Help me to learn to trade stocks!!!

[aevans1206]

All I know about investing in the stock market comes from my grandmother, whose father was a stock broker and survived the 1929 stock market crash: put your money in and don't look at it. Let it ride...a long time. Over that long time, your money will grow. My grandparents are enjoying a long, pleasant, fulfilling and wealthy retirement (I'm sure they've given in to speculation from time to time, but diversify, diversify, diversify). Gee, you'd think with all that sound advice and good role modeling I'd have picked up a good habit or two? Apparently not.

[Tim, Ohio]

Yes, I realize there are great risks trading stock. I set aside 5K to
get started. This was money I saved towards getting started with
trading. Like all hobbies, you have to spend money and that is what
this is to me. I don't suggest people "jump right in" without at least
understanding the basics. I used that phrase without explaining that
I did do some research to get started. But opening an account finally
was like "jumping right in" for me. All of the mechanisms that have
to be understood about that part of it are not easily understood until
you actually do it. I had a good experience and so I recommend others
not be too shy about it.

As for my experience, yes I did invest in Visa and yes it did well and
continues to do well. Keep in mind, there are mechanisms that help
you protect your principal if that is a concern. For instance (and I am
sure most of you already know this, but for the benefits of others), you
can place a trailing stop on your investment where a sell is triggered
at a preset value that continues to follow along with a stocks growth
in value, but when it starts to decline, triggers a sell. This is something
very useful to protect against devastating loss. You are in full control
and can make quick decisions which does make a difference for peace
of mind. I do agree that research is necessary, but how long do you
study and try to satisfy yourself of a companies worthiness before you
give it a try? You can, of course, pick stocks and keep track of performance
without buying to see how well your research paid off. Doing this
will give you some idea of whether you might be well suited for the
stress of the market.

Tim, Ohio

[Broken Arrow]

C'mon Broken Arrow, lighten up!

Why you bustin' chaps?

Tripod, I promise I'm not trying to bust anyone's... chaps. What I am saying isn't meant to be personal. I've always been against chasing after hot stocks, regardless of who brings it up.

In fact, I always try my best to be as objective and factual as possible.... Now, whether I succeed or not is a different matter.

But right now, Visa is the Latest Hot Stock, and whenever you have this much hype surrounding the stock, and with such a meteoric climb, chances are very good that the hype and speculation is cooked into the price.

Now here's the thing. I don't doubt that Visa is a bad company. Just like Google and Apple, I'm sure the fundamentals are solid. However, the fundamentals also has a hype-inflated bubble cooked on top, and the trouble with bubbles is that they're not built from sustainable business fundamentals. They can pop at any time, when you least expect it. That's the risk. That's what happened to Google (even though they're still a good company), that's what happened to Apple (even though they're still a good company), and believe me, that's what will happen to Visa eventually as well (even though they're still a good company).

Now, frankly, I'm not above speculating on short-term bubbles. But I'd definitely do so with a trailing stop in place. Or just sell outright. Sometimes, it's better to just go ahead and lock in the gains. Buying is great, but selling-- especially when you know it's About That Time-- is even better. That's all I am trying to say.

BA - I think trading stocks is fine as long as it is done as a small part of an overall investment plan. Taking 5-10% of your money for dabbling in stocks isn't such a bad idea.

Steve, I agree with you, because that's the same advice I give as well. But as I have mentioned in the above paragraphs, if the exercise is to actively trade stocks (as opposed to passive investing), then we need to know not just when to buy, but also when to sell.

If something is considered speculatively hot, it's made an abnormal return by bucking the trend against the rest of the industry, much less the sector, much less the market... AND, if we can't articulate the forward fundamentals as to why it can sustain that level, then the only logical conclusion to me is to SELL.

Again, I don't disagree with the advice to set proper allocation for speculating. But even in speculating, there is a good way and a bad way of going about it... and I just don't think chasing after hot stocks is a good way to go.

Yes, I realize there are great risks trading stock.

Hey man. Sorry if it seemed like I gave you a hard time. I assure you that wasn't my intention. I'm really glad Visa's done well for you guys. I had considered buying it, but couldn't articulate the fundamentals myself so... I didn't. Anyways, let's virtually shake hands on it? We're all Cool & the Gang here.

[disneysteve]

But even in speculating, there is a good way and a bad way of going about it

Personally, I'll be doing some speculating at the blackjack table at Caesar's tomorrow.

[tripods68]

No problem BA--I'll invite you for some beers if I could

I for one believe VISA has great fundamentals and I have some very compelling reasoning if you look at this stock beyond the "hype". VISA has No debt, except litigation settlement cost, and collect fees on transaction costs. So long everyone uses VISA to swipe their cards in making purchases, they are making money no matter what the condition of the economy. When you all SWIPE your VISA card (debit, or credit card) you all contributing to the success of company. Why the big run? Many feels it's undervalued and lots of speculation what ought to be the price target. Some analysts views VISA is worth at least $100 per share. It's simply trying to get there and perhaps it might capitulate back down. That's what trailing stops is there for. Most of VISAs revenues on 1st quarter came outside the US. They had 1 trillion transactions in the first quarter and about 400 million originated in the US and has a market share around 65%. I could be wrong on this analysis, but you asked earlier what we know about this stock that you don't. I just told you.

