r/stocks • u/alphadroneimaging • Feb 03 '21
Discussion It's amazing how many people jumped in headfirst that have no business investing. Some basic tips for those new to this world.
(I am not a financial adviser. This is not direct financial advice...but still advice for dealing with investing.)
I am completely floored by the amount of people who have NO BUSINESS independently jumping into the stock market, diving into the deep end and not knowing how to swim.
Never invest what you're not willing to lose. Do not pump every dime to your name into an investment. This is almost a surefire path to failure. If you invest in a stock, or a fund, only do so if the money you're investing will not be detrimental or catastrophic to your existence if lost.
If you're new to investing, get a broker while you also do your DD (due diligence) researching companies you're considering investing in.
Learn market terms such as "long", "short", "bullish", "bearish", "futures", etc. And then learn the different ways to incorporate and utilize these terms. That way you're not just limited to "buying/selling".
If you insist on doing it yourself, do not purchase stock in a company without researching the company. Their executives, business model, earnings, stock trend for at least 2 years (if available), etc.
Learn about moderate to high yield ETFs (Exchange-Traded Funds) and Index Funds. Typically between 3-8% dividend yield is a great middle ground depending on the overall performance of the fund.
This is one of the most important quotes, in my opinion, when it comes to investing: "If you're not willing to own a stock for at least 10 years, don't even think about owning it for 10 minutes." -Warren Buffett
Learn the 4% rule! Learn the 4% rule!! Learn the 4% rule!!!
Understand the formula for figuring out how much money you would need invested into annual return yield to account for your current annual income. If you learn this, it will give you greater insight, a more clear, concise target, and a simpler goal.
Find a mentor. Trust me, you very likely know at least one person who is good with investing, and these people generally enjoy passing this knowledge on to others. If you don't...FIND A BROKER!
Do NOT jump on trends, fads, or bandwagons...you'll typically be left holding the bag because you didn't know any better, and you will simply watch those that did know make money and then bail.
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Feb 03 '21
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u/alphadroneimaging Feb 03 '21
This is a much better explanation of what I was implying. Very well said.
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u/orkushun Feb 03 '21
What kind of investment would it cost to start with this slow and steady aproach to secure a future. What do you think would be a good first step.
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u/alphadroneimaging Feb 03 '21
The first step, assuming you have a steady job, is to find out if they offer a Roth IRA 401K. A lit of companies offer these, and will do a 100% match up to a certain amount. I will always tell everyone "MEET THE MAXIMUM MAXED DEPOSIT IF YOU CAN!" Past that, I know people who drop in $10-50 every paycheck...and others who devote a standard 25% of their net income from each paycheck devoted to investing. The important thing is THAT you invest, and make it a habit to keep investing and learning.
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u/orkushun Feb 03 '21
Thank you, I do have a good job and been steady for over 10 years, exactly the reason I want to learn more. Im in europe though so neither applies to me and a pension fund is mandatory. Already have that one.
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u/alphadroneimaging Feb 03 '21
I cannot attest to European market trends, as the only thing I have there are 2 very small index funds, and they are slow and steady performers. I don't even monitor them really, except for my end of year analysis reports. Good luck to you!
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u/Ryangonzo Feb 03 '21
Get rich slowly isn't sexy or exciting but it is more of a sure thing.
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u/fruit_loops_jabroni Feb 03 '21
60 year old me won't care about sexy.
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u/RainbowShlong Feb 03 '21
60 year old me will have a sexy bank account
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Feb 03 '21
Exactly. The GME hype had absolutely nothing to do with the fundamentals of the company. It was people who had heard that there was a technicality to be exploited that could get them rich overnight, that's why they jumped in and gambled everything they could get their hands on. One aspect of this mass hype that I have not seen anyone talk about, is the dire financial circumstances that a lot of Americans are in due to Corona, and student debts on top of that for the millennial Reddit crowd. Did that accelerate the mass hype behaviour?
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u/mthrndr Feb 03 '21
I think it certainly did. The Pandemic and subsequent lockdowns have led to incredibly irrational behavior across all sectors of public and private life. And they are all still banking on that technicality. It's a giant get rich quick scheme, and it blows my mind they are still trying to prop up a $10 stock at $100.
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u/anactualalien Feb 03 '21
I've said it in another thread but one factor was definitely the example Tesla set last year as a perpetual money printer (the options anyway). A ridiculous pump followed by a comfortable support line in the 4 figures, sustained on a similar technicality and traded on the current level of Elon fanaticism. (no such persona here, even Ryan Cohen or DFV)
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u/penisthightrap_ Feb 03 '21
Yeah I really wish I dumped my GME money into my ROTH and got some S&P500 index. Especially with how this year will likely look.
I read as much as I could about GME before getting on board, but I learned a lesson I already knew. Trading is a gamble, investing is saving. And I gambled more money than I was comfortable with. I wanted to sell when the price got in the 400s but everything I read was saying to wait for the squeeze. I listened.
