I am debating a few things: 1. Dividend stocks or growth stocks? If you have a bunch of dividend stocks you can potentially make thousands every quarter, and still have the stock to hold on to. But with growth stocks, the sky is the limit. 2. I have $1000 to invest, I know picking the big companies is the best, but there wouldnt be much profit? If I bought say, 20 shares of Wells Fargo, I would only profit a little bit if I held it for 20 years or so. I would barely receive a dividend. However, if I bought a pennystock I might think will do good, (CBL is $2 but has had a steady dividend for years) I could have 500 shares, and begin with $50 per quarter, which turns into more 25 shares the first quarter, and it will go up from there until riches. Question is, how do you tell if a pennystock will be successful? Its higher risk, but is there a strategy for long term pennystocking? I just dont feel like I can profit much buying strong companies. I'm trying to find old pennystocks that have ups and downs, like CBL. It was at $40 a few years ago, but it's gone up and down drastically from time to time. As long as they dont cut the dividend or go bankrupt, I should be good? They're at $2 a share and have a nice yield still.
Hi @Alex Griffith welcome to the boards! I'm not a usually a sub $5 stock investor, so I can't really say much about investing in that particular class of stocks. What I will say, though, is you can make good money on any stock with $1000 on the basis of percentages. Whether it's CBL (at 2.57 per share) or CMG (at 467.43 per share), a 5% rise in either grows your $1000 investment the same amount. So my point is, maybe don't rule out non-penny stocks as a viable place to grow your $1000.
I'll draw an assumption that you are younger and have time to invest and able to add money to your account over time. First thought is to suggest you do not invest in penny stocks. Like Three Eyes says above, think in percentages. A 2% rise for 10 shares of a 100 dollar stock makes as much as 100 shares of a 10 dollar stock. I would not worry too much about dividends etc until you get more built up and can allocate small percentages of a portfolio to long term. In the meantime start with an industry or sector you are most familiar and/or interested in. Tech? Medical? Restaurants? Finance? and focus on well known companies in your area of interest. As you learn things in the market and grow your total money to invest branching out into other sectors will be easier. Last note don't put a strain on your personal finances to stick money in the market. Make sure your credit cards / student loans etc are paid off and have an emergency cash fund to fall back on so you don't have to sell stocks to cover living expenses. Good luck.
"Long term investing for not much money." Congratulations on your decision to take the first step toward investing. Your thread title above contains a few inherent contradictions with your question about penny stocks. Are you going to be a long term person or short term? Penny stocks are usually short term due to their EXPLOSIVE nature. By explosive I mean their habit of blowing up in your face NOT going up. Are you going to be an INVESTOR or a speculator. Penny stocks are extremely speculative. You will often LOSE your money playing with this sort of gamble. (gamble, not investment) What I suggest is that you get your feet wet by starting your investing experience with an INDEX FUND. Something like a SP500 Index Fund. Something like the Vanguard SP500 Index Fund or a Schwab SP500 Index fund or any other big brokerage version of a SP500 Index Fund. With the small amount of money that you are starting with it makes more sense to start with a fund rather than individual stocks. With a fund like a SP500 Index Fund you will own the 500 largest companies in the US economy. You will own Apple, Microsoft, Amazon, Google, all the big consumer stocks, all the bank stocks, etc, etc, etc, all the stocks and companies that you hear about every day. With this sort of fund you will also earn a good dividend every year based on the dividends that those 500 companies pay every quarter. The dividend on your money will be about 2% per year. If it was me I would have all dividends and capital gains that the fund pays automatically reinvested every time they are paid. Historically the SP500 will get you a return of about 10% per year. Although like ALL stocks and funds the return will vary from year to year, one year it might be 2% the next it might be 20%, but over the long term it usually averages out to about 10%. Please, be careful and give those penny stocks some hard thinking. Most people that gamble in penny stocks lose their money. (notice I did not say "invest" in penny stocks)
