutual Funds, it is probably better to do so when the market is down 43% rather then breaking into new all time highs.

___On an individual stock basis, this is not how I invest as I use the CANSLIM method created by the owner of Investors Business Daily. In this method, if a stock is going to go through 5 and rise to 60, doesn’t it have to hit new all-time highs at 6, 7, 8, 10 etc? If it is stuck below a near time all-time high, it might be stuck there forever and dead money is worse then placing it in the bank.

___Good Luck

___Wayne

Late this year/next year the big money will be in pawnshops and repo companies. - Dale

Damn... $3,000 starting investment Requirements.
(Looking at Vanguard)

Not quite Waye, in my own .015 cent opinion:

1. Bank deposits are insured by FDIC. Stock principal is not. If the bank doesn't have the money, the fed will print it for them. If the fed runs the presses overtime, as they are doing now, all dollars are corrupted equally, but at least you preserve the numerical amount of dollars you always had.

2. Obama has promised to regulate, the Republicans promised to abolish regulation. Who say how it actually works out, but it IS an uphill battle.

3. I was thinking that so long as employment is in obvious free fall, there is no motivation to try to inverst. Make sense?

4. Actually, I misspoke a bit. I was actually thinking about the role of pure short term speculators, like hedge fund.

5. Don't know. Matter of opinion I suppose.

6. Though technically there is some truth in what you say, it seems to me that "popular" investing is founded on finding a good stock, or good manager where the objective is long term ownership of profitable and growing companies. I consider it speculation to buy/sell positions several time/wk while chasing trend lines and short term news, or guesses at the news. No individual can prosper in that environment, but it is the primary environment now - IMHO.

7. Well, I don't know how to reconsile this tension either, but I think it is a newly developing limit on prosperity. Of course, not all companies are affected equally.

Obviously neither of us have any infalliable insight into these matters. If we did we would both be rich, but these questions and considerations are important non the less.

You can open a brokerage account (ameritrade, etrade, scottrade, etc) for less than $3,000. Then you can buy one of the vanguard funds through an ETF instead.

Here is a list of the vanguard ETF's. I own several of these. I also consider them to be some of the best in the business. Why pay more for another passive index when they have the same performance (by definition)?

http://www.vanguard.com/jumppage/etfs/index.html