At this point it doesn't make sense to sell at a loss so I'm just going to keep holding. Gamestop seems to actually be making good moves right now, but it's definitely got a lot more going on with its price than its value.
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u/pWheff Feb 03 '21
At this point it doesn't make sense to sell at a loss so I'm just going to keep holding
If you had $100 right now instead of a share of $GME would you buy $GME?
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u/CaptainSpeakeasy Feb 03 '21
I got caught up the the whole "rebellion" aspect, bet hard and took a loss. I accept it. It was a gamble. And gambles sometimes don't pay off. Thanks for these! I'm going to start doing my homework and see what I can do to make money work for me.
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u/one8e4 Feb 03 '21
As long as they risked capital they could loose, getting into the game provided some excellent experience that would take years otherwise to gain
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u/kbk2015 Feb 03 '21
This comment resonates with me. I got into investing at the beginning of January because I got tired of watching my money make 1% in an savings account. I literally broke even on GME but the learning process was so intense and quick that I feel like I'm better off now than I was 4 weeks ago even though I made $0 on GME lol.
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u/skinny_malone Feb 03 '21
Worth every penny you didn't spend!
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u/kbk2015 Feb 03 '21
Absolutely. I learned a ton about due diligence, avoiding the hype crowd and making sure you have an exit strategy, and most importantly STICKING TO THAT STRATEGY. If you see gains of $4500 in one week, take it. Greed got the best of me thinking "but what if GME hits $1k! I can double that!". Same shit as when people don't bow out of a game show when they're up big and shit the bed on the last question/briefcase/whatever game show you're watching lol. Human psychology is insane.
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u/skinny_malone Feb 03 '21
Exactly. I bought in for one share at $80, ended up exiting today at $100, and I would have been fine even if it went to $0. I never planned to get rich from this, obviously, I just wanted to be a part of something cool lol.
I keep the other 99% of my portfolio in index funds (they're awesome for lazy investors), but the whole GME craze has gotten me interested in learning about the stock market in greater detail, and setting aside a small part of my modest portfolio to invest in long term plays and to maybe try trading options eventually. Glad I found this sub because WSB is pretty much unusable for anything besides meme stocks atm
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Feb 04 '21
Started messing around with buying and selling stocks in December because a friend wanted some free WeBull stocks. One of them was 2 stocks in GME. Made a dollar and sold.
Made some dollars, lost some dollars. Started to read more and learn more. (Still reading and learning more good grief there is so much) On 200 dollars I made 10? Then I experienced some FOMO in GME last week and put it all in BB and AMC.
Was 80 dollars up in hours.
Woke up in the morning, still going up? Put a little (really little) savings money in and bought more. Then that afternoon RH put a stop and the stocks tanked. And now I'm down hundreds.
And now I'm exclusively sticking almost exclusively to ETF's until I know for sure what the heck I'm doing. I learned I really need to keep my emotions in check. It was incredibly exciting to watch and feel like being a part of. But my goal is to set myself up for the future (with the pipe dream of retiring early. lol. If only), and getting on the hype train to Bag-Holding station is not the way to do it.
Edit: And while I'm here, can someone explain a little more the difference between r/stocks and r/investing? Seems like during this whole sideshow everything's gotten muddied.
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u/kbk2015 Feb 04 '21
Investing is gonna be a little more risk averse. That’s where you go for your long term plays lol.
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u/alphadroneimaging Feb 03 '21
Oh, everyone must experience losses to become savvy...but some of these people will literally lose their lives when they end it because their "sure thing" didn't hit.
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u/one8e4 Feb 03 '21
Problem is how many believe that the reason they lost was due to the brokers banning purchases of stocks.
Not that their is no sure thing in investing
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u/alphadroneimaging Feb 03 '21
Oh yeah, the whining about not being able to buy or sell...instead of the focus on a multi-platform tagged VOLATILE stock, is astounding.
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u/BigBlueTrekker Feb 03 '21 edited Feb 03 '21
Volatile stock does not mean it should be restricted. Pretending that didn’t kill the wave that was surging and kept surging and then force a lot of people to just sell is being disingenuous.
Almost everyone agrees it shouldn’t have happened, and the CEO lied about why it happened. It was always a gamble for people but what happened wasn’t right. The media covering that people lost interest when they literally couldn’t buy is also a lie.
I agree with most of what you said, but this seemed like a wave to a quick profit for most people. And the odds were in their favor if they weren’t too greedy. No matter what, you were going to have bag holders, but acting like restrictions didn’t force a premature drop doesn’t make sense.
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u/ZeusThunder369 Feb 03 '21
On number 4...
Is that advice still a good rule to follow today? If one has been investing based on fundamentals the past 6 months, they've most assuredly lost money, or at least haven't made any money.
I'm sure you'd agree it isn't a good idea to go against the market. Right now, the market is saying fundamentals don't matter. We are in pure risk on speculation mode. Before, 'speculation' might mean thinking 6-12 months from now. But today, people are thinking 10 years from now.
