Your Questions About Investing Strategies

vanessa answers:

If you start a business of your own, you will likely be investing more time than money, although depending on the business, you could be investing quite a bit of that as well. Your chances of success depend entirely on your skill set, persistence, and capital. You will need to develop a plan, and follow it.

Regarding stocks, there are so many different investing/trading strategies, I would have no way to go over them all. I can give you some ideas, though.

1. Short term trading:
- Advantages:
a. High compoundability
b. Low exposure to long term market trends
c. High liquidity
d. Small gains add up
- Disadvantages:
a. Limited or nonexistent tax advantages (unless trading within an IRA)
b. Relatively high expenses (commissions)
c. Somewhat time intensive
d. Market hours 9:30am-4:00pm (Eastern Time) make it difficult to trade if you have a day job
e. It’s a job — if you stop trading, you stop making money

2. Long Term Trading (A.K.A. Long term investing):
-Advantages:
a. Minimal time required during market hours
b. Relatively low expenses (commissions)
c. You’re in good company — most people with capital committed to the market are long term traders
d. If you get lucky, or pick exceedingly well, you could retire very rich
e. Favorable tax treatment on long term gains
-Disadvantages:
a. Beating the returns of an index is difficult, even by professionals
b. Liquidity is somewhat compromised (you don’t want to be in a position where you need the money during a bear market, or when your account is down)
c. Making money at all in a bear market is problematic
d. If you get unlucky, or pick exceedingly poorly, you could retire broke

Okay, all of this being said, if you know what you are doing, and have the time to devote to it, short term trading has a bigger “bang for the buck” than long term trading. If you don’t have the time to devote, or the knowledge/discipline, you would probably be served better as a long term investor with an index mutual fund (or ETF). Disciplined investing combined with a reliable annual return can serve you well without giving you the headaches speculation can give.

vanessa answers:

I am a professional trader. Most of it is painful to watch, but I do get “some” good info from Fast Money (both the lunch and late one) and Bob Pisani’s Trader Talk. Sometimes there may be a guest on who really knows what they are talking about, but most of them are just there to hear themselves talk.

I really listen to the Najarians. They know their stuff. If I am thinking of making a trade and it goes against what they say, it makes me wonder. They aren’t always right (no one is) but they are right more often than they are wrong.

And I can’t stand Rick Santelli.

vanessa answers:

I look at the economy see what is selling, what people have to have like food energy etc. Then I invest in those. Done pretty good so far. You have to think whats in demand.

vanessa answers:

The Ultimate Dividend Playbook

vanessa answers:

If you’re a rookie in investing or stocks, go to

www.finance.yahoo.com.

Open up a portfolio without using real money. You can give yourself as much or as little money to try out the market. The stocks you want to focus on is consumer staples, consumer discretionary, and healthcare. These are DEFENSIVE stocks that will survive through good and bad times. Most of my positions are in these stocks. Some names include 3M, Procter & Gamble, Kimberly Clark, Exxon Mobil, Walmart, Costco. Everybody’s got to eat and wipe their butts regardless of the state of economy. Many of these companies survived through the Great Depression.

That’s the benefits. You can sleep at night knowing your money is doing well. There are NO guarantees that you won’t lose money. It’s just that these stocks are the best. They pay good dividends too.

Then once you’re comfortable and test the waters of the market, you can finally put some real money in. Go to Scottrade.com. They’re excellent for beginners.

vanessa answers:

First of all, you will quickly learn that there was nothing you learned in college that will prepare you for trading or investing.

Next, I have some 2,500 posts full of info you might want to look at. Here is 19 years of market experience for ya – free.

As for the book, I am still working on mine.

vanessa answers:

First, I would not listen to the person suggesting to invest in the Chinese stock market – it is a bubble still deflating. They haven’t yet hit capitulation.

For $500, and little to no savings, I would recommend looking into QQQ – which is an ETF that follows the S&P 500. Here you can invest in the biggest and best companies in the US – essentially it’s like betting on the US economy.

Furthermore, keep you money in there – don’t take it out for 10 years. If you’re going to be in less than 10 years, I wouldn’t touch the stock market. Get a CD.