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    Are Stocks/Shares as simple as they sound?

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    • S
      ShinigamiKing
      last edited by
      S
      spiral
      ShinigamiKing
      spiral

      Basically the thread title. I posted this on another website before, I just want some more advice and answers.

      So like, let's just say that Apple shares/stocks are $100. If I buy a share, and then Apple's profits are doing well, will I earn money?

      And then will I earn money if I then sell that stock? Or if the stock prices go up?

      And if I'm buying shares in a company like Nintendo or Mircrosoft etc. (just as examples), do you guys recommend buying multiple shares so that any sales boom will yield more dividends?

      And what happens if you buy stock/shares, but then the company loses money? Do you have to pay them since you are technically a shareholder (hence why people are weary of individual stocks)?

      Is it this simple guys?

      FMA 03> FMA Brotherhood

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      • Femme
        Femme
        Warlord Mod
        last edited by
        Femme
        spiral
        Femme
        Warlord Mod
        spiral

        I'm learning about this myself and it does seem more complicated than just buying and selling. Buying, for example, should include paying attention to social and political trends. For example, investors were paying attention to the Brexit long before it happened to decide what was more likely to happen, and after it happened many people decided to divest in UK-related shares because of the climate of instability.

        But I'd love to learn more from more business-savy minds.

        Hidden:

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        • Jabberwok
          Jabberwok
          Warlord Mod
          last edited by
          Jabberwok
          spiral
          Jabberwok
          Warlord Mod
          spiral

          Buying stock is basically giving a company on the loan and tying your returns to their performance. You don't earn money at any point until you sell the stock, at which point the difference in value of each share from its price when you bought it is your profit/loss.

          You can sell your shares at any time during the day once you've bought some (when the stock market is open) and different markets, usually depending on geography, have different volatilities and stocks for sale. Most people hang on to their stock for a while in hopes that the value will contonue to rise.

          There's no advantage or disadvantage to buying a single share versus multiple shares, other than that the loss or gains will be multiplied. However, many investors like to buy stocks in multiple companies at the same time (diversifying your portfolio) to offset the losses that at least one of the stocks will probably have.

          The whole risk of the stock market comes from knowing when to buy and sell in order to get maximum profits.

          Someone with actual personal experience trading stocks can add more to this.

          If you get dunked on in the dream, you get dunked on in real life

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          • Robby
            Robby
            last edited by
            Robby
            spiral
            Robby
            spiral

            At its simplest one sentence description, it sounds simple, yes. You put in money and if it does well, you make money when you sell it.

            You could have, for instance, invested in Nintendo a few weeks ago when Pokemon Go launched and made a tidy profit… an then lost it when Nintendo revealed they only owned part of that.

            In practice? Once you account for processing and transaction fees, and how long you generally have to wait on turnaround, market fluctuations, and the fact you can't touch or withdraw those funds easily? It's rough.

            Even professionals who do stocks as a living don't entirely know what it all is, there's thousands of variables and complexities.

            No, it's not simple at all. It calls for a lot of research in advance, and taking a chance. No such thing as a "sure thing."

            Mostly, don't go into stock with any money you're afraid to actually lose or be unable to touch for years.

            Also, trying to put in a couple hundred bucks to just make a few hundred bucks, is not worthwhile after the fees and time spent and what you'll be charged for various things. If you can't put in at least a thousand of dollars into it, it's not really worth the time. Some stocks will charge you annually if you have less than 2000$ in them because someone has to manage that stuff.

            And what happens if you buy stock/shares, but then the company loses money? Do you have to pay them since you are technically a shareholder (hence why people are weary of individual stocks)?

            No, you aren't obligated to pay anything. You already invested in buying in the initial stock. It going down in value is you losing money, IF you sell stocks while the value is lower… but no you don't have to then pay more money because of it.