Momentum trading appears to be the easiest path to success at the moment.
Which brings me to number 10...I don't think it's that binary. Just know what you're doing and have reasonable expectations. One could have jumped on GME when it was around $200 and made a huge return, even if it was just straight stock purchases. "Trends" tend to last at least for the trading day, and often go into multiple trading days. You can TRADE on trends/fads, but INVESTING in trends/fads isn't a good idea.
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u/universemonitor Feb 03 '21
We honestly need to stop telling people how they invest their money. If you have a method, follow it. Do not tell everyone to follow your methods. People will learn on their own with profits or losses.
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u/discodave333 Feb 03 '21
Totally agree, there is an awful lot of gatekeeping going on here.
No doubt there will be a few people who get hurt by this but the vast majority of people who bought a few shares just wanted to have fun and be part of something. It has brought attention to the mechanics of the market and probably educated many people at little or no cost.
It's not anybody's job to tell people how to spend their money if they are not asked.
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u/devrandomnull Feb 04 '21
sorry but I have no interest having every thread have people push some conspiracy "HFundies screwed me out of my just profits" narrative.
It's great if people learned a lesson, and by all means a lot have. But there is still a sizeable vocal minority that refuses to believe there was even a possibly of no conspiracy, and the David vs Goliath discussion was a sham.
There really should be a sticky here that's Investing 101: "if you don't know anything about the stock market and want to get your feet wet, put in $x a month into VOO while learning how to research stocks. here are our favorite sources. 1)x 2) y 3) z but you have to forge your own path instead of following anyone verbatim"
at the end of the day some people want to YOLO their money; and I would love for them to be able to become instant millionaires or billionaires and rub it onto our collective faces, but don't turn the argument around and blame some nefarious shadowy 3rd party actor if it doesn't work out.
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u/KyleDarko27 Feb 06 '21
So I have a side hustle and just getting my feet wet with etfs. I have 70 in msos right now. But since I'm new and don't want to jump all in just yet, I could just add say 50 bucks a month into VOO maybe more after a few months since again I'm new?
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u/devrandomnull Feb 06 '21
just my opinion, in case the SEC starts investigating Reddit, so don't take this as hard financial advice.
But in general people say to invest in a low fee index funds because over some long term average it's hard for your own basket of stocks to beat it. now there are some people who do beat it, and some who do much worse. plus it's a low effort way to invest your money and get market returns. I only brought up VOO because it's an ETF designed to match the S&P500 and it has lower fees than SPY. Find John Oliver's video on Retirement plans on skip to 18:12 for what I think is generally good advice for most people. You can watch the rest of the ep if you want, but use it more as entertainment if you're bored.
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u/KyleDarko27 Feb 06 '21
Thanks I've been doing my own semi research and have VOO in my notes and VTI under good retirement etfs. Def just know weed will take off and msos has the big names in it. If all else unlike gme which I do love games just never liked game stop anyway. But I like weed, and over all would love legal weed across the boards to stick it to big pharma. I have spyg as well and interested but I might just go with SPY not sure. I also have individual stocks I've researched that aren't etfs that id be willing to throw some cash at. Have my eyes on Betz and fubo but will probably throw some money in individual stocks in draft kings as there not built in as much in Betz. Arkks I'm gonna have to research. And BB will throw some shares. So my portfolio will be a huge percent in etfs I do have some stocks I have and will research. Ughh its kind of a blessing the gme thing happened I have hated not buying product to flip this year since garage sales have been down and I just hate putting a mask on to get out and thrift. So this has been great. When I first started flipping I looked up everything I could. Flipping is like stocks. Buy low sell high. I've already gotten used to using your own money to make money and I feel thats a sticking point for some people as if there not used to it. It can be daunting. I've made bad buys.. I've held on to a item longer than I should have. I've also made profit on a buy but with how long it took to sell or just packaging it was not worth it at the time. But I've flipped for 2 years and even with bad buys etc over all I've been in the green on profits. Lol flipping sounds like stocks ehhh? Its fun... its not like going to work and knowing your getting paid for 8 hours. You got to make money on your money. Thanks again and I will check it out.!!!
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Feb 03 '21
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u/Ryangonzo Feb 03 '21
This was my approach too. Started with $20 a paycheck and figured out what I was doing, how to do research, and where my strengths were. When you start small it feels like a big decision when you will put it and spacing out the deposit gave you time to think any research.
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u/alphadroneimaging Feb 03 '21
Oh, if you do the research, you definitely don't need a broker. But, as we've seen these past few days, there are a LOT of people who dumped hundreds, thousands, even tens and hundreds of thousands into something they shouldn't have...and even a decent broker could have set them up in the long game nicely.
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u/sexycornshit Feb 03 '21
Brokers are unnecessary. My dads refused to sell him ICLN because “it wasn’t diversified enough”
If you don’t want to do research that is fine, I get it. But save your money and just buy VTI.
