Newbie and some questions

[abk33139]

Hi everyone - my name is Alison and I'm new to the group and I live in the Washington DC area. I'm interested in playing a bit in the stock market. I decided to take $3,000 or so from my 401k (since my investments there weren't doing much) and see what I could do with it. I have a few questions, and Mr. Market told me this is a great group with lots of smart folks, who could help me out. So, here goes:

1. In order to buy stocks with my 401k money, I set up a separate account. Each time I do a transaction (which I know means buying and I assume also means selling), I have to pay a $14.95 fee. If I have a lot of transactions per year, that price will drop. Because it will cost me around $30 to buy and sell a stock, does that mean I shouldn't buy small amounts of stocks because I'll lose so much of my profit to the cost of the transaction? I had originally thought I'd buy 5 or 6 stocks and on some of the higher per share items only buy 25 shares or so, but then I have to make a larger percentage to absorb the fee. Should I concentrate on 2 or 3 stocks and buy more shares?

2. What does everyone think about Sirius Radio (SIRI) stock? I'm very interested in that one to invest in over a longer period of time because I believe in the product and its potential.

I think that's it (for now). Thanks in advance for your help and sharing your wisdom.

Take care,
Alison

[Karel]

Hi Allison,

that is a hefty fee, these days. Anyway, $15 per transaction amounts to 5%-6% per round trip with 6-5 stocks. I think that is an awful lot. I prefer to be under 2% per round trip, which is what I started with. (It's under 1% now.) In your case that would translate to a position size of $1500, or 2 stocks. But I think that is not enough for MrMarket stocks. 6 would be my minimum. I started with 8 myself. (I have more now.) Why? Because you need some activity in your positions to remain happy. I know I do. Sitting on 2 stocks that you know/hope may turn around sometime is no fun. And one of them might even be a lemon.

Of course, you might not specifically be interested in Mr.Market's style of stock picking, but you could do worse.

OK, what to do? Free more money? Look for a cheaper broker? Try 4 stocks? Take your pick.

Good luck!

[abk33139]

Karel - thanks for your reply. Unfortunately, I can't use a different broker. Because I'm using 401k money, I have to pay their fee. I could free up more money for this type of investing. Maybe I'll do that. I could go with a few less stocks, but you're right - its riskier to do that.

One more question - do you automatically sell when you hit the 15% target?

Thanks,
Alison

[Karel]

One more question - do you automatically sell when you hit the 15% target?
My broker has non-expiring limit orders for no extra charge, and I enter my sell order right after I bought the stock. So: yes! I follow the lead of the Huge One. The model turns up new stocks every week, if not every day.

regards,

Karel

[MEA_1956]

As Karel has stated, the more the better is they way to go if you plan on tuneing in every day to see how things are going. Investing into different sectors will also help lower the pain on down days. You may also think about delaying your investments ( not all at once ) for you may have a change of heart in where you really want to place your bet. On the norn., it takes about two to three days before I place my orders. Yes time is money but time is also your friend becuse haste makes waste. ===> MEA

[scifos]

Indeed, $15 can be a lot (reguardless of how many transactions per year), depending on what you get for it. If your broker helps you pick stocs/manage your port, then it isn't bad. But if you are doing all the legwork yourself it is a bit high. Like Karel, I try to keep my overhead (commissions+fees) to under 2%. Its near impossible to diversify with several stocks and stay that low. Have you thought about Exchange Traded Funds (ETFs)? There are becoming a very popular investment choice.

Personally, I think SIRI's price is overextended. I'm not interested in it, but there could be a lot of money to be made in it if you play it right. I just think it would be hard to play, and I wouldn't be comfortable with it, espically if it is 1 of 3 stocks in your port.

[Websman]

I've been in SIRI for about 7 months and am holding a profit. I would have to say that SIRI has great, long term potential, but if I wanted to buy it now, I would wait for an entry price of around $3.50.

As far as having to use a certain broker...I feel your pain because I am forced to use sharebuilder, which has high fees. The advantage though is that I'm trading tax free! I have a 457 account which is about the same as a 401K.

To sum it up...I consider it a trade off. I pay high fees, but I don't have to pay taxes.

I'm in the process of saving money for a Sharebuilder account. When I get it open, I'll prbably throw my 457 money back into mutual funds or ETF's.

Good luck!