Alex.....give us your thoughts so this is a conversation. That way people will be able to address your specific concerns and thoughts as discussion. Again CONGRATULATIONS, it is a positive step to be thinking about investing for your future. For example.....if you invest your $1000 and add to it in a SP500 Index Fund......here is the top 50 companies you would own, AND, in addition you would own the next 450 largest, greatest, companies in the USA. 1 Microsoft Corporation MSFT 2 Apple Inc. AAPL 3 Amazon.com Inc. AMZN 4 Berkshire Hathaway Inc. Class B BRK.B 5 Johnson & Johnson JNJ 6 JPMorgan Chase & Co. JPM 7 Facebook Inc. Class A FB 8 Exxon Mobil Corporation XOM 9 Alphabet Inc. Class C GOOG 10 Alphabet Inc. Class A GOOGL 11 UnitedHealth Group Incorporated UNH 12 Pfizer Inc. PFE 13 Visa Inc. Class A V 14 Bank of America Corp BAC 15 Verizon Communications Inc. VZ 16 Procter & Gamble Company PG 17 Intel Corporation INTC 18 Chevron Corporation CVX 19 AT&T Inc. T 20 Wells Fargo & Company WFC 21 Cisco Systems Inc. CSCO 22 Merck & Co. Inc. MRK 23 Home Depot Inc. HD 24 Coca-Cola Company KO 25 Mastercard Incorporated Class A MA 26 Boeing Company BA 27 Comcast Corporation Class A CMCSA 28 Walt Disney Company DIS 29 PepsiCo Inc. PEP 30 Citigroup Inc. C 31 McDonald's Corporation MCD 32 AbbVie Inc. ABBV 33 Walmart Inc. WMT 34 Philip Morris International Inc. PM 35 Oracle Corporation ORCL 36 Medtronic plc MDT 37 DowDuPont Inc. DWDP 38 Amgen Inc. AMGN 39 Abbott Laboratories ABT 40 Netflix Inc. NFLX 41 Adobe Inc. ADBE 42 3M Company MMM 43 International Business Machines Corporation IBM 44 Union Pacific Corporation UNP 45 Eli Lilly and Company LLY 46 salesforce.com inc. CRM 47 Honeywell International Inc. HON 48 Altria Group Inc MO 49 Costco Wholesale Corporation COST 50 Accenture Plc Class A ACN
I appreciate the replies, and it gave me a new perspective. I had the thought process that more shares = more money, but that isnt always the case. How do you learn about a specific industry? Is it simply researching the biggest companies in that industry? I have taken a lot of interest in GE and some oil companies such as Marathon, although I haven't looked at the balance sheets or anything yet. Also, I dont really know much about Index funds. I do know that it spreads over a large portion of companies, but doesnt it also give low returns? More of a low risk - low reward sort of deal? Thank you all for these answers, so if I were to buy 10 shares of Coca Cola and Wells Fargo each for example, I would probably profit more than say 500 shares of different penny stocks? What would you all do with the first $1000? I'll look more into index funds, I just never considered it as a great source of money.
Past performance is not an indicator of future performance. This bull market beginning in 2009 is long in the tooth. Every year more and more baby boomers are reaching age 70-1/2 and get a letter from the gubbermint telling them they must begin liquidating their retirement accounts. These liquidations, this forced selling of stock, will accelerate for about the next 11 years and beyond when the peak number of boomers reach age 70 1/2. When, not if, this situation cracks the markets, is the question. Buy and Hold, la di da di do investing, is dangerous, imo. If that's what you want to do, I'd wait for the bottom of the next bear market.
People are forced to sell their stocks? I never knew that. Yes, I know it can be risky. But theres long term investing, short term, day trading. I'm trying to find what best suits me.
The shorter the time frame, the less risk. Day trading has the least risk but you need a minimum account balance of $25,000. With a smaller balance the number of allowable day trades is severely limited. So that's out for you. It's out for me too since I have a well paying job already. I currently classify myself as a position trader.
Regarding all responses. For you to consider the responses you got so far in this thread you need to determine your goals and risk tolerance. In the "business" of investing there is a concept called SUITABILITY. A GOOD financial advisor or broker should be helping you to invest in investements that are SUITABLE for you. This is partially based on your income, age, investment goals, assets, investing knowledge, risk tolerance, etc, etc. This is why when you open a brokerage account you will be asked questions like age, income, goals, assets, etc, etc on the initial account forms. A broker can have liability for puting someone in an investment that is not "suitable" for that person. It would help to focus the discussion if you listed some of this sort of info. If you are concerned about puting this info out there on a message board, at least consider this sort of info as you try to decide what type of investing is right for you. AND.....NO, people are not forced to sell their stocks. You can take a distribution from a retirement vehicle "in kind" and not necessarily have to sell anything. Or you can sell whatever in a retirement account, and take the distribution and immediately reinvest it in stocks or funds. What Onepoint is talking about is the fact that the baby boom generation is nearing or in retirement and many people will be taking taxable required distributions from their IRA or 401K or needing to or required to take distributions and/or cash in retirement holdings to live on. Or, they will be reducing their retirement holdings to reduce market risk in retirement when they are not working and dont have as much of a long term horizan. I suspect that with 401K type plans being the only retirement vehicle for most non-government workers now, and with the vast majority of young 401K and IRA investors going into index and other stock funds, this will more than offset the annual distributions from the baby boom generation. Many baby boomers did not have these sort of retirement vehicles available over their entire work lives. I think the net of whats going in and what is going out of retirement type accounts annually will definately be a large positive net inflow of money into stocks and funds driven by the investing of the millenial generation.