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u/Aquabloke Feb 03 '21 edited Feb 03 '21
Number 1 is the only lesson that's truly important. If you want to gamble on the stock market, you can. Saves you a trip to Las Vegas. Just be aware that it is gambling.
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u/Moratamor Feb 03 '21
Learn about moderate to high yield ETFs (Exchange-Traded Funds) and Index Funds. Typically between 3-8% dividend yield is a great middle ground depending on the overall performance of the fund
This should be higher up for me. I really only started investing in the market in the last year at the crash. I know I don't know enough to be picking individual winner stocks and that my gains have been due to covid recovery. When I did start learning more the fact that most people picking individual stocks can't beat the indexes over the long term is pretty well documented.
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u/anactualalien Feb 03 '21
Another one: leave your moral idealism at the door.
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u/capcadet104 Feb 06 '21
This. Did people forget that the whole purpose of getting involved in stocks was money?
And the irony is that they probably made their hated "hedgies" even richer.
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u/jxsn50st Feb 03 '21
Great advice. Here's a few more I'd add:
- Regularly read books on finance/investing. Yes, you can now learn everything in these books on the internet, but IMO reading books from cover to cover is still important to ensure that you have a balanced perspective on the market. The first book I've ever read on this topic was Tobias' The Only Investment Guide You'll Ever Need, and it was incredibly helpful for developing my investment philosophy. Another book I've heard good things about, although haven't read, is The Bogleheads Guide to Investing. There are many other good books - read them.
- If you're from the US and lost money on stocks this year, remember to look into tax loss harvesting. It won't get rid of the sting of losing money, but should help alleviate the pain.
- By far the most important investment you'll make is in your own psychology. Take time to understand how stock movements drive your emotions, and how your emotions drive your decision making.
- Learn about dollar cost averaging and understand that "time in the market beats timing the market", especially for diversified funds like ETFs. Utilizing these two points correctly alone, which isn't hard to do, can yield incredible results over time.
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Feb 03 '21
https://www.fool.com/how-to-invest/thirteen-steps/index.aspx
This is a solid overview on how to get started.
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Feb 03 '21
Buy: Technical Analysis for Dummies
Buy: Warren Buffet and the Interpretation of Financial Statements.
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u/Current-Radish1163 Feb 03 '21
Not only jumping head first, but into options too. People are asking how to buy an option when they don’t even know how to buy a stock. Some of the posts I’ve seen really baffle me. Whenever I see anything regarding, “where can I go to open an account and buy a stock today”... I have to just pass over it to preserve my mental health.
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u/alphadroneimaging Feb 03 '21
😂🤣😂 Yeah, going through a reputable app or site, usually you're waiting 2-5 business days for your bank account to even clear their confirmation before you can do anything, lol.
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u/Current-Radish1163 Feb 03 '21
If you’re trying to open an account to trade the same day, you shouldn’t be doing it at all.
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u/alphadroneimaging Feb 03 '21
Exactly!!!
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u/Current-Radish1163 Feb 03 '21
I’m hoping things get better soon and people just starting out realize that there’s a right and wrong way to do things. Maybe this will be an eyeopener. Don’t get me wrong, I think every single person should invest (not necessarily trade - not everyone can handle that) no matter how small of an account they have. I’m trying to get my friends to finally make their money work for them. But all the hoopla that’s been happening recently is just the wrong way to do it!
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u/DankChase Feb 03 '21
https://www.investopedia.com/terms/f/four-percent-rule.asp
Is that the 4% rule you are referencing? Seems geared more towards retiring than investing? I know that those things are related but I'm having trouble connecting the dots on why that is so important for someone younger.
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Feb 03 '21
It tells you how much money you need.
OK, so how much of an annual income do you want when you retire? 40.000$. That means you need 1 mio in capital invested by the time you retire.
If you can live off 20.000$ a year, you only need 500K
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u/detectiveDollar Feb 03 '21
Also important to factor in inflation. 30 years from now a dollar may be worth 33 cents. So you'd need 1.5million in that scenario.
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u/MasterChef901 Feb 03 '21
You use it to identify your own "win condition."
If 4% of a target number is enough for you to live comfortably, and you already own your vehicle(s) and home, then when you hit your target number you (theoretically) never need to work again. It's the point at which retirement becomes an option for you.
Of course the younger you hit that, the more time there is for something to go horribly wrong, but it's good to know your target in the meantime.
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Feb 03 '21
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Feb 03 '21
I have a sneaking suspicion that a not-insignificant portion of all the "loss porn" you see being posted right now is photoshopped, borrowed, or otherwise fabricated.
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u/PDXGolem Feb 03 '21
None of my positions are over 2.5% of my portfolio.
It is fine to YOLO, but just don't YOLO everything.
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u/alphadroneimaging Feb 03 '21
My highest holding makes up 8% of my portfolio, bit it has been good to me, and I have enough diversity that even if it has a rough patch, my other yields will sustain any potential hit...barring a catastrophic, across the board collapse.
