Investing 
4
comments

Resources to Learn About Stock Market Investing

If you know nothing about the stock market, consider yourself lucky.

If you think the stock market is a scary place that you don’t understand, you’re actually in good shape.

I learned about the stock market in a time of prosperity, in pieces, and probably in the worst possible way and it’s burned me on numerous occasions. When everything is going up and there’s an irrational exuberance, you are afforded the opportunity to have good results come out of bad decisions and that can lead to the development of bad habits. So, if you know nothing about the stock market and are scared of it, that’s actually the best time to start learning about it.

So, if you’re scared and I have bad habits, why should you read anything I have to say about investing? I don’t actually talk much about investing outside of discussing ideas and theories (and recommending index funds from Vanguard) but today I’ll outline a few good resources I’ve found to help you learn more about investing in the stock market.

Morningstar Investing Classroom

Morningstar is great. The number one best place to start, if you know absolutely nothing, is with Morningstar’s Investing Classroom. They have four areas of beginner study – Stocks, Funds, Portfolio and Bonds. Each classroom has five levels of study with the exception of Bonds, it only has two, and each level has anywhere from five to eleven courses. I’ve taken several of the courses and they begin with the basics and move onto progressively more advanced topics.

As a bonus, you earn points for answering the quizzes following each course and can redeem those points for various rewards (you have to be a free registered member to earn these credits).

Motley Fool’s Investing Basics

If you’ve completed all of Morningstar’s Investing Classroom courses, Motley Fool’s Investing Basics is a great place to reinforce those ideas but with a witty and humorous twist. Depending on how quickly you went through the Morningstar site, you probably glossed over a few topics or forgotten others, so review can’t hurt. Plus they’re entertaining to read.

Decisions Decisions Decisions…

At this point, armed with the basics, you have to make a decision. Do you want to invest the your stock allocation in index/mutual funds or do you want to try to go your own way and invest in individual stocks? If the answer is index and mutual funds, you probably are armed with enough information go forth and conquer. Open an account with a Vanguard or a Fidelity and have it (those two always seem to dominate Top Fund lists). If you want to go after individual stocks… there is more learning ahead. (some would say there is more to learn but from here but between Morningstar and Fool, you have enough information to Google search from here)

Securities and Exchange Commission

The SEC has a great guide to financial statements, which you’re going to have to decipher and interpret if you hope to be able to pick some winners in the stock market. I would also get myself familiar with EDGAR, which is the SEC’s database of company filings (EDGAR Quick Guide, Comprehensive EDGAR Guide). EDGAR is far more versatile (and comprehensive) than navigating company websites for their filings. They also have a pretty extensive Publications section that has all sorts of valuable information.

Google Finance

If you want a very quick snapshot of a particular company, I think Google Finance has the most amount of information on a single page and provides the easiest interface to reach it. Simply type in the ticker or name of the company and you can get a wealth of information on one page. You can access their related companies, their latest financials, recent and future events, key stats & ratios, a brief summary as well as links on their company website, list of officers and directors, as well as links to other resource reports such as SEC filings, MSN Money’s listed major holders, etc. All that information is one page, that’s why I like it over other similar services like Yahoo Finance (Yahoo Finance’s advantage is that you can add a lot of technical indicators to their charting services).

Wall Street Journal Markets Data Center

So, armed with that information, you probably have enough to go out and do some serious damage to your portfolio (take that any way you’d like :) ). Are you ready to be inundated with market data? If so, and my inundated I mean like drinking from a fire hose, then check out the Wall Street Journal Markets Data Center. Pages and pages and pages of financial information at your finger tips. (if it’s intimidating, but that’s okay… and that’s just the home page, you can drill down even more!) It’s absolutely stunning… now go forth and conquer!


 Investing 
10
comments

Are Investment Newsletters Worth It?

I have having lunch with a co-worker last week when he mentioned he was considering signing up for Motley Fool’s Hidden Gems newsletter run by Tom Gardner himself. A single year’s subscription to the newsletter costs $199 a year! Is it worth it?

I have no idea, but I know who might, the resident investment blogger that I talk to on a semi-regular basis and the only one I’ve actually met in person – George of Fat Pitch Financials (you may remember he gave me a sneak peek at his Contributor’s Corner). What did George say?

I’ve tried most of the MF investment newsletter subscriptions. The Hidden Gems research is pretty good and they use to have a great message board back when I tried it out. The subscriptions also give you access to the Fool forums. The only drawback with Hidden Gems that I’ve heard of is that the members often drive up the price of these small cap stock picks real quick when they are selected and the price can drop dramatically when the stock is no longer recommended. The picks also often tend to be higher risk growth stocks.



