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9 quick fire questions about buying stocks and shares?

1. How do you know what to invest in? 2. How can you make a killing on the stock market? 3. Would you expect to make a large loss before making a large gain? 4. Do you always make a loss as soon as you purchase stock? 5. Can you be very successful on the stock market by doing it on a casual basis, or would it have to be a full time thing to make any money? 6. Is it possible to have any inclination of a certain companies stock massively increasing (by say 300% or more)? 7. Where (esp. on-line) is the best place to get decent “recommendations” on what stock to buy? 8. What should I be looking out for (in terms of a company) to know what to buy and what to steer clear of? 9. How do you know if the stock you are buying is under-valued or over-valued?

Public Comments

1. Answers to 1-9... Watch Jim Cramer!!!
2. 1) Research 2) Luck/insider dealing. 3)Not neccesarily 4) Nearly always - stamp duty/transaction fees. (However employee share options and the like can make a gain straight away) 5) You have to have some idea on what you are doing but you don't have to have a close involvment. It may be best to put a little in regulary to a tracker. 6)Yes - these are usually small companies in emerging sectors - also the type of company that can fall in value by 100%! (Also insider dealing) 7) Never trust the internet for recomendations or other places - nothing is better than your own research. 8) Steer clear of things you don't undersatnd - Buy what you understand. What to look for:- Strong Brands Barriers to entry. EPS (earnings per share) - is the company making money for their efforts? Gross margin. How do their direct competitors stand up? Are they best in field? PEGs - What is the projected earning growth? Debt cover - can they afford their level of debt? P/E - this shows weather a share is cheap or not. Personal experience with the company or it's products. Dividend yields 9) Compare the P/E ratios with firms in the same sector low - cheap. (or dividend cuts expected)
3. 1. How do you know what to invest in? This first depends on your risk/reward tolerance. It then depends on what your style of investing or trading is. 2. How can you make a killing on the stock market? Work for George Soros. 3. Would you expect to make a large loss before making a large gain? That question makes no sense. If you're asking, "Should you hold onto your losers in hopes that they rise?" the answer is "no." 4. Do you always make a loss as soon as you purchase stock? No. 5. Can you be very successful on the stock market by doing it on a casual basis, or would it have to be a full time thing to make any money? Can you be a successful part-time brain surgeon? 6. Is it possible to have any inclination of a certain companies stock massively increasing (by say 300% or more)? Sure. Happens all the time. Look at Apple, it went from 7 to 80 in a short time. 7. Where (esp. on-line) is the best place to get decent “recommendations” on what stock to buy? You don't. You do your own work. Tips are for suckers. 8. What should I be looking out for (in terms of a company) to know what to buy and what to steer clear of? My best advice for you: Do some research, find a company you want to go long on, and then go short. You're probably your best contrarian indicator. 9. How do you know if the stock you are buying is under-valued or over-valued? You do the valuation on it. Learn how to do that. Good luck.
4. P M is right on the money. Let me see if I can give an as credible answer. 1. darn, I can not improve on his answer much. Research is the basis of all good investment decisions. You might help your research along by visiting such places as Fool.com. 2. killings are pretty much a be in the right place at the right time sort of thing. For every 30 to 100 investments, I might possibly make one killing. Look outside the U S and look at small cap companies within the U S. Those are the best posibilites. You will never make a killing on a large cap stock. Never. 3. there is always the possibility of a large loss. It normally happens when a person thinks that the small loss will turn into a large gain but it seldom happens. It usually turns into a large loss. 4. brokerage commissions almost guarantee it. 5. I was until I became a full time investor. Some of my largest percentage gains were as a casual investor. Luck perhaps. 6. Sure it is, but do not count on it. Small cap stocks have a better propensity as do beaten down out of favor stocks. And of course there are always the tech stocks that hit upon the right inovation. 7. This is the most difficult question to answer. If the stock is recommended, it is probably too late. My best best returns were on stocks that were not heavily recommended but that I thought were good values. 8. I tend to stay clear of tech stocks. They are generally overpriced. I tend to favor non- U S companies. The U S economy is over leveraged. Look to China and India, two economies that are running circles around the U S. Also look to Europe. There are good companies in the U S, but I will be darned if I can find them. All my U S investments are way underperforming my Chinese, Indian and European investments. 9. If the pe is above 20, I think it is over valued. Many use a PEG ratio. If the PEG is above 1.5 it is over valued, but the PEG is based on projections which can be very miss leading. In general value stocks tend to be safer bets than growth stocks. Growth stocks tend to be over priced in general. Everyone loves growth. No one appreciates value.
