Slowly starting into individual stocks...

**minnie1928** · 09-02-2009, 06:27 PM

I use Tradeking for my trading, they only charge $4.95/trade with no monthly fees. Then I usually just save my money up until I have enough to make a purchase worthwhile. I started about 10 months ago and have an average return of about 30% (taking into account my fees too), so I'm pretty happy.

**cptacek** · 09-02-2009, 09:34 PM

Could DRPs help? Not all companies offer to sell their stocks with a DRP program, but if a company you are interested in does, I don't think that they charge a trading fee (? I'm going off the top of my head here...so check it out.)

**Broken Arrow** · 09-03-2009, 05:26 AM

My favorite is looking at Berkshire shares. B classes cost roughly $3000+ per share, and A classes are currently.... $98,000+!

And some would argue that it's going for a discount right now.

By the way, Sharebuilder's weekly buys are like $4. Marsco is also $4 per trade. Zecco offers 10 free trades per month if you have a balance of $25,000. Likewise, Wells Fargo offers 100 trades per year for maintaining the same balance of $25,000. No experience with any of these though.

**am_vanquish** · 09-03-2009, 05:41 AM

Originally posted by kork13 View Post

So the companies whose stock I am looking to buy vary in price up to about $75/share. YEESH! Right now, I'm only able to send $100-$200/mo to my brokerage account! Plus, a single share of a company's stock is not really very beneficial

I've never really understood this logic. To me, a stock's price is pretty ambiguous. What's the difference in buying 10 shares of a $10 stock and 1 share of a $100? Isn't it theoretically possible for most of the significant stock parameters (P/E ratio, Beta, whatever) to be exactly the same regardless of share price? Seems to me that the only difference between a stock that costs $10 a share and one that costs $100 a share is psychological. Also, can't a company decide to "split" their shares at a ratio of 1:2 or something like that? Does that really change the market value of outstanding shares or the company's projected earnings for the next quarter?

That said, I don't really own individual stocks so maybe I'm just uninformed. I prefer index funds with a "tilt" toward small cap/value stocks. I guess I look at the market in terms of percentages. If most of the parameters of two stocks are the same, I would expect the value of a $100 investment in each stock to be about the same ... regardless of whether I have 1 share or 10 shares.

**Broken Arrow** · 09-03-2009, 06:47 AM

Ah, vanquish, you hit on something that all stock investors and traders need to understand. You're right, the stock price by itself means very little. If you plan on buying $1000 worth of stock, it won't matter if they cost $10 per share or $100 per share. You'll still get $1000 worth either way.

That's why most people look at the Price to Earnings ratio instead.

There are a few extreme examples of when price does matter. For example, with Berkshire A class, I would need about $100,000 just to buy one share right now!

On the opposite end, most common stocks need to stay above $1 I think, in order to stay listed with the NYSE for example.

But mostly, it is purely psychological, and it's interesting to see how a company may sometimes manipulate their stock price (through splits, asset injections, and book-keeping tricks) to make their stock look healthy.

**EEinNJ** · 09-03-2009, 06:55 AM

kork, I give you credit for wanting to invest in the stock market even though the state of the economy and market valuations is questionable.

Given the amount of money you have to invest, though, and your objection to brokerage fees, suggests to me that individual stocks are not for you just yet, unless there are 1 or 2 you like you could buy via DRIPs. Perhaps buying a no-transaction mutual fund through automatic deduction would be a better option.

**disneysteve** · 09-03-2009, 07:14 AM

Originally posted by cptacek View Post

Could DRPs help? Not all companies offer to sell their stocks with a DRP program, but if a company you are interested in does, I don't think that they charge a trading fee (? I'm going off the top of my head here...so check it out.)

Some DRPs will sell you the stock directly from day one. Others require you to already own shares in order to participate in their DRP program. In that case, just buy 1 or more shares from the broker and then do the DRP.

**amarowsky** · 09-03-2009, 09:27 AM

I suggest dropping your money into a brokerage account until you have a decent chunk saved up. Often if you open a new brokerage account you can get "x" free trades just for joining, and they usually are valid for a while.

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Here's and E*trade link. They are offering 100 I guess. I have never used them but they have been one of the main pioneers of Electronic trading. I believe they were around back when Datek was still around.

That way you can openly trade for a while, and at least get your feet wet nor worrying about biting the $8 trades busting your number of shares bought down by a few.

