I'm Pretty New To Investing - Any Advice?

[Alexeyberry]

I'm not a pro at buying and selling stocks and to be honest, I don't have a lot of funds to invest either. I set up an account with TD Ameritrade, mainly because there is no minimum balance or investment requirements and began toying around with their ThinkorSwim platform in paper mode (simulation)...

In any event, I just bought 6 shares of SIRI (Sirius XM Holdings Inc) stock this morning and at close today, I made $0.06. I know that isn't much, but that I actually made money my first day makes me ecstatic. I picked SIRI because it is selling for under $5 per share, has stability as a company, and invests a ton on marketing (there isn't a week that goes by without me getting at least one piece of mail from Sirius radio), not to mention they have contracts with most auto dealerships around the country.

I selected dividend reinvestment on my account and am going to be investing about $25 every week. I'd like to ideally buy around 100 shares of stock per company and have stock in a few hundred companies. I'm thinking of focusing pretty heavily on natural resources...

I was wondering, do any of you veterans have any tips on investing profitably? Any markets to avoid; considerations to keep in mind and so on... Any advice would be great.

[AlisonVoge]

Luck certainly plays a role, but so does keeping abreast of market news, trends and strategy. Warren Buffet has made billions in the stock market and I guarantee luck is only partially responsible.

[AlimypwDind]

$0.06 is more than you had yesterday! Congrats and way to get excited.

If you're one for reading up on things, Technical Analysis of Stock Trends by Robert D. Edwards and John Magee is pretty great. Its on its 11th (I think) edition, and you can normally find a copy in your library, or pick one up at Amazon.com - http://amzn.to/1VvW3i8

The book goes a long way to show you the basic patterns to look for when trading. Its good to know, else you could fall into some pretty obvious pits, which is no fun!

[AlphonsoTh]

Depending on who you're trading with, they may charge more for OTC markets, or penny stocks, so careful on that front! I used to use capital one share builder, but they charged / share for penny stocks (any thing under $1.00), so that got frustrating and expensive fast! Recently I moved over to Robinhood.com as they offer free trading but only on larger markets (No OTC), and they don't do ROTH accounts. Which is a little frustrating, but if you're just getting into it, its a great way to avoid some fees!

[admin]

Since you are with TDA your first trades are probably free so have fun with it. But once the free trades run out here are a couple of things to consider. First...make an account with Tastytrade.com and Dough.com...and use your TDA credentials for your username and password. They have a relationship with TDA so it will all be linked and secure. It's free and they won't try to sell you anything. Anyway...once you have done that call your LOCAL tda rep and tell them you are signed up with tastytrade and will need for them to put through your fee reduction. That will get your stock trade fee down to 7.50 and your option fee to a flat 1.50.

Once you start paying fees per transaction you will really need to consider how much you put in at a time. If you're investing 25$ per week you will only be able to buy 17.50 worth of stock after fees. To make the math easy lets say you buy 20$ worth of a 5$ stock and pay 7.50 for the transaction. That means your break even point will be 6.875. So the 5$ stock will have to go up 37% before you are profitable....in other words you start off 37% down.

If we use $SIRI as an example lets say you bought 5 shares of SIRI at 4.00$ per share and paid 7.50 to do it. Your per share price would be 6.875. And given current Implied Volatility levels you only have about a 10% chance of it seeing anything above that in the next 12 months. Although you may not trade options you can look at them to get an idea of what the expected movement is for a certain amount of time. You also have to consider the likelihood that all the information you know about the stock and a whole bunch of stuff you don't know is already priced into the stock. The options pricing can reflect what may not be known like events such as earnings announcements etc. You may see evidence of advertising or fundamental stability but there are people out there with billions at their disposal that know to the penny what they (SIRI) are doing...they have visited their facilities, talked to their people...on and on.