            Foolio 1 Reply Last reply Reply Quote 0
            • Foolio
              Foolio
              admin
              @Robby
              @Robby last edited by
              Foolio
              spiral
              Foolio
              admin
              spiral

              This is the type of thing that can get as complicated as all hell depending on how deep you go, but if you just want to get started then you can definitely keep things really simple (and generally you don't want to get fancy unless you REALLY know what you're doing). Disclaimer: I am by no means an expert, but I do have some experience, because I have a 401k that I can manage and also using personal funds out of curiosity.

              @Jabberwok:

              Buying stock is basically giving a company on the loan and tying your returns to their performance. You don't earn money at any point until you sell the stock, at which point the difference in value of each share from its price when you bought it is your profit/loss.

              This is the basic gist. You buy something (stocks) for X dollars, and then eventually you sell it for Y dollars. Your goal is for Y to be higher than X. Which is just determined by the market value of your stocks at any given time. It's not fundamentally different from buying a collector's item and hoping it gains value over time. But I do want to clarify that you CAN earn money just by holding stocks. Many companies pay out dividends on their stocks (usually quarterly or semi-annually in my experience), meaning that they will actually pay you a percentage of what your stocks are worth periodically.

              @Jabberwok:

              You can sell your shares at any time during the day once you've bought some (when the stock market is open) and different markets, usually depending on geography, have different volatilities and stocks for sale. Most people hang on to their stock for a while in hopes that the value will contonue to rise.

              There are certain complications for the average guy who wants to trade, namely that whatever company/service you are using for trading will probably impose some restrictions. Unless you're paying a lot of money, you probably won't be able to buy/sell stocks very quickly (day trading etc), at least not without incurring a large penalty. One reason for this is that it actually takes a significant amount of time (days or weeks) for the transfer of ownership of stocks to actually conclude (i.e. you get the official title and the money changes hands). So even if you buy some stocks and within seconds you see them in your account, if you try to resell them right away, you are technically selling something you don't officially own yet. I have an account with Fidelity and if I did that I'd get slapped with a huge fee for "good faith violation." I think in general with my account type I'm not supposed to sell anything off within 30 days of buying it. Also if you buy mutual funds I think many of them have similar restrictions by the fund managers, sometimes 90 days or longer.

              @Jabberwok:

              There's no advantage or disadvantage to buying a single share versus multiple shares, other than that the loss or gains will be multiplied. However, many investors like to buy stocks in multiple companies at the same time (diversifying your portfolio) to offset the losses that at least one of the stocks will probably have.

              Robby touched on this slightly, but most likely you'll be getting charged a transaction fee for each purchase/sale of stocks. Not always, because I know people with special bank account types that give them a certain number of free transactions per year, or for me I can buy Fidelity-managed mutual funds without a fee because my account is with Fidelity to begin with, but in general you will be charged a per-transaction fee (it's like $8.00 for me). But it's per transaction, not per share. So if I buy a bunch of shares at once, I still only pay $8.00. But what this means is that if you are buying/selling small quantities, you are going to have a much harder time turning a profit.

              My general advice? If you're just looking to mess around and get a feel for how it all works, pick a stock you think will do well and give it a shot with a small amount of money. Just recognize that especially in the short term, it's pretty much just a form of gambling. Obviously you should have a reason to buy a particular stock, and you should research the stock's history and details. There are lots of free resources out there for that. You can start by looking it up on Google Finance. I did this once when Sony stock was kind of low and I thought it had to come back up. I actually ended up having to wait over a year before the stock went up higher than when I bought it, but in the end I made nearly $2000 (and Sony does pay dividends, but my returns on dividends were negligible). $2000 for sitting on your ass for a year is pretty good in my book.

