books for n00bs on investing in stocks

[Confused]

Stop Working: Here’s How You Can! Derek Foster.

this might be a good read for you, guy retired at 34 working an average job with average pay and talks about his investment strat which might not be for someone a little older but is still interesting.

what he didn't specify was that he participated in speculation to fund his dividend purchases and dumped all his stock that were considered 'recession proof' right at the beginning of the March recovery

 

[Confused]

i'd suggest fool.com, investopedia.com or the countless Canadian personal finance blogs such as the milliondollarjourney.com for the basics

 

[derek]

i read a few of deep's recs last year (on his rec). a very good base for getting some knowledge i was lacking.

i use a discount broker (TD Waterhouse, and as noted the seminars have been very helpful), and use a planner as well (fps aren't just about investing, they can look at your whole financial picture and provide insite on how to better manage your money you might not see yourself). i also have products with other institutions (decent spread, don't keep eggs in one basket sort of thing) the majority of my holdings are with ETFs that track the market like an index fund. i have a small percentage reserved for more risky products. my dad's all over the bull / bear ETF products, but he's retired and has the time to watch his finances more frequently & closely (and not stupid, he has a good spread, but can afford to a little more risk than me). the bull / bear ETFs are not for the faint of heart, or those without the acumen to understand what's going on in the market.

there is one book that deals with canadian products only i found useful, i'll have to dig it up.

but, yeah, i'm just a neophyte in the world of investing. and to think i was a junior acheiver

 

[Hi i'm God]

Here's 3 books written by my father in law.

Investors Source

 

[diablo]

wrong, thousands of retires and fixed income folks with limited or at least modest means who were invested in what they believed were conservative bond-like or annuity funds were duped or mislead and lost considerable amounts of money.

most folks invested in the general stock market suffered significant losses in 2008, w/ the TSX at 14000 in the start of 2008 and about 11700 now after a solid recovery in 2009, even a conservative and passive investor is down a few years on, and with the sluggish economy might take a few more years to catch up. so "ordinary people" as you state that were invested prior to 2009 suffered too, especially considering how many people in the baby boom generation close to retirement that can afford to take a large loss which they beleived they were protected from by investing in what many "financial advisors" told them were conservative stocks like large cap's, financials and dividend paying utilities.

*Everyone* took a hit to their portfolio, not just poor old folks on fixed incomes. If someone wants an absolute guarantee that their holdings will never go down, they should buy an explicitly guaranteed product (e.g. GIC, government bond or seg fund). I'm sure that some people were poorly advised, but:

a) having/using an advisor doesn't absolve you from having the faintest idea about what goes on in your account (unless it's discretionary managed, in which case you should *still* have an idea of what you're invested in)
b) like you mention further along, people often ignore the possible downsides when they have dollar signs in their eyes. People are happy to ride along during the good times, and then blame everyone in sight except themselves when things go bad. People often think that ignoring small possibilities makes them disappear altogether.

true in part, banks will sell proprietary products but increasingly they can invest you in ETF's and or specific stocks all depending on your situation. transaction fee's to purchase a mutual fund might be waived but embedded in the fund itself are MER's that are for all intents and purposes a fee, and they are generally high (2.5%) for canadian funds which we have discussed before share a poor track record of being unable to beat their parent index year after year the past while.

Mutual funds charge a management fee, yes. A broker will also charge you a fee to trade, rebalance or give advice (if that's their model). Online brokerages cut out the charge for advice, but still charge you monthly/trade fees. You won't get everything for nothing. Also, a 2.5% mutual fund MER would include a trailer to your broker/advisor, which compensates him for the advice relating to the fund purchase and the ongoing service that you receive.

we know that by their record and in general year over year financial planners and their coutner parts with large banks have been unable to obtain better results than passive investing by simply purchasing the index's (ie: investing in the SPY vs. a SPY like mutual fund)

the issue isnt so much about the quality and substance of one's qualifications as much as dispelling the myth that a person with several years worth of experience selling mutual funds and rehashing the same old concepts of porfolio balancing is somehow going to earn you more money than simply putting it all in bonds, GIC's or a savings account the way alot of people used to do decades ago. depending on when and how much you began to invest, and in what classes its difficult to really give direct proof that the time and $$ spent purcahsing stocks or mutual funds was beneficial over more conservative and passive approaches.

but i can appreciate the need for people you can trust to guide you if the whole subject is new to you. some people simply arent interested in learning either so there will always be a need for banks and brokerages to provide guidance, my issue is that false hype that has been built up around advisors and the kinds of false promises or false perceptions people seem to have about them.

having someone you can trust is to me the biggest issue because at least they can convey to you the relative risks of what they are doing or about to, and how much risk tehy are willing to take on. though in the retail advisor's defense i suspect people dont really hear or want to hear what bank advisors are telling them when they discuss risk and potential draw downs. so the need for someone you trust is all the more critical as these types of cautions are more likley to stick, so in the event of a 2008 style collapse people dont get blindsided under the false impression that conservative blue chips simply dont or cant fall %50 in a market panic....

The biggest misconception that people have is that financial planning isn't just about investing. It encompasses investing, tax planning, debt management, insurance, estate planning and any other number of factors. Your investments relate to many other aspects of your life, and this is why people are increasingly opting for a "big picture" approach and using Financial Planners. Some guy selling a book based on a computer-modelled stock analysis stategy isn't taking into account your personal circumstances, which is the starting point for any type of solid financial plan or investment strategy.