I think the biggest drawback of the Motley Fool products is that you only get research on a few stocks each month. I like MorningStar as an alternative because they cover 1500+ stocks. I think for even less than the cost of a MF subscription, you get a lot more with the MorningStar Premium Subscription.

Sounds like the newsletter is certainly of value but there are certainly very obvious drawbacks. While there appears to be value in the MF Hidden Gems one specifically, I can see how most of those drawbacks are systemic problems for all newsletters. Just think of the picks Jim Cramer gives away for free on his television show, the stocks spike the next day and any value that was there is quickly diminished. While the picks may or may not be good in the long run, in the short run they are made “less good” by virtue of being broadcast on CNBC. The only mitigating factor (to the popularity issue) of Hidden Gems is that the annual entrance fee of $199 dissuades many an investor so you won’t get the throng that pant over Jim Cramer’s daily selections.

Beyond the short term spike, George mentions something that may be obvious if you think about it – they tend to pick higher risk growth stocks. Well they’re looking for hidden gems, so they’ll probably be picking riskier propositions but ones with long term potential. With venture capital, the old maxim is that you pick one home run, four treadwaters, and five busts (something like that… I’m not a VC); so if you apply that to stock picking, you don’t have to be mega-successful percentage-wise to be mega-successful dollar-wise. All it takes is one twelve-bagger…

Lastly, there is also the issue of coverage, since the newsletter has to make certain picks, it can’t cover the whole field and provide extensive research on a lot of securities. Also, what if there aren’t any hidden gems or they don’t find any? There is the possibility that right now there are no hidden gems worth taking a shot at, so do they trot out something or just research a bunch of securities and let you have at them? It’s an interesting question that I don’t know if anyone has asked them yet. That’s why George recommended Morningstar, especially if you’re a more active investor because you get significantly more information.

Lastly, I do have to give a shoutout to George’s Contributor’s Corner (especially since his email was very thorough), it certainly has value and comes with a cheaper sticker price of only a hundred dollars a year. George finds all sorts of arbitrage opportunities that come with little risk and requires quite a bit of work on George’s part. Making back the $100 is a cinch through the various going private, reverse split, and buyout opportunities he digs up. (George isn’t cutting me in on the action though :) )

Anyone out there use MF Hidden Gems or any other investment newsletter and care to share their experiences? MF Hidden Gems does have a 30 day trial so my friend might dip his toe in to see how it is, I’ll report back if and when he does.


 Investing 
2
comments

Model Portfolios Built with ETFs, Part 4

This is a guest post by Sun of Sun’s Financial Diary and is the fourth segment of the Model Portfolios Built with ETFs series. Part III can be found here.

So far in this series, I have discussed possible choices to build some well-known portfolios with nothing but ETFs. Looking back at the six model portfolios being covered, we can easily see that none of them has exposure in the precious metal sector, one that is considered as a good diversifier in a portfolio due to its weak correlation with other major asset classes. In this part, we will have a chance to build a portfolio that has a new element: precious metal.

In his discussion of model portfolios, Jonathan at My Money Blog used an example from the book, The Intelligent Asset Allocator by William Bernstein, to introduce precious metal into the picture. The bold investor portfolio has 70% in stocks and 30% in bonds and consists of the following asset classes:

  • S&P 500 index: 10%
  • Small-cap stocks: 10%
  • REIT: 10%
  • International larg-cap stocks: 10%
  • International small-cap stocks: 10%
  • Emerging markets stocks: 10%
  • Precious metals: 10%
  • U.S. short-term bonds: 30%

Except precious metals, possible ETFs for all other components of this portfolio have been discussed before (in part I and part II of this series), thus, will not be repeated here. Using Morningstar’s ETF list, I identified the following precious metal ETFs as candidates for this portfolio:

  • streetTRACKS Gold Shares (GLD)
  • iShares COMEX Gold Trust (IAU)
  • PowerShares DB Gold (DGL)
  • Market Vectors Gold Miners (GDX)
  • PowerShares DB Precious Metals (DBP)
  • PowerShares DB Silver (DBS)
  • iShares Silver Trust (SLV)

Among them, GLD and IAU have longer tracking record than the new comers such as PowerShares’ DGL, which incepted in January, and GLD is the leader in both net assets and trading volume. Another key difference between GLD, IAU and DGL is that both GLD and IAU are directly backed by bullion and their share values are based on the price of spot gold, while DGL mainly invests in gold future contract (more on DGL).

