Basics of stock trading 101: Stock traders and Mono to me!

[Tamas]

Sound advice here. You should not shy away from more specialized ETFs, though. And if you are an adventorous gambler like me, be careful. And only do short-term trading if you really, really enjoy the thought of doing it. Here is why:

For example, I have been monitoring commodity stuff plus some stucks for 2.5 weeks now, and it's been quite a roller coaster. Just today I decided to battle in the trench warfare of today's pre-news undecided enviroment, and not only I mis-calculated the hopeful small-scale correct move twice in oil and gold in one day, when the big move happened, I was not in the market. 
But the two days before that were wonderful, too bad this one extraordinarly bad one took them all away. And I am sure today's fall will be bulled back, I'll just have to keep an eye out for that.

So, in 2.5 weeks of the above rollercoaster ride, I stand at having a profit of about 5% of the cash which I have on my account but did not invest to serve as a hinterland for my margin trading. That's actually sort of nice of course, except that the other half of my savings is also standng on about 5%, and that was achieved by buying an India ETF and forgetting about it
And needless to say, even if I would spend a month with this and would close it with 5% profits, that would be a quite decent average, and it would be more than enough to keep me going. But there is no point in doing it if you do not like the info-mining, chart-browsing, hard decisions, stress that goes with it.

[Malthus]

You are Canadian, right?

If so, you can invest up to $5000 per year tax-free in a TFSA account.

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/menu-eng.html

Also, depending on what your income is and your plans are, you can save taxes by investing in an RRSP. I do that, because in my tax bracket, it makes sense (you pay taxes based on your income when you withdraw it).

Yes, I am Canadian. *coughs* 

I already invest in a RRSP plan via Royal Bank through my job, around 1400$ per annum matched by my company (So 2800$ per annum in RRSP).

I'll definitely go for CELI/TSFA as a tax shield. Great for accumulating capital, I must say.  However, I have seen that many banks put adninistration fees that basically eats up any tax savings I might earn for its use.

Yup, it's a delightful perk tax-wise, isn't it?

I'm maxed out - I put $5,000 in last year and $5,000 in this year, recently.

I put it in an ING mutual fund, because it was easy to do on-line and the fees are low. As of today, it is worth $11,045.76.

I'm reasonably happy with ING. Though I'm totally open to other recommendations. I use TD for my chequing and credit card, but not for investing - fees seemed hefty to me.

[Malthus]

Sound advice here. You should not shy away from more specialized ETFs, though. And if you are an adventorous gambler like me, be careful. And only do short-term trading if you really, really enjoy the thought of doing it. Here is why:

For example, I have been monitoring commodity stuff plus some stucks for 2.5 weeks now, and it's been quite a roller coaster. Just today I decided to battle in the trench warfare of today's pre-news undecided enviroment, and not only I mis-calculated the hopeful small-scale correct move twice in oil and gold in one day, when the big move happened, I was not in the market. 
But the two days before that were wonderful, too bad this one extraordinarly bad one took them all away. And I am sure today's fall will be bulled back, I'll just have to keep an eye out for that.

So, in 2.5 weeks of the above rollercoaster ride, I stand at having a profit of about 5% of the cash which I have on my account but did not invest to serve as a hinterland for my margin trading. That's actually sort of nice of course, except that the other half of my savings is also standng on about 5%, and that was achieved by buying an India ETF and forgetting about it
And needless to say, even if I would spend a month with this and would close it with 5% profits, that would be a quite decent average, and it would be more than enough to keep me going. But there is no point in doing it if you do not like the info-mining, chart-browsing, hard decisions, stress that goes with it.

Personally, that kind of play isn't for me.

I'm more of a "gradual accumulation over time" kinda person. I put stuff away into investments I don't have to watch all the time.

[Tamas]

Yeah I can perfectly understand that. I may very well get bored/overstressed with it in time.
It's just that right now I have the time to do it, the interest, and altough losing a bigger amount of money would certainly hurt very much, it would not "knock me out" so I feel the timing is right to try my hands at this.

[MadImmortalMan]

Yeah I can perfectly understand that. I may very well get bored/overstressed with it in time.
It's just that right now I have the time to do it, the interest, and altough losing a bigger amount of money would certainly hurt very much, it would not "knock me out" so I feel the timing is right to try my hands at this.

I'm in between the two of you. I have my main retirement savings, which is the vast majority of my investment money, in the 401k, IRA, etc and not actively traded by me. Then I have a much smaller lump of cash that I don't mind losing and I use that for doing trading on my own. It's more of a hobby or entertainment thing. Incidentally, my "fun" account has done WAY better than the "safe" stuff over the period of time I've been doing it.

[citizen k]

Incidentally, my "fun" account has done WAY better than the "safe" stuff over the period of time I've been doing it.

That's because you pay closer attention to it, i.e. "it's fun". I'm not a "buy and hold/forget about it" type investor. I'm in it for capital creation not capital preservation.

[Malthus]

Incidentally, my "fun" account has done WAY better than the "safe" stuff over the period of time I've been doing it.

That's because you pay closer attention to it, i.e. "it's fun". I'm not a "buy and hold/forget about it" type investor. I'm in it for capital creation not capital preservation.

It is, I assume, due also to a good heaping of luck.

Many attempt to do better than the market generally; few succeed, over the long haul. "Paying attention" only marginally increases most folk's odds. Often it has the reverse effect, as players are drawn in by a buying rush when times are good and panic sell when times are bad, leading to a "buy high and sell low" strategy that so often seems to be the result of attempting to time the market.

Not saying expertise makes no difference - my wife worked in the industry and nicely saved our collective bacon this last recessionary go-around.

But generally, excessive fiddling with accounts is a money-losing strategy for most; for one, every trade has a transaction cost that adds up; for another, there is the buy-high-sell-low effect. 