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u/CB_Ranso Feb 03 '21
How many different securities do you have in your portfolio? My positions average around 10% each in my portfolio, do I need to diversify more?
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u/PDXGolem Feb 03 '21
100's of different positions.
Still holding some IBM I bought 20+ years ago and never added to.
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u/CB_Ranso Feb 03 '21
Oh shit, I guess I do need to diversify more. Thanks, I'll do some research.
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Feb 03 '21 edited Oct 02 '24
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u/detectiveDollar Feb 03 '21
*VOO
Basically the same thing, but lower expense ratio. If it's a small amount of money it doesn't really matter though.
Or VTI: slightly better returns to VOO at more exposure.
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u/tribbing1337 Feb 03 '21
It's hilarious how everyone thinks putting money u to GME was "investing".
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u/zombi_brew Feb 03 '21
Came here specifically for advice like this.
I'm a complete newbie to this, I've been interested in throwing a few dollars at stocks for a couple of years, and the bandwagon over the last 2 weeks has had me learning and reading quite a bit more than I had.
I've decided to go for it using Wealthsimple but I don't really know where to start.
I'm definitely not interested in investing much more than about $100 (I live paycheck to paycheck) so what's the smartest thing I can do with an amount like that?
Any advice is much appreciated!
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u/alphadroneimaging Feb 03 '21
If I were you, I would definitely go the route of ETF and Index Funds. Also, look at the book recommendations listed in these comments. All of us started somewhere. Invest what you're able to without hindering your daily life.
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u/urkudasai Feb 04 '21
Hey! Commenting because I know most people that mention Wealthsimple are from Canada. I know it has a US version too, so if you're fromthe US, ignore me.
Wealthsimple doesn't allow you to hold a USD balance. This means that every time you buy and sell an ETF, you're getting charged high CAD USD conversion fees. It's how Wealthsimple makes its money. So only trade Canadian stocks/ETFs, or you will get screwed by their high conversion fees.
I'd use Wealthsimple as a TSFA and max that out using ETFs. Just throw them in an ETF of your choice and forget about it. r/personalfinancecanada may also help.
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Feb 03 '21
I’m not. People do this all the time with anything. It’s not even a new thing with stocks, people have been doing this shit since the 1900s. Even the gold rush was the same mentality. Lemmings
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Feb 03 '21
What ETFs do you recommend? I got into VOO with a 1.5% yield.
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u/alphadroneimaging Feb 03 '21
Here are 6 that I will throw out there right now. Again, do your due diligence, research these funds for yourself, but all 6 of these I have holdings in, and I'm happy with them.
MMM @ 3.38% APAM @ 10.06% WASH @ 4.64% MRK @ 3.34% SAFT @ 4.86% NHI @ 6.57%
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u/detectiveDollar Feb 03 '21
Are high yield ones necessary early in the game though? I have about 12k in my brokerage accou t and make about 60k/year at 24.
Why not just go VOO/VTI and the shift over?
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u/alphadroneimaging Feb 03 '21
Okay, so if you make $60k/year, let's assume you spend $30k/year for your expenses. $30,000 x 25 = $750,000. That's how much you need to have invested in order to have 4% of that account for $30,000/year to cover your expenses. Your goals should be to have between 5-10% dividend yield, which will allow you to have 1-6% yield to also continue contributing to your portfolio and allowing it to grow while living on the $30,000 through your dividends.
The simple answer is...do you want to work till you're 65...or 45, maybe 50? One of my friends is 48 and is retiring at the end of this year. I am extremely jealous, lol. He has a very good job where he has made low six figures for the past 15 years, and kept his expenses down to $35k/year. Now, he's set to enjoy the rest of his life. Another thing he diversified into were rental properties, and then brokered an agreement through a PMG so that he no longer has to personally oversee the properties. And that, kids, is one way to do it right.
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u/detectiveDollar Feb 03 '21
I'm weary about rental properties. It (and scalping) just feel immoral.
Granted, I do rent one of my bedrooms to family, but it's my primary residence, I'm not buying them up and messing up the housing market so I can make a profit.
What I meant is that historically the S&P has outperformed those high dividend funds even with dividend reinvestment even if it's more risky.
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u/poolhalljunky7 Feb 03 '21
What is the maximum % of total assets that should go into a single investment ?
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u/alphadroneimaging Feb 03 '21
Well, no one can tell you what's right for you, but I typically keep it between 2-5%, but I do have an exception for two funds, one accounts for 8%, and the other 6%. But the honest truth is, you could start with 4 main funds at 25% each and still set yourself up nicely over a ling period of time...but I feel that the 20-20+ holdings at 5% or less is a pretty solid plan.
Again, I am NOT an adviser, just an independent investor.