              But if you're looking to actually make an investment, especially something you can leave alone without worrying about it or trying to manage it every other day, stay away from stocks and look into mutual funds. They are basically collections of stocks in various companies. Some are actively managed and charge some fees (or have a minimum investment required to buy in), but others are not. There are many types, such as industry sector funds (i.e. if you think retail is doing great, you can invest in a retail sector fund that is comprised entirely of stocks related to retailers). Some of these make ridiculous returns (like 30% annually), when they're doing well. But the absolute safest thing is probably to buy what are called index funds. These are funds comprised of stocks that represent a large cross-section of the market. The idea is that it's diverse enough that you are simply betting on "the market." If the stock market as a whole does well, your fund does well. If the market goes down, your fund also goes down. But statistically it's the safest bet. In the long term, the market has so far virtually always gone up. And even expert traders usually have a hard time beating index funds consistently.

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              • S
                ShinigamiKing
                last edited by
                S
                spiral
                ShinigamiKing
                spiral

                Wow thanks for the advice guys. So pretty much, you earn money from selling stocks in which the value went up on. So I assume that you should only go for the "gamble"/independent stocks for a start up company so that your profit is higher?

                And for companies that will pay good dividends?

                FMA 03> FMA Brotherhood

                Purple Hermit 1 Reply Last reply Reply Quote 0
                • Purple Hermit
                  Purple Hermit @ShinigamiKing
                  @ShinigamiKing last edited by
                  Purple Hermit
                  spiral
                  Purple Hermit
                  spiral

                  @ShinigamiKing:

                  Wow thanks for the advice guys. So pretty much, you earn money from selling stocks in which the value went up on. So I assume that you should only go for the "gamble"/independent stocks for a start up company so that your profit is higher?

                  And for companies that will pay good dividends?

                  First rule of thumb is to invest in what you know about. If you understand the industry and the business model and strategy of the company and knowing when's good to invest (when people undervalue the company, P/E ratios, etc), then you can be sure your investments will get a net return. Likewise, you should also be cognizant that selling your shares incurs a fee as well, so it may not be all that wise to just trade when you see things are higher if it's just a marginal increase.

                  While stocks and shares are fairly simple, you probably should do a good amount of reading to figure out how to pick things out. The Intelligent Investor by Benjamin Graham is probably the prototypical book on the subject but you can always pick up a few other smaller reads to get yourself going if you really want to jump in. I'd probably also encourage using a virtual stock exchange like updown.com to get familiar with how the stock market works.

                  S 1 Reply Last reply Reply Quote 0
                  • S
                    ShinigamiKing @Purple Hermit
                    @Purple Hermit last edited by
                    S
                    spiral
                    ShinigamiKing
                    spiral

                    @Purple:

                    First rule of thumb is to invest in what you know about. If you understand the industry and the business model and strategy of the company and knowing when's good to invest (when people undervalue the company, P/E ratios, etc), then you can be sure your investments will get a net return. Likewise, you should also be cognizant that selling your shares incurs a fee as well, so it may not be all that wise to just trade when you see things are higher if it's just a marginal increase.

                    While stocks and shares are fairly simple, you probably should do a good amount of reading to figure out how to pick things out. The Intelligent Investor by Benjamin Graham is probably the prototypical book on the subject but you can always pick up a few other smaller reads to get yourself going if you really want to jump in. I'd probably also encourage using a virtual stock exchange like updown.com to get familiar with how the stock market works.

                    I'll pick up some books on the matter. As for industry knowledge, I often read about sales and industry trends and history of the video game industry moreso than I even play them, so I have a good amount of knowledge on that subject.

                    I've also looked in virtual stock exchanges too.

                    –- Update From New Post Merge ---

                    @Foolio:

                    Robby touched on this slightly, but most likely you'll be getting charged a transaction fee for each purchase/sale of stocks. Not always, because I know people with special bank account types that give them a certain number of free transactions per year, or for me I can buy Fidelity-managed mutual funds without a fee because my account is with Fidelity to begin with, but in general you will be charged a per-transaction fee (it's like $8.00 for me). But it's per transaction, not per share. So if I buy a bunch of shares at once, I still only pay $8.00. But what this means is that if you are buying/selling small quantities, you are going to have a much harder time turning a profit.