[abk33139]

Wow, $3.50 for SIRI? I hope it doesn't go down that low. ;-) I do think its has long term potential, so I'll stick with it (although I should have bought it today instead of last week).

I guess the fact that I'm trading tax free is a big benefit. That does take the sting out of paying the fee, but I still have to draw the conclusion that buying 25 (if its alot per share) or 50 (if its a low priced stock) shares of stock doesn't pay when you are paying that kind of fee to trade. I guess I have to stick with larger purchases to make it worth while and not have my profit eaten up by trade fees. Unless I can manage 20% per trade. ;-)

OK, what is a ETF? Can someone educate me?

Thanks for all the feedback!
Alison

[Websman]

I usually don't talk about the # of shares I buy, but I will tell you that I have about 1700 shares of SIRI. For every penny SIRI goes up or down I make or lose $17.

If you only have $3,000 to trade with, I would not hold more than 2 positions at a time. If you buy only 25 shares versus 100, it takes a larger move to make a profit.

It's a good plan not to take large positions until you get a feel for the market, but once you get a little better feel for things, I would try to buy larger positons. I usually buy no less than 100 shares of anything and prefer 300 or more. All of this is just my personal views, Someone else here may tell you something different.

Hopfully IIC or Spikefader will give you some advice. They have a lot more expertise than myself. And I can also tell you that Mr Market is a great guy, and has influenced me a lot.

[Michaelk005]

This post goes out mainly to Websman.. If you are so sure about SIRI, take a look at some Digital cable companies,, they will have quite a large growth potential as well..

[IIC]

Welcome...Money seems to be a concern...I remember when I used to have to pay a couple hundred dollars per transaction...then in the 80's I was so happy to pay 35 bux each way w/ Quick and Reilly.

But anyway, I would recommend a $2,000 account min. And if that is all you have...then only one stock at a time.

You have to build it up. Commissions will make it harder at first...maybe a couple of years...but be patient...If you compound and add $$$ as you can, the commish will become almost meaningless when it's a fixed rate.

My best advice...take it slow, be patient...AND COMPOUND!...Best, Doug(IIC)

Wait...maybe my best advice would be to read what others have to say...you will soon realize who has something to say that may be of interest to you...but Don't EVER EVER EVER buy something because so and so said so...and I include myself...weigh the info and do your own research. There are some sharp people around here...but you have to do what you are comfortable doing...For example, I have a very high tolerance for risk...you may not???

Also, I buy varying amounts depending on my feelings on a stock...some light...some heavy...you may not realize something like that if I happen to tout a stock...maybe I bot 5 grand...maybe 50 grand...it would make a big difference to me in how I trade it and how much room I give it.

Welcome...and Best Of Luck...be observant and be patient...and I think you will do well in the long run.

One last thing...Don't let mistakes get to you...it will happen, believe me, I've made plenty and still do...reflect and learn...but then just go on to the next thing

[IIC]

Oh...one more thing...try not to buy odd lots...It is best to buy 100, 200, 300 etc shares at a time...if not possible then OK...but your order may get filled in an alternative market on odd lots and you may get slammed on the price...IIC

[mrmarket]

Allison...hope your head isn't spinning yet! Commissions are the "silent killer" for start up investors, but soon enough they will become a smaller and smaller factor in your investments.

I like to carry a portfolio of 10 - 14 stocks. This way I can afford to ride out some big losses if I have to.

Good to see another Springsteen fan on the board!

[scifos]

I learn something new each day. I thought odd lots were mostly on the open market.

IIC is right about mistakes. Don't let them get you down, and remember; if you learn from them your mistakes will actually save you money down the road.

[stenzrob]

Mistakes?
I've made a few, but then again, too few to mention.
I did what I had to do
And saw it through without exemption.

I planned each charted trade;
Each careful step along the buy&sell way,
But more, much more than this,
I did it my way.

[spikefader]

Hi everyone - my name is Alison and I'm new to the group and I live in the Washington DC area. I'm interested in playing a bit in the stock market..........
2. What does everyone think about Sirius Radio (SIRI) stock? I'm very interested in that one to invest in over a longer period of time because I believe in the product and its potential.

Hi Alison. Welcome to the boards.