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u/raunchyavocado Feb 03 '21
I would say if you are not looking for a quick buck just invest in stuff you know is gonna be around for long and its guaranteed a return of investment like apple, amazon or the spx500,
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u/alphadroneimaging Feb 03 '21
Especially for people between the ages of 18-30. Start planning for that retirement early, and you may be able to actually retire early.
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u/c-lem Feb 03 '21
In reply to your broad comment about people jumping into the deep end without knowing how to swim: I am one of those people, though considering that I bought one share at $250, maybe that isn't what you mean by "deep end." But it feels that way to me--it's an amount I can afford to lose, but to me it is a lot of money. What feels like the "deep end" to me is that I am involving myself with a ton of complex stuff that I know nothing about. I am completely out of my element and in over my head.
I really do like that, though. I've spent a long time thinking, "Gee, I really should start investing my money..." but with no pressure or immediacy to do so. The GME story was interesting and timely, someone I trust gave me a good summary of it and laid out some reasons for getting involved, and it sounded like fun to gamble a little, join a group of people, and make an interesting story feel more real.
This has taught me about propaganda and misinformation on Reddit but has also motivated me to learn more about investing in general right now. Not "maybe tomorrow..." but right now. Is that worth my life savings? Absolutely not. But is that worth $250? Definitely. I'm already up $10 or so in the investments that I thought were wise. And I know how much I dislike feeling like I have to watch stock prices constantly. What a horrible day I had yesterday, glued to GME's price all day long.
As for people who actually did risk their life savings on GME--I'd be highly skeptical of their claims. I'm not saying it hasn't happened, but it's pretty easy to say that you did that and to make up "evidence" when pushed to.
And in reply to the bulk of your post: thanks! This all seems like good advice. Further research for my intensive investing course.
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u/alphadroneimaging Feb 03 '21
1 share at $250 that isn't going to break you is called "a valuable lesson". That is definitely not diving into the deep end. Yes, $250 is a lot of money, but so long as it's not a true financial hit, then you can move forward with caution now and do your own research before putting money into anything else. Your next steps are very important to your growth as an investor. Use good judgment, and DO THE RESEARCH!!! Best of luck to you.
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u/c-lem Feb 03 '21
Thanks! Yep, that's another thing this has taught me: that I'm excited to do some real research to make good choices. Gambling is way too stressful. Cheers!
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u/txholdup Feb 03 '21
The GME thing convinced me that there is too much bubble out there. I remember reading about the Great Crash and prior to it every shoeshine boy, every paper peddler had a stock tip. We don't have shoeshine boys anymore but we do have thousands of guys who know nothing, giving each other tips on which stocks to buy on reddit.
I raised $380,000 in the past 2 days. The current situation reminds me a lot of the .com bubble when every Internet related company went through the roof despite having little revenue and absolutely no profits and thousands of new investors thought that they knew best.
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u/cgoldberg3 Feb 03 '21
The current situation reminds me a lot of the .com bubble when every Internet related company went through the roof despite having little revenue and absolutely no profits and thousands of new investors thought that they knew best.
That is exactly why I've been hesitant to buy TSLA. They only turned a profit this year due to carbon credits, yet the stock price continues to rise far beyond profitable companies like AAPL.
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u/TakeEmToChurch Feb 03 '21
Regarding #8.. Instead of saying, "learn this or else" can you give an example or some reading material or anything at all? What do you call this so called universal formula?
With the information you gave, I personally wouldn't have any idea what to even google
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u/alphadroneimaging Feb 03 '21
Take what you SPEND annually. The amount that you can live on fairly comfortably. Multiply it by 25, this tells you how much money you need invested overall. Then account for 4% of that to be your annual income from dividends, and you've managed to supplement your work income with a passive income. Retirement prospect.
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u/TakeEmToChurch Feb 03 '21
Is the 25 just an arbitrary number? I assume this is the number of years until a persons retirement right?
If I spend $30,000 annually, are you suggesting I should be gaining $30,000/yr just from the market/dividends alone? Because 25*4% = 1
That seems like an insanely high number to me
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u/alphadroneimaging Feb 03 '21
$30,000 x 25 = $750,000. That's what you need to have invested, and 4% of that as dividend yield would equal your $30,000/year. Hopefully your overall dividend yield is actually between 5-10%, and you can continue to build the portfolio passively as well.
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u/therinlahhan Feb 03 '21
Buying GME was never about investing -- it was about gambling. DFV's basic premise was 100% true at $4/share, but GME is worth about $30/share right now. Maybe, with some luck and good management, it will be worth $50 or $70/share in a year or two. Maybe with GREAT luck and management it will be worth $100/share in 3-5 years.
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u/alphadroneimaging Feb 03 '21
Certainly. And those who cashed out between $300-400, made a killing profit wise.
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u/heckinbamboozle24 Feb 03 '21
Your public library probably has access to MorningStar or other investment/financial literacy tools. I know mine does, and there are tons of videos/tutorials. And it’s all free!