5. 1. research but should not be buying indiviual stocks to start out 2. don't even try. takes time. No day trading 3. No reason to expect that if start with index funds/etfs 4. just the commission which can be $10 or so 5. yes but must invest; not speculate 6. yes but not likely 7. cnbc on cable + internet but don't start out trading. Index until you know enough 8 & 9 - again - stick to indexing/etf (IAU, EFA EWA) until you know.
6. 1. You've got to study the fundamentals of the company you're going to invest in to make that call. 2. Don't do anything I do (except buy Lehman Brothers at it's IPO and it's too late to do that). 3. No. 4. Sure, as soon as you purchase, you're down the transaction fees. 5. It will depend on your definitions of "very successful"and "casual" 6. Sometimes. The above mentioned Lehman Brothers. I bought at $15. It split so my per-share is $7.50. It's currently trading near $80. How did I know this was a good idea - my Dad worked for them. 7. Motley Fool often has good advice. I really wish I'd bought Panera when they looked at it. 8-9. Sadly, if I knew those answers, I'd be much wealthier than I am now.
7. 1. Use a system 2. Stick to your system 3. No, I use stops 4. Half of the time. The trick is to let your winners run 5. Depends on your time horizon of investing. Dollar Cost and Value Cost Averaging systems work too and demand much less time than daytrading. 6. I haven't found it. For every four trades I make, 2 give small losses or gains, 1 is a dud and 1 is a 30-40% winner. Cut the first three quick and pyramid the winner. 7. Doesn't exist, IMO. It's best to do your own homework. 8. Growth stocks at a reasonable price with not too much debt, that have positive momentum. Stay away from everything that goes down. Stocks always go down for a reason, one that some people know, but not necessarily you. 9. By comparing with other similar stocks.
8. If you need more help than was answered by these answers, here's a book on trading for beginners: http://www.best-stock-trading-systems.com/trading_for_beginners_review.html
9. 1.What you invest in depends on whether you need the investment back to cash in a hurry, investors are people who normally can lose some of their investment and then wait for it to re appreciate with no adverse affect on their standard of living. I.e., if you can wait many years before using the money then you would put it in businesses/stocks that appreciate slowly and steadily year on year and not in businesses that are volatile and are generally jocking stocks.2. If you have millions then you can theoretically speculate and hence move the stock up or down with buying or selling and affect other investors' profits and losses in the process. 3. no. ref stop loss. definition 4. stock prices move up as well as down, you only take a loss if you actually sell. 5. you follow the market on a passive basis for two years or more usu. with a mentor. you gain experience as you go. analysis and mental work is full time. But don't forget your day job. 6. Your own business acumen, investment experience, your age and understanding of political economic issues. 7. Read newspapers first. 8. p/e, trading size, large cap better. avoid high competition businesses/high fuel usage. not sure what else?9. usu. price earnings ratio low is good in comparison with other stocks in the same business type. You really must read the Financial times/wall street journal on investment issues/problems.
10. Good answers by many people. 1) Research 2) Read "How i made 2 million in stock market" by Nicholas Darvas 3) No. Learn to use stop losses to avoid large losses. 4) Depends on what you mean by loss. As soon as you buy your cash is down and does not return until you sell at a profit. Accountancy dictates that you do not account unrealized profit and hence you incur an accounting loss as soon as you purchase. Real loss/profit is known after you sell. 5) Read the book recommended above. Yes you can make a lot of money by being detached from the market NOT casual. 6) No 7) yahoo finance or fool.com but do not get into the habit of buying on recommendations 8) Read "The Intelligent Investor" by Benjamin Graham or "The Successful investor" by William O'neill. 9) PEG less than 0.5 is undervalued and greater than 1.5 is overvalued