                    My general advice? If you're just looking to mess around and get a feel for how it all works, pick a stock you think will do well and give it a shot with a small amount of money. Just recognize that especially in the short term, it's pretty much just a form of gambling. Obviously you should have a reason to buy a particular stock, and you should research the stock's history and details. There are lots of free resources out there for that. You can start by looking it up on Google Finance. I did this once when Sony stock was kind of low and I thought it had to come back up. I actually ended up having to wait over a year before the stock went up higher than when I bought it, but in the end I made nearly $2000 (and Sony does pay dividends, but my returns on dividends were negligible). $2000 for sitting on your ass for a year is pretty good in my book.

                    If the dividends of that $2000 were negligible, than what was it made of? Just selling the stock?

                    Because many big companies don't have stock that costs that much. Unless you bought multiple shares.

                    FMA 03> FMA Brotherhood

                    Foolio 1 Reply Last reply Reply Quote 0
                    • Vectorkov
                      Vectorkov
                      last edited by
                      Vectorkov
                      spiral
                      Vectorkov
                      spiral

                      I have a 401K and I'm enrolled in an employee stock purchase program with my company, but I think I might start investing more after I get my car paid off. There's some good advice in this thread.

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                      • Foolio
                        Foolio
                        admin
                        @ShinigamiKing
                        @ShinigamiKing last edited by
                        Foolio
                        spiral
                        Foolio
                        admin
                        spiral

                        @ShinigamiKing:

                        Wow thanks for the advice guys. So pretty much, you earn money from selling stocks in which the value went up on. So I assume that you should only go for the "gamble"/independent stocks for a start up company so that your profit is higher?

                        And for companies that will pay good dividends?

                        Startups are pretty much the absolute riskiest thing you could invest in. Yeah you could make a fortune (I know someone who invested like $10k into Tesla, then sold it after a couple of years and used his earnings to buy a Tesla), but at the same time you could end up with absolutely worthless stock. Making a startup become successful is incredibly hard. You might not stand to earn as much from bigger, more established companies, but you're also not running the risk of losing all of your money overnight.

                        @Purple:

                        First rule of thumb is to invest in what you know about. If you understand the industry and the business model and strategy of the company and knowing when's good to invest (when people undervalue the company, P/E ratios, etc), then you can be sure your investments will get a net return.

                        More like you maximize your chances. But you can do everything right and still lose, because business involves a lot of luck and investors are fickle.

                        @ShinigamiKing:

                        If the dividends of that $2000 were negligible, than what was it made of? Just selling the stock?

                        Because many big companies don't have stock that costs that much. Unless you bought multiple shares.

                        I had a bunch of shares (a few hundred). To make dividends a significant income source I think you'd need a huge amount invested. I've never had dividends even offset the taxes I end up owing on my earnings. That's the other thing… this crap gets taxed really hard (and complicates doing your taxes too). In that respect it's also worth looking into bonds, something we haven't even touched upon in here. Bonds usually have modest returns (a couple percent for ones that aren't junk), but if you buy government bonds they're almost guaranteed to pay out, and many types of municipal bonds are tax-exempt which is really cool.

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                        • Jabberwok
                          Jabberwok
                          Warlord Mod
                          last edited by
                          Jabberwok
                          spiral
                          Jabberwok
                          Warlord Mod
                          spiral

                          Yeah, government bonds are very reliable even though the earnings are relatively low. Municipal bonds, like those in contracted energy companies, are a good safe choice too.

                          If you get dunked on in the dream, you get dunked on in real life

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                          • Femme
                            Femme
                            Warlord Mod
                            last edited by
                            Femme
                            spiral
                            Femme
                            Warlord Mod
                            spiral

                            There's some amazing brains in here. I appreciate all of you in a new light.

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