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So I'm a new, beginning investor. I haven't invested yet but would like some advice on how to define and improve my strategy and advice on the strategies of other people.
I am looking at P/E ratios, EPS's and viewing the historical performance of companies. I am reviewing their websites to understand their culture and products, with politics, environmental factors and consumer behavior in mind.
Some companies that are low "penny stock" are trading very high amounts of stock at one time (ie 4 million) while others are not.
My strategy is to look at the transactions of the stock market - if someone bought 400,000 of a particular penny stock, obviously they are either a) a professional investor b) someone with a financial advisor or c) someone who has lots of money and is very stupid.
I would say a or b is the most plausible answer.
Is looking at transaction histories on the stock market a good strategy?
Is looking at transaction histories on the stock market a good strategy?
Only if you want to be one step behind whatever manipulations, trends etc others are doing.
Sad fact is that the stock market is a 'big boys game'
I don't mean you may loose, but the individual investor is competing against a computer which makes decisions, and evaluates more than we can in a month in nano seconds.
I like the idea of investing in what you know. If you are a Dr... you know about company's with new drugs coming out... It blew my mind the accountant for Wallmart NEVER bought wallmart stock (For like 20 YEARS!)
Etc.
So I'm a new, beginning investor. I haven't invested yet but would like some advice on how to define and improve my strategy and advice on the strategies of other people.
I am looking at P/E ratios, EPS's and viewing the historical performance of companies. I am reviewing their websites to understand their culture and products, with politics, environmental factors and consumer behavior in mind.
Some companies that are low "penny stock" are trading very high amounts of stock at one time (ie 4 million) while others are not.
My strategy is to look at the transactions of the stock market - if someone bought 400,000 of a particular penny stock, obviously they are either a) a professional investor b) someone with a financial advisor or c) someone who has lots of money and is very stupid.
I would say a or b is the most plausible answer.
Is looking at transaction histories on the stock market a good strategy?
No
A good strategy is to look at the financial records of a company you are interested in. Make sure they are still growing in sales; have enough money on hand; are in a market which you believe to be stable.
I recommend you learn fundamental analysis instead of the way you are headed, which is technical analysis. Fundamental analysis will reveal to you which stocks are fairly priced, technical analysis will only tell you which stocks are most popular.
I prefer investing in growth stocks. You want stocks that experience high growth. You should ask the following questions before buying a stock:
1. Do they have a clear path for growth?
2. Is there strong demand for their products or services?
3. Are there any competitors that are better?
4. Are they expanding overseas?
5. Do they have a healthy balance sheet?
6. Is the stock overpriced?
7. How effective is management?
8. How will they perform in a poor economy?
9. How are their margins trending?
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In regards to your penny stock question, most professionals stay away from them. Most penny stocks are just pump and dump scams in my opinion. Professionals looking for high returns deal with options, futures, commodities etc.
...if someone bought 400,000 of a particular penny stock, obviously they are either a) a professional investor b) someone with a financial advisor or c) someone who has lots of money and is very stupid.
I would say a or b is the most plausible answer.
Actually, C is closest to the correct answer. Except that they don't necessarily need to have lots of money (400,000 shares of a penny stock might cost them a mere $4000, $400 or less) and they might be uneducated rather than stupid (although they could also be both or neither). Newbie traders/investors are often drawn to penny stocks because they feel they can get the most bang for their limited bucks, but it's faulty thinking. You're usually better off buying 40 shares of a quality stock than 400,000 shares of a crap penny stock.
Quote:
Originally Posted by Themanwithnoname
the individual investor is competing against a computer which makes decisions, and evaluates more than we can in a month in nano seconds.
I hear this all the time, but you're only "competing" with the computer if you and the computer are after the exact same trades, which is HIGHLY unlikely.
No
A good strategy is to look at the financial records of a company you are interested in. Make sure they are still growing in sales; have enough money on hand; are in a market which you believe to be stable.
I will look at financial reports as well when considering investments, likewise looking at press releases and will be critical when analyzing the potential bias of such reports. I don't take investing my money lightly and will be greatly informed before making any purchasing decisions. I believe taking a information / research approach when investing and reading up on all available information before making risky investments.
Actually, C is closest to the correct answer. Except that they don't necessarily need to have lots of money (400,000 shares of a penny stock might cost them a mere $4000, $400 or less) and they might be uneducated rather than stupid (although they could also be both or neither). Newbie traders/investors are often drawn to penny stocks because they feel they can get the most bang for their limited bucks, but it's faulty thinking. You're usually better off buying 40 shares of a quality stock than 400,000 shares of a crap penny stock.
Thanks. Do you think it's worth buying more expensive stock that are seemingly high in price at the moment?
I see Disney as a good quality stock at the moment, perhaps Viacom too, but these companies have just peaked since dropping in share price last year.
I hear this all the time, but you're only "competing" with the computer if you and the computer are after the exact same trades, which is HIGHLY unlikely.
Not really:
Quote:
No matter what type of investor you are, there is bound to be a mutual fund that fits your style. According to the last count there are more than 10,000 mutual funds in North America! That means there are more mutual funds than stocks.
I prefer investing in growth stocks. You want stocks that experience high growth. You should ask the following questions before buying a stock:
4. Are they expanding overseas?
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In regards to your penny stock question, most professionals stay away from them. Most penny stocks are just pump and dump scams in my opinion. Professionals looking for high returns deal with options, futures, commodities etc.
I agree with all your answers, great thinking. Expansion is risky though. I will definitely consider investing into companies expanding into Asian, African and South American markets. Many companies have failed because they don't understand the culture of their selected area of expansion. Likewise, many companies from the UK and Australia have failed expanding to the US market because:
1) they don't understand that the US is like a mini continent, not like a country with one culture.
2) they don't understand that America already has a well defined retailers
and
3) they expand vigorously, not slowly and in doing that waste a lot of money when they realize, after quickly purchasing 20 retail outlets, that they are losing money and not gaining anything at all.
I agree with all your answers, great thinking. Expansion is risky though. I will definitely consider investing into companies expanding into Asian, African and South American markets. Many companies have failed because they don't understand the culture of their selected area of expansion. Likewise, many companies from the UK and Australia have failed expanding to the US market because:
1) they don't understand that the US is like a mini continent, not like a country with one culture.
2) they don't understand that America already has a well defined retailers
and
3) they expand vigorously, not slowly and in doing that waste a lot of money when they realize, after quickly purchasing 20 retail outlets, that they are losing money and not gaining anything at all.
Yep, when you ask yourself these questions, you need to go in-depth.
For example: If XYZ is going to start opening stores in China in 2014, you should find out how many stores, which cities, what consumers are they targeting, what reputation (if any) do locals have about XYZ etc.
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