People huff and puff about outrageous management fees, but how much time and effort will you spend monitoring your own investments (especially if you're a relative newbie)?

Investing, like any other field, is full of people who want to validate their own choices by convincing others of the same. Just as you have die-hard GM and Honda buyers, you will have people that will swear up and down that ETFs or GICs are the way to go ALL THE TIME. The simple fact is that what's best for you all depends on:

a) your current savings
b) your needs/goals
c) your need for security

Anyone that tells you that "Product X is right/wrong for everyone" or "Product X is universally better/worse than product Y" is blowing smoke up your ass. The recent mutual fund backlash is fuelled by the fact that most people took a hit on their portfolios in 2008, and mutual funds are the most popular type of equity investment. They didn't suddenly become terrible products overnight.

 

[Hi i'm God]

Not to mention you still held the same amount of assets it's only the value that fell assuming investors didn't panic and sell every thing will see their investments back where they were pretty soon.

 

[air-bag]

Online brokerages cut out the charge for advice, but still charge you monthly/trade fees. You won't get everything for nothing.

Lowest trading fees are at Questrade: 1c / share, min $4.95, max $9.95

 

[Deus]

Here are my thoughts about investment books.

Every book will claim that its contents will make you a millionaire. Or at least that the trading strategy it advocates is the best one. It is hard to not buy what they're saying because they are all written buy financially successful people who have used that particular strategy to get rich. However, there are so many books and so many types of investing that it's impossible to follow one trading strategy.

Although it is tempting to start investing according to the first book you read, you must really read several books to get what trading is about, and to be able to pick the trading style that you want to follow. One book will advocate day trading, the other short term or long term investing. One will also teach you to trade on fundamentals such as company assets and earning while the other will teach you that you must look at stock charts to make your buys and sells.

From my readings and experiments you can be equally successful at any of the strategies you just need to pick one and master it. Which one you pick will depend on how much time you have available to dedicate to your investments and how much money you have to invest.

My advice is to pick-up a number of books and read them all and choose one which you best think will fit with what you have in mind. Later you can get more books on the particular trading strategy you have chosen.

 

[KillaLadY]

Booooooooooooooooooyaaaaah!

 

[jazzsax]

Lowest trading fees are at Questrade: 1c / share, min $4.95, max $9.95

Unless you trade high volume low value shares, in which case you are better of with someone like TD Waterhouse.

Questrade passes on the miscellaneous fees (which can be 0.0037 cents per share and add up if you trade 10K lots). TD and others do their fees "all in" so a high share trader would be horrible with Questrade.

Make sure you always look at whether the broker "passes on" the exchange fees or not. Questrade does, the major bank discount brokers don't.

(I have accounts with both, they each have pros and cons)

 

[Mrs. Pink]

TD Waterhouse offers some great beginner seminars. Check with your local branch. Good starting point if you are interested in learning the interface.

 

[jus me]

I'm in the same boat...and am so confused. I usually do the RRSP, GIC, TFSA thing, but want to see more return this year. I'm not a risky person at all.

 

[Mrs. Pink]

You may want to consider some conversative mutual funds as your first introduction to markets then. There is always risk associated with this kind of investing. If you are completely opposed to risk, stick with GIC's. When i'm discussing with clients potential investments, i have a graph that i use that shows potential gains and potential losses....i always cover the gains and then ask them what they would be comfortable with losing. Great wage to gage risk.

 

[diablo]

want to see more return this year. I'm not a risky person at all.

^^ Financial paradox #1

This is why people need a plan that clarifies their goals (among other things). Apart from the natural desire to have more money, why do you feel that you need a higher return? Unless there is a concrete financial goal, someone who is "not a risky person at all" will lose a lot of sleep by chasing high returns just for the hell of it.

 

[judge wopner]

i have a graph that i use that shows potential gains and potential losses....i always cover the gains and then ask them what they would be comfortable with losing. Great wage to gage risk.

a good 10 year chart that sums up my feeling about traditional approaches to investing that tend to be overweight in large capped/blue chip stocks and underweight bonds and precious metals. at least from an american perspective, do you think investment dealers selling people diverse selections of mutual funds are showing this kind of chart to the average client?

 

[Teflon]

**

 

[jus me]

You may want to consider some conversative mutual funds as your first introduction to markets then. There is always risk associated with this kind of investing. If you are completely opposed to risk, stick with GIC's. When i'm discussing with clients potential investments, i have a graph that i use that shows potential gains and potential losses....i always cover the gains and then ask them what they would be comfortable with losing. Great wage to gage risk.

.

Thanks for the direction. I've done this with choosing the mutual funds for my company's RRSP program (matching contribution). It was this quiz I filled out and I seem to fit the profile of someone who is willing to take on some risk, but not much. Ok, I'll take the non-risky statement back. I'm a calculated risk taker.

And Diablo, my goal is a hefty down-payment and then some for real estate within the couple of years!

 

[atbell]

being a cynic rocks!

 

[Sleepy Giant]

Bogle - The Little Red Book Of Common Sense Investing


Bernstein - The Four Pillars of Investing, The Intelligent Asset Allocator

I have read those too and A Random Walk Down Wall Street is in the mail.

Any other suggestions?

 

[CUZO]

Just PM Skipper lol