[Iormlund]

I've also got significant savings that are not producing anything at the moment (and more to come as I finish paying my car). Oh, and absolutely no idea about the markets other than my Econ 101 class at Engineering School.

ETFs sound like something I should get into though. Which should I buy and which are to be avoided?

[citizen k]

Incidentally, my "fun" account has done WAY better than the "safe" stuff over the period of time I've been doing it.

That's because you pay closer attention to it, i.e. "it's fun". I'm not a "buy and hold/forget about it" type investor. I'm in it for capital creation not capital preservation.

It is, I assume, due also to a good heaping of luck.

I wouldn't assume that at all. MiM is a smart fellow. Now if it was Jaron's portfolio, I would attribute it to "a good heaping of luck". 

[Drakken]

I'm reasonably happy with ING. Though I'm totally open to other recommendations. I use TD for my chequing and credit card, but not for investing - fees seemed hefty to me.

But how do you actually make it?

Sign with ING, accumulate the money in one of their monthly interest account until you have the money, transfer the capital in a TSFA linked to a investment plan of your choice, and voilà?

[Malthus]

I wouldn't assume that at all. MiM is a smart fellow. Now if it was Jaron's portfolio, I would attribute it to "a good heaping of luck". 

It's not a commentary on MiM's smarts; it's a commentary on the nature of the market. Plenty os super-bright folks who make it their business to live and breathe the markets go bust taking on lots of risk.

No matter how smart or skilled, risk is risk.

[Malthus]

I'm reasonably happy with ING. Though I'm totally open to other recommendations. I use TD for my chequing and credit card, but not for investing - fees seemed hefty to me.

But how do you actually make it?

Sign with ING, accumulate the money in one of their monthly interest account until you have the money, transfer the capital in a TSFA linked to a investment plan of your choice, and voilà?

At ING you are limited to the products they happen to sell; it is pretty easy, you set up an account with them (you have to send 'em a cheque and sign some stuff), you can then transfer cash into a savings account with them or direct from your bank, and put cash into TSFA accounts - either savings accounts, GICs, or their mutual funds.

I presume, but do not know, that you can simply declare any account that meets the federal criteria a TSFA account, and put what you like (within the criteria) in the account. I'm just lazy, so I just buy the ING products. I dunno if they are the *best* products or not; they looked okay, but I don't have any real way of knowing other than seeing their simplified prospectus and looking under 'fees'. 

Here's the link:

http://www.ingdirect.ca/en/save-invest/taxfreesavingsaccounts/index.html

[Admiral Yi]

I've also got significant savings that are not producing anything at the moment (and more to come as I finish paying my car). Oh, and absolutely no idea about the markets other than my Econ 101 class at Engineering School.

ETFs sound like something I should get into though. Which should I buy and which are to be avoided?

What you might want to do first is see what brokerages operate in Spain.  Then see which markets those brokerages allow you to trade in, and the fees.  That narrows down your choices somewhat.

[Monoriu]

Well, for a long while I've been thinking about gathering some capital to buy stocks and trade on the side, but I do not know where to start (or how much I should start with). Everyone I have been consulting is rather risk-averse (diversify, buy blue chips and banks, etc.), but I still have some doubts. So:

A) What would be a good starting capital for a private stock trading venture out of my own pockets? I planned around 3,000$ would be a good start (Canadian, but still).

B) Even with a small amount, is it still better to diversify my stock wallet or should I hit it big first by speculating on a few eggs in my basket and diversify later as my capital grows?

C) What about penny stocks? Buying 1c stocks and reselling it when it hits 2c or 3c seems easy, although risky if the said stock is to disappear after a short while. Thoughts?

And yes, I am a newb in this, so KISS. I want to learn, but I need to grasp the basics first. 

A) Minimum investment amounts are usually dictated by brokerages/banks/mutual funds due to admin costs of serving you. Or lot sizes of stocks. Other than that, there really is no lower limit.

B) The real question is how much risk you are willing to take, and what do you want to accomplish with the investment.  If you want to gamble, then gamble on one or two stocks.  If you want to be stable, then diversify. 

C) Just remember, it is equally easy for a 4c stock to become 1c in a few hours 

[Monoriu]

Some random thoughts on investing.

1. Do everything online.
2. Start reading the news daily.
3. Live below your means. 
4. Remember: high risk, high return; low risk, low return. 
5. Anyone who tells you otherwise is lying.
6. Don't lend money to friends and relatives, or in fact any individual.
7. Your investment strategy should help you achieve your overall objectives in life.
8. Always keep at least 3 months of expenses in cash, preferrably more.
9. Don't start business partnerships with anyone and expect to make money by doing nothing except contributing capital. 
10. No one can beat the market in the long-run.
11. Diversification is an effective means to reduce risk.
12. Fees and expenses matter hugely.
13. Never buy life insurance.
14. All get-rich-quick schemes are scams, and there is no exception to this.
15. A camel can beat a financial professional in picking stocks.
16. Default risk is real.
17. No one is interested in your financial well-being except yourself.
18. Never grant discretionary mandates to anyone, especially your spouse.
19. Financial professionals always have their own interests in mind, not yours.
20. Long-term investment is no gurantee of success.
21. Never invest on margin.
22. Pay down debt before investing.
23. Avoid trading odd lots.
24. Automation is your friend - set up your accounts so that you pay your bills automatically, and stash your money away automatically.
25. Figure out what your risk tolerance level is, and invest accordingly.
26. Passive investing beats active investing most of the time.
27. Allocation of asset classes matter hugely.
28. Stock dividends matter - the value of a stock is the discounted value of its future dividend stream.
29. Take advantage of all tax incentive schemes.
30. Never listen to financial advice from anyone.  Including me.