I know you're probably all fired up and ready to place your first trade, but before you do, I would strongly recommend that you paper trade a little while, until you have demonstrated to yourself that you are capable enough to formulate a trading plan for a particular stock, have the ability to enter with a good risk reward ratio (risking no more than 4% on any one trade), be disciplined with a stop loss, and be able to take your profit at a projected target.

If paper trading isn't your thing, then fire away -- but just promise me that you will treat the market for what it is; brutal, unforgiving, surprising, unexpected and always always always right. From the beginning, you should block out all emotion and act only on logic. Expect to make mistakes, and prepare yourself to learn from them. Only you are responsible for them; not the market, not the newspapers, not the brokers or the market manipulators. Take full responsibility for your losses, and treat them as a business and training expense. And be on the lookout for your mistakes that lead to profit, for these are the most dangerous of all!

If you haven't traded before, you will soon discover that trading stocks is much more complicated once you have real money on the line. You will experience many different emotions as your chosen stocks fluctuate up and down.

I see you're restricted with your account, but it would be much better to use a direct trading platform such as Interactivebrokers.com (a penny a share). Not only will your orders be executed instantaneously, but commissions are low. But if you can't and you're stuck paying $30 for a round trip, then I would suggest having no more than two separate stock positions open at one time. Otherwise, your fees will hurt, especially if your trading plan employs stop losses (which I highly and strongly recommend). Many people don't employ stops, but I can tell you that if you're only having two positions, you will definately want to use them. A 50% or worse hit on one of those stocks means a quarter of your capital is gone in one trade. By limiting your loss to 4% or lower, it means that you can take a few hits, looking for the stock ride that gives you 15% or better. Remember this: it's the person who LOSES best that will WIN best in trading. You will have losses - there is no question about this. So why not learn to accept them, plan for them, and to even love them. It's OK to get stopped out. Stops will save your capital, and teach you a lot about yourself. Stops are good :D

Good rule of thumb in trading is BASSAR. Buy-at-support-sell-at-resistance. Do this, and you will do well. Be patient. Don't chase. Don't fear you'll miss a move and jump the gun, because you will more than likely start the trade in the red, and worse, get stopped out only to see your pick turn and go in the direction you wanted. It's better to miss opportunity than lose cash. You can afford to be patient. You don't HAVE to have an open position all the time. Having no position IS a position. Learn about Fibonacci retracements and waves, and regression channels. Check out www.quotetracker.com for their great free charting, and check out their pivot points indicator, which will draw your intraday support and resistance lines for you. Armed with that knowledge, you can attempt entries at the ideal intraday points rather than resistance levels where traders take profits. Remember, the big boys that are accumulating stock will buy at support and boost the move, thus this is where you want to buy your train ticket.

On Siri, I am expecting some more retracement in the short-term before any futher bullish run. I would wait a while before entering. I follow it pretty closely, and will post charts from time to time in my thread. Webs is very bullish on it and is in it for the long-term, and got a good entry so he's holding it. If you like the prospects, then seriously consider waiting to buy at solid support areas.

All the best, and I pray your first trade is a profitable one!

[stenzrob]

Great post, spike. Many quotable quotes there.
I would add to that - study, study, study.
Read one or more books.

For a decent intro to technical analysis, browse around this site - http://stockcharts.com/education/

[Websman]

This post goes out mainly to Websman.. If you are so sure about SIRI, take a look at some Digital cable companies,, they will have quite a large growth potential as well..

Thanks! I'll check them out.

[IIC]

"And be on the lookout for your mistakes that lead to profit, for these are the most dangerous of all"! ...Spike

Great advice Spike...can be a real killer...IIC

[Websman]

Hey, I'm learning some lessons here myself...

[abk33139]

Wow! I couldn't get online for a day and am so impressed with all of the replies and great advice. Its embarrassing to admit, but it looks like I've already made some mistakes, but this is a learning process and they haven't cost me too much money. :-) First, I probably got into the market on the stupidest day - election day. Stocks were going up that day and there were a few things that I bought and paid a little too much for (like SIRI). Had I waited another week, I would have bought at a much lower rate. Lesson learned. I was so anxious to jump in that I didn't make some good choices. I did buy about 5 different stocks, and as of today 3 of them are up (including my commission fee for buying, but not including the selling fee) and 2 are down. Some stocks I bought hundreds of shares (SIRI) and some I bought as few as 25 shares. I see that as a mistake. I should have focused on 2 stocks (3 max) and gone from there. One of the stocks is down 4%, so I'm wondering if I should sell. Right now its only a deficit of $11 (plus the $15 to sell), so maybe I should get out before I lose more on it (this is a stock I only bought 50 shares of).

