When to buy stocks?

[savemachine]

What I'm trying to say is do you guys even buy stocks?

I understand that the people on this forum is pretty conservative and as per everything I've asked thus far in relation of how to save has concluded in a resounding yes to ROTH IRA, 401K, Emergency Fund, High yield saving accounts, and CDs.

Do you own or buy stocks? If so then when should you do it? I've contributed 4k to ROTH IRA for 2006, and I'm close to upping my saving account to 10k. I've also asked before on how to get a downpayment for a house in a couple of years and it turned out that the best way to get that amount of money is to put it into a high yield saving accounts.

So stocks.

Is that like gambling to you?

[jIM_Ohio]

What I'm trying to say is do you guys even buy stocks?

I understand that the people on this forum is pretty conservative and as per everything I've asked thus far in relation of how to save has concluded in a resounding yes to ROTH IRA, 401K, Emergency Fund, High yield saving accounts, and CDs.

Do you own or buy stocks? If so then when should you do it? I've contributed 4k to ROTH IRA for 2006, and I'm close to upping my saving account to 10k. I've also asked before on how to get a downpayment for a house in a couple of years and it turned out that the best way to get that amount of money is to put it into a high yield saving accounts.

So stocks.

Is that like gambling to you?

stocks are for long term investing and a great way to maintain or improve your purchasing power.

In any Short term stocks have significant downside risks. 25% of value could be wiped out overnight. It has happened before and will happen again.

[sweeps]

So stocks.

Is that like gambling to you?

Depends on what stocks you're buying. I would say that putting $10,000 on a penny stock is gambling. Also day trading is gambling. (Not saying some people aren't good at it, but it's still gambling.)

On the other hand buying a diversified group of stocks for long-term gain is definitely not gambling and is one of the best investments a person can make.

A person takes a much bigger risk over the long haul by keeping all their money in low-yield "safe" investments.

[disneysteve]

Do you own or buy stocks?

Absolutely, although personally I invest mainly through mutual funds. When I was just starting out, I bought some individual stocks because that was all I knew at the time. Since then, I've learned the advantages of investing through mutual funds and pretty much restrict my investments to that.

[Scanner]

I owns stocks through mutual funds because I am not privy to the inside and technical information that mutual fund managers are.

However, not all of us are "conservative" by any means. My portfolio is 33% domestic stock, 33% international stock and 33% commodity. I limit that one commodity to silver because it's a commodity that I understand (or at least think I do) and am willing to assume the commersurate amount of risk/reward on that.

I also follow oil prices/trading/markets.

I find commodities easier to navigate because it's about supply/demand and market forces such as strengthening/weakening dollar or destablization.

With stocks, I am at a loss. It's about hiding money in accounting (ala ENRON), changes in management, along with fundamentals. It's also about "the market", that is, you can have a solid company and all of the sudden there's a "correction" just because the co. may have been overvalued or the Moon was in Phase 2. I have no idea how to look at a balance sheet for General Motors and ascertain if they are lying or not.

Stocks aren't gambling but I do think they are speculative as a general rule.

[disneysteve]

However, not all of us are "conservative" by any means.

Stocks aren't gambling but I do think they are speculative as a general rule.

I agree with you that we aren't all conservative. I've currently got nearly 80% of my portfolio in stocks, mainly through mutual funds but also with some individual issues, so that's far from conservative.

I disagree, in general, with stocks being speculative. I think a well diversified portfolio is the best way to go. Keeping all of your money in conservative, fixed-income investments poses a much higher risk of not meeting your goals and ultimately outliving your money. Of course, some stocks are highly speculative and your odds are better at the blackjack table, but with more established companies, stocks can be quite safe.

[MonkeyMama]

Most of my retirement is invested in stocks (through mutual funds).

Honestly, we invested in a lot of stocks in 1999 when we graduated from college. A lot went down the tubes, and some we cashed out in recent months when we dumped our broker. We are just getting to a point where we will be investing outside of retirement again. Last few years money has been tighter and less to invest. But in the last year I have been studying up on mutual funds and feel much more comfortable investing in funds rather than individual stocks.

Anyway, we just built back up our e-fund so will be investing in some mutual funds outside of retirement. I can't say I ever have before (hmmm) but I steadily contributed to my mutual funds in my 401k in 1999 and 2000, and then switched jobs and stopped contributing, and am way ahead today, so I am not too scared overall of the market. It was interesting experience riding out such a nasty wave in the beginning of our investing career. Diversification is very important to us as a result, as most our stocks tanked and the mutual funds rode out the wave. We will probably dabble a little in individual stocks down the road when we have more money to play with. But overall mutual stocks will make up most of our portfolio for a long while.

As far as investing in stocks individually or through mutual funds, as soon as possible is when I would do it. Youth and a long investment horizon decreases market risk considerably.

[Scanner]

I disagree, in general, with stocks being speculative. I think a well diversified portfolio is the best way to go.

DisneySteve,

I am not debating the virtues of diversification but with individual stocks diversification is hard to acheive, although I suppose with companies like share builder/Scottrade you can do it easier and with less money than in years past.

Enron was quite established and some people lost their shirt on that. Same with MCI/Worldcom.

With stocks comes another responsibility too - when to take a profit or a loss. Of course, there are formulas but I don't think you can just "buy and hold" forever, even with Blue Chips like Coke and McDonalds and Boeing. I know you can do that with mutual funds but I think it's naive if ou think you are going to buy some blue chips and just hold.

Sometimes you have get out - either take a profit or loss. That's puzzling to me, I'll admit.

With oil, I'm not puzzled because you can always refer to fundamentals. You see, right now, oil is high fundamentally, so if I had any oil exposure, I'd take a profit, even if it was only 10%. Sure, it could go higher with an Iran crisis or a Hurricane but point is, to me, it seems simpler.

Individual bonds I can understand better than stocks. . .after all, that's just a loan to a corp, gov't, or city.

[humandraydel]

Of course, there are formulas but I don't think you can just "buy and hold" forever, even with Blue Chips like Coke and McDonalds and Boeing. I know you can do that with mutual funds but I think it's naive if ou think you are going to buy some blue chips and just hold.

I suggest a book called "The Future for Investors: Why the Tried and True Triumph over the Bold and New" by Jeremy Siegel, a professor at the Wharton School of Business.

In it he talks about the top performing stocks over the last 50 years. One of the fundamental things that led to such great performance was a high dividend yield combined with with periods of poor performance. The reason is that when the dividend yield is high and the performance is poor, reinvested dividends are able to buy more shares. Then, when the performance picks back up (as it usually does with such blue chips), those extra shares make a BIG difference in overall return. The number one performing stock over the last 50 years? Altria! Why? Because through all the tobacco litigation, regulation, etc investors were wary of the stock, depressing the price to a low valuation. Yet Altria kept dishing out increasingly higher dividends, allowing buy and hold investors to accumulate more and more shares. As the dust settled on tobacco litigation and the stock rebounded, those shares have become worth quite a bit!

[disneysteve]

with individual stocks diversification is hard to acheive

Or at least more expensive to achieve. I agree that if you are just starting out or have a relatively small amount to invest, you are much better off with mutual funds for instant diversification. Individual stocks do have advantages, particularly related to tax issues, over mutual funds, but I think diversification comes first on the investing priorities list.

[jIM_Ohio]

Most reading I have done suggests stock diversificition can be had with around 8 stocks, and there is diminishing returns with anything above 20 stocks.

I am attempting to build a dividend portfolio of individual stocks myself, as one leg of my retirement income stream.