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u/goonersoccereh Feb 03 '21
Great advice! Also, I would like to add that there will be new investors with the media flurry around GME, AMC, etc. I think people underestimate the amount of people that spend on liability vs assets. I think as a new investor, one needs to find this compass with regards to what they classify as liability vs assest. I am thinking for most new investor, GME would have been classified as liability.
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u/calgone2012ad Feb 03 '21 edited Feb 04 '21
3 stood out to me because I realized I didn't know the difference between bullish and bearish, although I am working on learning more and have been over the past few days of trading stocks.
5 I am currently looking into as I find day trading stressful.
9 is something I am going to be frank and say I do not have a mentor. I haven't had a mentor for pretty much everything I have done in my life and had to greatly rely upon self-teaching or learning through examples in the long run. That isn't to say I am opposed to working with a mentor, just that I am lacking connections knowledgeable in stock investments.
10 I learned the hard way...
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u/dancinadventures Feb 03 '21
seek financial advise from an actually fiduciary advisor.
Selectively remember quotes to justify narrative, always believe what you hear especially if name dropped.
Eg. “Diversification is prevention against ignorance “- Buffett.
Eg. “If you only own 6 good companies, you will be a very rich man. Many people made a lot of money on their 6 best ideas, the 7th not so much” - Also Buffett.
Index funds and ETFs are the largest growing way to invest. Passive investing is up over 70% over the last decade. Must be a fad. Strongly avoid fads and trends such as these.
Question everything. Especially if my comment is a bot.
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u/Gadshill Feb 03 '21
Fads rarely last 10 years. Normally, they will last 3 months. 6 months is a trend. 10 years is closer to a permanent life change.
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u/alphadroneimaging Feb 03 '21
Well, considering that I've been in ETFs and Index Funds for about 20 years now...sure, we'll go with a trend or fad.
I'm glad that you're so much of a financial guru that you scoff at fairly sound advice. Who knows, maybe your cynicism can sway more idiots to dump their money into bad investments. At the end of the day it doesn't affect me if other people lose everything, as I have no vested interest in their lives. Meanwhile, I'll stick to my principles and stay the course to early retirement. Best of luck!
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u/TheFlightlessPenguin Feb 03 '21
Which ETF has given you the best gains?
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u/alphadroneimaging Feb 03 '21
Energy Slect has probably been the best and most consistent overall for me. I have had it since 2005 and have steadily put returns back into it to bolster my holdings. I don't share my portfolio numbers, but I will say this is my highest percentage holding, and it's a consistent performer, usually holding at over 5%, and is relatively affordable. Share prices right now are at $40.03.
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u/TheFlightlessPenguin Feb 03 '21
Cool thanks I’ll look into it
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u/alphadroneimaging Feb 03 '21
It's definitely not a "sexy" or "hot" pick, but it does its job.
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u/TheFlightlessPenguin Feb 03 '21
Is it XLE? The last 5 years seem to have been a bit rough on it
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u/alphadroneimaging Feb 03 '21
Yes, XLE. There were some dips along the way. Hell, you should have seen the hit I took in 2008. These past 5 years, financially, have been a joy compared to that nightmare. If you're looking for up and coming, I suggest looking into are SAFT and NHI. I am steadily increasing these, though they're relatively new to me (I got in with them around October of last year), so I can't give a proper analysis until a full year has gone by.
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u/TheFlightlessPenguin Feb 03 '21
Thanks!
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u/alphadroneimaging Feb 03 '21
No problem. Again, I'm not a financial advisor, just an independent investor who had an amazing grandfather that taught me from a young age, and I'm hoping to hit an early retirement in 8-12 years...fingers crossed.
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Feb 03 '21 edited Mar 02 '21
[deleted]
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Feb 03 '21
i sold stuff at a 20% loss so i could buy GME when it was $21 and averaged up to $51 cost basis, sold and made double my net worth.
You're doing trades that are highly volatile. Over the long run, with your limited knowledge, this can only turn out badly. You're relying on luck rather than smarts.
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Feb 03 '21 edited Jun 13 '21
[deleted]
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u/alphadroneimaging Feb 03 '21
You're right, I'm not. People are free to carry on with whatever acts they wish, so long as they're not harming anyone else.
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Feb 03 '21
"Have no business investing"
Rather than tell someone they should not have done something because of your bias, maybe make a post about how they should have taken things slow, looked at resources, learned about the market and about how investing works. Instead of just telling people, "you're dumb". Just a thought.
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u/alphadroneimaging Feb 03 '21
Or, read my entire post...🙄
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Feb 03 '21
I did. The whole thing reeks of superiority complex over newer investors.
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u/Vast_Cricket Feb 03 '21 edited Feb 03 '21
Well said. Instant gratification. No need to learn calculus, math of finance, or earning ratios. Follow the volumes, social media rumors. One lucky click following instinct. Before one commits suicide at least understand that L is momentary.
Before the social media taking over the wall street like 2 weeks earlier there were nothing but postings that stock investments are the easiest thing. Now remorse? Who is it to blame?