Symbol ER (%)
Yield (%) YTD return (%) 1-yr return (%)
GLD 0.40 N/A 7.85 14.20
IAU 0.40 N/A 7.37 13.79
DGL 0.50 N/A 8.58* N/A
GDX 0.55 N/A 6.11 N/A
DBP 0.75 N/A 8.68* N/A
DBS 0.50 N/A 9.12* N/A
SLV 0.50 N/A 8.75 N/A

As the above table shows, most ETFs in the precious metal sector have been around for only several months, thus, it’s difficult to evaluate their performance. For GLD and IAU, the price of spot gold will determine their share prices. Considering that precious metal can be a powerful force in boosting a portfolio’s return, a 10% allocation seems to be appropriate.

*3-month return


 General, Personal Finance 
15
comments

Favorite Money or Personal Finance Forums

I was wondering, what are the popular web accessible personal finance, investing, or otherwise money-related forums out there? I want to, with your help, compile a very comprehensive listing of these forums so that we can all learn from them.

Here’s a brief start… let me know your favorites, thanks!


 Investing 
1
comments

Morningstar Investing Classroom

I wish I had learned about these resources years ago because like most folks, I learned how to trade stocks in bits and pieces – never took a course, never really read a soup-to-nuts book, and never talked to an advisor of any kind. It’s amazing Morningstar offers these for free. They bill the Morningstar Investment Classroom the “best place to sharpen your investing skills and pick up new ones. Whether you’re a novice, an experienced investor, or someplace in-between, we can help you…” It’s a collection of 172 courses on stocks, funds, bonds, and portfolio management which each are only supposed to take ten minutes each. After each “course” you take a small quiz and earn points that you can redeem for free merchandise. I decided to give it a whirl.

Each classroom has five levels of courses, 100-level to 500-level, and you’re permitted to jump to any course at anytime, so you won’t need to finish all 100-levels to take a 200-level. That sort of flexibility is nice because novices can start early and the more experienced can jump straight to what they don’t already know. Personally, I decided to take each course in order just so I was sure the foundation they wanted me to learn was established before I tackled harder topics. Well, I skipped straight to the quiz for a few 100-levelers. :)

When you take the quizzes, you earn a points for each correct answer and some of the prizes you can earn are a coffee cup (300 pts), “The Five Rules for Successful Stock Investing” and other books (400 pts), Morningstar Premium Membership or a T-Shirt (650 pts), FundInvestor or StockInvestor subscription (800 pts). The prizes are nice because they’re free and you’re also learning some solid information while you’re going along – a win-win situation so to speak. Give it a shot, you can take the courses without registering but you won’t earn points (they have to keep record of it somehow), maybe you’ll even learn something…

Have any of you taken these lessons or know of any of the other free “classroom” type resources out there?


 Investing 
3
comments

ETFs and Mutual Funds – Empowering Average Joe Trader

Let’s be honest… the average Joe Trade is awful at picking stocks. I am awful at picking stocks (don’t ever listen to my stock suggestions). Everyone I know is awful at picking stocks… but everyone knows what the hot sectors are these days right? During the Internet boom, everyone knew Internet stocks were crazy! Get in on the IPO and get rich! The problem was Joe Trader picked a stock, it tanked, he (or she) was burned, and quit trading all together. Diversification is Joe Trader’s best friend and ETFs/Mutual Funds allow Joe Trader to capitalize on the “hot sector” concept without swinging at the blazing fastball and striking out miserably. ETFs are like fast moving mutual funds because you can trade them throughout the day, whereas with a mutual fund you need to wait until the end of the day. That’s why ETFs are becoming more popular.

Yahoo! Finance has a great section on ETFs (Exchange Traded Funds). Morningstar has a very good ETF section as well. Read them and understand them thoroughly because I’m not going go into them in detail. The main difference is that ETFs have intraday prices and trade like stocks (with commission fees too!) whereas mutual funds are traded using end of the day prices.

Money is rushing into ETFs like crazy, ETF assets grew 47% to $222 billion, according to Morningstar. (Article, requires free registration, use BugMeNot) Why? Because ETFs empower the regular trader and allows them to invest in a “hot sector” with little work involved. Do you believe, like everyone, that Biotech and Energy are hot? Invest in an Energy-ish ETF. Right now they top Morningstar’s lists of great performers.

There are downsides to ETFs, mostly regarding commission fees eating into your return, so do your due diligence. Allow this article to open your mind to the concept of ETFs and what they can do for the average trader. Instead of pumping all your cash into Company X because you believe that sector is hot, you can consider pumping it into an ETF for that sector instead.


Advertising Disclosure: Bargaineering may be compensated in exchange for featured placement of certain sponsored products and services, or your clicking on links posted on this website.
About | Contact Me | Privacy Policy/Your California Privacy Rights | Terms of Use | Press
Copyright © 2014 by www.Bargaineering.com. All rights reserved.