CHEERS!!!

[Broken Arrow]

Thank you tripod. Now THAT's the kind of answer I am looking for! I do have a few questions though... and perhaps it will also shed some light as to why I didn't get into the buy....

Visa uses an open-ended royalty system that Mastercard also uses, Discover has at a discount, and American Express is opening up with soon. What competitive advantage does Visa bring with theirs that others do not?

The IPO was only a month ago. How did you conclude that it was undervalued, despite all the hype?

Again, what is the forward fundamental that suggests that Visa will sustain this level?

Finally, would you recommend a buy NOW? Because what happened has already happened right? And I can't go back in time to buy it at the IPO price.... So, the only thing I can consider is whether to buy it now or not.

I hope this doesn't seem to come across as personal attack either. I've got money in reserve for a buy if this is still a good opportunity. Again, I'm really happy for you guys that Visa is panning out so well. I agree Visa is indeed a good company, but is it a good investment now?

[tripods68]

The edge for VISA is they don't carry credit liability like AMEX. They are simply a transaction company; therefore they carry no default risk. Like AMEX which I do carry BTW, they are subject to high default risk in bad economy. In addition, AMEX is already a matured company, which means the only way to grow earnings is to lower default risk, or expand their products which also carry risk at the expense of their revenues. On the other hand, VISA employ less than 6000 people worlwide and they have so much growth potential which carry high valuations (price per share) in the next 5 or 10 years. As far the stock being undervalued, this came from analysts I read about prior to IPO. Much like their counterpart MasterCard (MA) which has a market share around 40% their stock price is at $291 as we speak since going public in 2006. Go figure!

As far the stock outlook, I'm looking to buy more shares in the next several months. My goal is to get 100 shares. So far I've accummulated 40 shares @ 59. I do recommend buying this stock on the dip which is my strategy when i want to accummulate stocks over time to get to my goal. However, I'm long on this stock so you need to adjust your expectation depending your risk tolerance.

[Broken Arrow]

Ah, a prompt and excellent response. Thank you. Now... hmm... this is the part where I think I may be running the risk of coming across as a poo-poo head.

But I do feel the need to point out that Visa does indeed offer revolving debt products, and without looking into their numbers, I currently can't imagine their default risks any higher or lower than Mastercard.

However, I do have to disagree about American Express being a higher default risk. American Express' core business has always been the charge cards, and it's typically held by clientele that are a lot more financially stable. The credit offerings are a more recent development and their royalty system is still closed last time I looked.

That said, I do agree about much of what you said, especially going long and buying on dips. I think I'll maintain a "wait and see" approach on V, but I think I've rained enough on people's parade on this one. Here's to hoping that it continues to prosper for you guys.

[tripods68]

VISA offers alternative payment choice, but don't offer debt to no one. That link you referred are various payment options VISA offers. Debt are carried by Bank like BOFA, Wells Fargo, CITIGROUP, etc...that offers VISA logo on their cards. VISA does not extend credit to anyone. Try again!


Anyway, Here's one article i found, link is below:


MasterCard was offered at $39 a share, less than its proposed target price, in May 2006. But shares closed Monday at $198.45. In each of its quarterly reports so far, the company easily topped Wall Street estimates of its earnings per share.

In January, Craig Maurer, a top-rated analyst on MasterCard who rates the stock "buy," renewed his price target for the shares at $260 after seeing the company's fourth-quarter results.

"There are many who missed out on the MasterCard offering," said Menlow.

Like MasterCard, Visa is not a lender but a processor of card-based consumer purchases, which dominate retailing. Its revenue comes from fees paid by merchants who offer the card.

By contrast, credit card issuers that extend credit to customers, including American Express, Capital One Financial and Riverwoods-based Discover Financial Services, saw their share prices swoon late last year along with the downturn in the economy.

Visa charges ahead with IPO plan -- -- chicagotribune.com

[hacik.istanbul@yahoo.ca]

Investing and Banking

Regular trading in stocks is not suited to the faint of heart investor. Unless you have a real understanding of the industry and the growth potential of the company you are investing in, I recommend taking advice from a professional who understands your specific needs and risk tolerance. Please don't be misled by all the spectacular advertising about how you can strike it rich with little or not money. Proper investing takes time, patience and a clear understanding of your goals. Good Luck ! Hacik Istanbul

[Broken Arrow]

Hmm! Thank you for the clarifications! I will definitely keep an eye on this as a potential future buy then.

[schrutzen]

I started out two three years ago when the market was booming..
i think i just got lucky cos if i started now i could have lost lots of money since the economy is in a bad swing.