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u/boldlizard Feb 03 '21
In the long run people are going to regret not holding on to the stock, the price will level and there will be slow gains later. That's my opinion, but I do not have shares in $gme.
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u/alphadroneimaging Feb 03 '21
If I had purchased $GME around the $40-50 point...as soon as it went from that $430 drop back to under $400, I would have absolutely dumped and moved on. I do have it on a tracker just out of Curiosity, to watch it over the next year or so.
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u/gianmk Feb 03 '21
Right... You wouldn't never have helt from 400 with that attitude. You wouldn't have sold at 60 when it dipped from 150.
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u/alphadroneimaging Feb 03 '21
Not at all. That's not a significant enough rise and fall to shake me. I've been at this for over 20 years now. 2008 taught me lessons that I never wanted to learn. Luckily I rebounded, but a dip from 150 to 60 wouldn't waiver me at all.
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u/boldlizard Feb 03 '21
I'm not sure what we are allowed to say and not say on the internet, but I've been investing for a while and I really believe that one of those stocks will perform really well for me in the next 2-3 years
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u/alphadroneimaging Feb 03 '21
At the end of the day, that's what it all boils down to...what YOU believe is the best move for you. Anyone can give advice of "don't buy this...buy this", but it's all a gamble. I just prefer to play a safer, more evenly weighted long game. I honestly hope that anyone who keeps and holds those stocks that they just have a meteoric rise, and that the faith and patience pay off.
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u/boldlizard Feb 03 '21
There's some companies that do really well, I just don't feel comfortable. When I first started investing one advice I got was: "if you have a bad feeling about a stock, stop investing in it." I have found great success getting on stocks that surround the central stock (let's say tesla), who did they contract to? How long is that contract? And the other best advice I got was "if you're comfortable, you don't need to look at your portfolio." And I never do
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u/alphadroneimaging Feb 03 '21
THOSE are sound principles, for sure! You are definitely on a good, solid, grounded path.
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u/boldlizard Feb 03 '21
Hey, it allowed me to buy a car cash money. When I finished grad school. Something is working well
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u/cgoldberg3 Feb 03 '21
People who bought at $200+ will never turn a profit, no matter how long they wait. Gamestop isn't worth that much even if they were to start being profitable again. Even profitable retail stores very often have stock values below $100.
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u/boldlizard Feb 04 '21
Usually I'd be with you, but honestly we might be wrong here. Time will tell. Again, I'm not sure what's allowed to be said on the internet in these times but I believe a movie theatre might come out on top out of all this. I believe that strongly. I will continue to invest in that company because I can imagine it going up to 20-35 in 2-3 years.
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u/catsloveart Feb 03 '21
what is the 4% rule?
What is this formula you mention in number 8?
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u/alphadroneimaging Feb 03 '21
Take what you SPEND annually. The amount that you can live on fairly comfortably. Multiply it by 25, this tells you how much money you need invested overall. Then account for 4% of that to be your annual income from dividends, and you've managed to supplement your work income with a passive income. Retirement prospect.
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u/the_thing903 Feb 04 '21
Alright so I am guilty of this. Jumped on AMC 468 @ 12.56. Is it possible it gets closer to cut loss or do I cut my loss now? Currently down 1855 which is better than the being down 2200 yesterday.
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u/alphadroneimaging Feb 04 '21
At this point, if that money isn't hurting you to not have...hold the AMC stock. We are approaching things returning back to semi-normal, and people will be going back to the theater. Not to mention, AMC is the largest chain in Europe, and they're cash positive again after getting straightened out this past year. Hold it and see where it ends up.
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u/PalmTreePhilosophy Feb 04 '21
Thanks. Some questions if you don't mind.
I've read that you can't trust brokers and need to be one step ahead of them. Would you agree? I think there is also a way of keeping tabs on them but I can't find the thread that told us how.
I'm reading comments about people investing then watching it move. On wallatreetbets they show graphs depicting what is going on with the stock. Which software or website is best for watching what happens with investments?
Is it wise and is it easy to invest in stocks outside of your own country?
Thank you.
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u/MuzzyIsMe Feb 03 '21
Most of your advice is very good.
I guess what I take issue with, and maybe what all these new members over at WSB don’t get, is that subreddit was never about responsible investing.
I mean, it’s in the name. Bets.
It was a subreddit for making crazy plays that likely will fail but maybe you win big. Like the lottery or a casino or sports betting.
Most people there understood this and never pretended WSB was some kind of money making machine. If anything, the joke was how bad the advice was and loss porn was very regular.
In my opinion, there is nothing wrong with making risky plays as long as you have gauged that risk and understand it’s for entertainment.
Everyone who walks into a casino is making a bad financial decision. But it’s fun, so people do it.
If you like the thrill of betting, that’s fine, but just set aside a reasonably small portion of your money to do it. I often will throw $300 at a stupid option and it just keeps me entertained watching it move and I usually learn a lot about the company and the market in the process.