I'm kind of in the same boat, I only have a little bit of money to trade with, and I believe I had like $550 in AMD. I pulled it out and put it into DTE energy, because AMD had been floating around not doing ****, and I decided that even though I'm going to bite about 3% just by doing the two trades at $8 a trade. I just decided that if I'm going to have some stagnant investment I would be happier having it in a stock that is currently pulling a a 6% dividend (which is double what is cost me to do the move).

I have been reading a lot more finance books and mag's lately and I did not realize that traditionally most long held high performing stocks created 45% of their stockholders wealth though dividend payouts and reinvestment.

Right now my grandparents are recently retired and they are in a Blackrock dividend fund that has been paying a solid 10% guaranteed dividend even though the past few years of rough economic times. Because Blackrock has some talented hedging, they have been able to take amazing advantage of the high dividends offered by a lot of companies to keep stockholders holding onto their stock.

**Broken Arrow** · 09-03-2009, 09:43 AM

For a while, AMD is kind of a bad bet, with Intel making a very good call with the Atom processor, and the rising popularity of smartphones and netbooks, as well as winning the performance crown with i7 as well as power efficiency with the Core processor. So, considering how AMD was beaten in every which way, I'm actually surprised if their stock held on somehow.

However, I think there are some upsides on the horizon for AMD, such as winning the Apple contract through ATI, and their upcoming Fusion platform. Granted, it's highly speculative, and Intel is still the king of chips into the foreseeable future.

That said, please take that for what it's worth, because I almost never touch tech stocks. Not that I wouldn't, but... I just feel like it's too risky when there are better options available out there.

**amedvedovski** · 09-03-2009, 01:18 PM

Just several comments.

My assumption you are doing everything in your taxable (not retirement) account.

If you start doing DRP then it might be very challenging bookkeeping exercise after you sell stocks and need to pay taxes. Just keep all the records. The same, by the way, goes for buying mutual funds.

If you invest into single stock you can burn yourself really quick. If this is one of the first investment experiences I would start by buying mutual funds or ETFs (that are very liquid and diversified by definition).

Alex Medvedovski
alexfacts.blogspot.com
Twitter: @alexfacts

**kork13** · 09-03-2009, 07:36 PM

Alot of interesting comments, thanks to all... To respond to a few:

@cptacek -- I don't know much about DRP's, but from what I found briefly online, it seems a little more complicated than I want to mess with. Although the money aspect is obviously a part of it, I am also interested in individual stocks to learn about how the markets work and flow. Between those, I think I actually want the simplicity of a brokerage account, even if I do pay something of a premium for it... They at least can make sense of the taxes and profit/loss tracking.

@BA -- I'll have to look into sharebuilder... The lower trading costs are clearly a good thing. I might be worried about the flexibility of using it (trading when I want to, not when the schedule says I will), but I'll look into it.

@EEinNJ and Medvedovski -- First, yes it would be a taxable account. As both of you mention, I have been using mutual funds for the last 3 years or so (when I first got into investing). For the purposes of progressive wealth accumulation/building, I definitely prefer mutual funds. I can't totally state my end goals.... Maybe the desire to dabble in individual stocks is just to experiment, and see what happens. In any case, the more I look into it, the more I reinforce my intent to take this slowly.

I think I've decided for now to just build up my money in a balanced-portfolio mutual fund, earmarking it for future stock trading. I'll just keep researching, learning, saving, and waiting for the right time to actually start into individual stocks.

Thanks again to all for your thoughts, your advice really is quite valuable.

**Broken Arrow** · 09-04-2009, 05:26 AM

DRPs can only be taxable and you have to have it set up with each company that you are interested in directly. Also, not all company offer it. Also, you have to go through each set of paperwork with each company when filing taxes. Er, don't get me wrong. I'm not trying to poo-poo on the idea, just wanted to point those things out.

Sharebuilder also offers market orders (immediate buys), but that's at $10 per trade. So, it depends on how often you think you need market orders.

Finally, when I was building up money for a stock trading, all I did was find an online savings account that I thought paid decent interest, and left it there.... Truth is, stock trading was and still is more of a hobby than a serious exercise in "money-making". Worst case, that money can double as your secondary emergency fund (until you start trading again).

**safari** · 09-07-2009, 01:00 AM

I wouldn't bother with individual stocks unless you have more than $1K ready to invest. Also, don't pay attention to the stock price, as it means absolutely nothing. If you buy $1000 worth of shares, be it 100 shares for $10 each or 10 shares for $100 each, the end result is the same. For example, if the share price goes up 10%, your gain is $100 in either case.

Slowly starting into individual stocks...