I also made the mistake of buying a few investment magazines and bought based on some of their pics. I won't make that mistake again (one of those is the one that's down 4%).

Anyway, I hate to admit my mistakes, but you guys have been so great with sharing your knowledge, I thought I'd fess up. ;-)

I look forward to reading more and contributing as I learn more.

Thank you to everyone for the warm welcome.

Alison (fellow Springsteen fan like Mr. Market)

[MEA_1956]

They are all winners til you sell. Use your Investment Mags as a lessons, they do know what they are talking about cause they are doing it there way.

If you are in it for the long, 4% is easy to make back up over a long peiord of time. Some of mine are a lot lower than that but I sell ofter I have reached my sell point. Has this stock reached your sell point or do you have a plan that includes a sell point.

www.precisionalert.com may help you keep an eye on thing till you are more confortable with your ports.

One Up On Wall Street by Peter Lynch is a good read, simple and to the point. He also has another book out but can't tell you the title right now.

Forbes Mag. 200 best small companies, I looked throught it and picked out a handful to follow and in that time this paper port is up over 16% in less than two weeks. Found a lot of M.M. picks in there also, plus a few that I've traded myself. Investment Mags are a good source of info. Its how you use this info that matters. AVSI, MIDD, and UCO are a couple of my personal fav.

time for work T.T.F.N. ===> MEA

[spikefader]

They are all winners til you sell.
Oh boy......don't want to shoot you down in flames or anything, but do you really believe this Mea? :D
With the greatest respect, that rationale is squarely based on denial, and is all about hope. It merely gives one justification that one never needs to admit a trading error, and that stocks will always rise back to where you entered.

I know, I know, many at this site don't employ stops at all, including the big man himself, and that's fine -- as long as the person's portfolio is well diversified and all your eggs aren't piled into one or two baskets. Having the occasional loser such as BEL might be built into the system, and it doesn't matter in the grand scheme of things.

But what about those that are trading with only a few (say one to four) positions open? Is it really wise not to use stops? I think it's madness, reckless, and bound for disaster. Sure, one might get lucky and be on the right side of a bull market, but what about a bear or sideways market? Kiss goodbye to your capital, unless you are very disciplined.

Stops save lives. And to a new investor, that is the approach they should start with, instead of learning that lesson after a Royal hammering.

[mrmarket]

There's more than one way to make money. It's just a question of style. Some guys pick up chicks cuz they have big muscles. Some guys wow the ladies because they are intelligent. Some guys make the gals ga ga because of their clever wit.

Then again there are some guys who have muscles, intelligence and wit.

[Websman]

There's more than one way to make money. It's just a question of style. Some guys pick up chicks cuz they have big muscles. Some guys wow the ladies because they are intelligent. Some guys make the gals ga ga because of their clever wit.

Then again there are some guys who have muscles, intelligence and wit.

Wow...No wonder the Chicks are after me all the time! I have every one of those qualities!

[IIC]

Then again there are some guys who have muscles, intelligence and wit.
Thank's for the compliment Ernie...but it really wasn't necessary...IIC

[RL]

Ernie,
How did you know about me Inever sent my pic.

[MEA_1956]

#1 have a plan
#2 stick to it ( I've learned should have sold AACE at 45%)
#3 STOPS, not me, Or I would have never made 100% on BJ, TGRL, JCP, just to name a few.
#4 dicipline
just my take. I have a high talorance for pain. love to flirt with disaster, somedays I think she is my half sister.===> MEA

[Websman]

I hope you're still holding SIRI. It went up big tome today!

[IIC]

I have a real problem being interested in a stock because it is on some magazines list or they have a feature article on it or something...Sure, some keep going...but by the time I read an article...How many thousands...or millions already saw it before me?

The only print magazine that I like is Technical Analysis of Stocks and Commodities...IIC

Plus they send it to me at no charge

[abk33139]

I agree about the magazine thing - I definitely learned a lesson there.

I did hold SIRI. I actually bought it planning to hold it for a while. I'm hoping for way more than 15% on this one.

Have a good week, everyone!
Alison