I dont really know a goal. I just want to build as massive of a portfolio as I can get with some companies I can rely on to grow. As for risk, I'd say I have a pretty high risk tolerance. I'm interested in GE right now, its down to $7.
On March 4, 2009 GE traded 152 million shares printing a high of 7.25, a low of $5.73 and closed well off the low at 6.69. That bar represented the stopping action that triggered short covering that culminated in a high of 14.55, a rise of 154% in 2 months. In the last couple months a ton of supply has come into the GE market. It is nearing the point where everyone who wants to sell has sold. The current price of 7.01 is now within that bar of March 4, 2009. I suspect a bounce is imminent but it could be as low as 5.73 or lower, much lower even, before stopping action comes. Just need to wait for that stopping-action bar. Buy the close and put a stop under the low of that stopping-action day. Your risk will be the difference between the close and your stop, just under the low of day. If that difference is $1.00, your risk is $1. I normally don't risk more than 2% of my portfolio on any one trade. You say you have a high tolerance for risk, so you may want to risk 10%. So, if you have $1000, you can risk $100. That means you can buy $100/$1 = 100 shares. If the difference between your buy price and stop is $2, then you can buy $100/$2 = 50 shares. The point is to limit your loss to 10% of your portfolio, or $100 and you'll live to trade another day. Also, don't forget to move your stop up as the price rises so that you don't give up your gains.
Call me slow, but what do you mean by stop? Also, I was thinking more of investing about $400 out of $1000 in GE. I'm guessing that's too much? That's 40% of my portfolio.
A "stop-loss order" is an order that your broker holds until the price you specify (your stop price) is hit. Once a trade happens that matches your stop price the "stop-loss" order is sent to the exchange as a "market" order and your stock is sold. Okay, just buy $400. But don't buy more shares than your risk tolerance will allow. If you buy GE at $7 then you would be buying $400/7 = 57 shares. If you don't place a stop and it goes to $1 (and it could) before you sell, then you would get back $57 cash. You just lost 400-57 = $343 or 34% of your portfolio. Using that example, buying at $7 and setting a stop at $1, then your risk is $6. Assuming you don't want to lose more than 10% of the $1000, or $100, then you can only buy $100/$6 = 17 shares. At $7 per share those 17 shares will cost you $7 x 17 = $119. So you might as well not set a stop and ride it all the way to zero if necessary, as you'd only be risking 11.9%. You need to know where you are setting your stop before you get in the trade so that you know how many shares to buy. Read my previous post again.
Below is a hypothetical picture. I drew in the ending-action bar. You need to wait for the real thing and you'll want high volume by the way. For this hypothetical situation, the calculations I show say you could buy a maximum of 87 shares to keep your total risk under $100. So in this example you'd be okay to buy $400 worth of shares ($400/6.50 = 62 shares) since $400 is less than $565.50 and 62 shares is less than 87 shares. In conclusion: there's only one thing that can cause price to have a high-end close with heavy volume near support...buying by the big players and public shorts (short sellers borrowed shares from their brokers to sell on the market and they need to buy them back to return to the broker and thus close out their positions) if it goes below your stop then you were likely wrong and you will be able to buy it back lower at a cost that makes up for the $100 cost of the stop-loss...or think of it as insurance you can wait a day for confirmation but the location of your stop would be the same and the closer your buy is to your stop the more shares you can buy because you have less risk per share. the markets are looking real bad right now, don't be tempted to buy this if it just drifts lower which this can do and go much, much lower.... wait for ending action.
Ford F is a long-term winner and pays around 7% dividend at. 60 per share, currently around $ 8.42 per share.
