A few beginner questions

Discussion in 'Ask any question!' started by Dr1v3n, Aug 12, 2021.

  1. Dr1v3n

    Dr1v3n New Member

    Joined:
    Aug 12, 2021
    Messages:
    1
    Likes Received:
    1
    I'm relatively new (been doing it "casually" since 2018ish) to stock trading using my actual money and had a few questions, as I am getting more into it now. Please note that I am into science, engineering, and professional research so my mind loves to analyze and understand how things work.

    1. Why is it that when I look into investing tips, so many people say to avoid doing individual stock trading? Virtually every company that I personally have wanted to invest in has mostly done quite well. For example, Amazon, Microsoft, Google are 3 companies that I wanted to buy stock of many years ago and I was quite certain they would do well. Why? Because everyone uses their products and they continued to grow into new spaces and done relatively well with that. They've mostly held up to that prediction. There are quite a few other such stocks like this in my mind. Basically, there is never a time when I thought "Oh, I would love to buy X" and it ended up totally bombing out and that stock lost it's value and never got it back. Additionally, I notice that just because a company's stock falls for a while, doesn't mean you've lost a lot of money... You can just wait for it to go back up, which I've seen occur quite a number of times. Not ALWAYS, but if I look at e.g. a 5 year+ history of the stock, and it started at e.g. $25/share, then it ended up going to $100/share after a few years, then $150 for many years, then back down to $130 for a few months, then back up to $150 for a couple years, now it's at $300/share and has overall been growing for the last 5 years, I would expect that the business depending on its perception and overall success, would not be as risky of a buy as one that e.g. is extremely volatile in both directions on a month-to-month or yearly basis.

    Note that I also plan to only buy stocks with money that I could afford to lose without freaking out. I would never take a large sum of my assets and "bet" them in the stock market. Most of my investments are relatively long term too, with some mid-term growth stocks as well. I also plan to actively monitor the status of them, and not "put money and forget". That doesnt mean that I plan to volatively buy/sell all the time, it just means I will monitor the markets.

    I mean, are people just completely blindly throwing large sums of their money away on businesses in industries they have no idea about? It sounds like that's what occurring when I hear that advice. Either that or the advice is perpetuated around by the large funds themselves in order to scare people into buying them almost exclusively. :)

    2. Sorta related to #1 but why are some folks so scared of temporary loss? For example, if I invest $10,000 into company X by buying 200 shares at $50/share, and then 2 years later, those shares drop to $30/share due to some unforseen event, but the overall market has shown growth, would this be considered a "loss?" I would only consider it a loss if I SOLD at the price. Can't I just be patient and wait out the drop? Of course there is always a chance that it could not go back up, but again, based on stocks I've looked at in the past, I've seen that to be relatively rare. However, I hear stories of people freaking out and selling at the worst times. I imagine in most long-term investments, this will occur on occasion. Isn't the point of long-term to be able to wait it out?

    3. What are some reasons that stocks may not have major growth, but also may not have major dips either? Stocks that seem more "stable?" For example, I look at AT&T stock, and that seems to be the case, as it's floated around $30/share for quite some time. It's also a large, well known business that supports technology with its internet/uverse products, but it's e.g. much different performance from say a Microsoft, Apple, Amazon, Alphabet, Tesla (which I know is on the more volatile side, but you get the point), etc... One reason I can think of is it seems dividend stocks (such as IBM) tend to be more like this, but what are some other reasons?

    4. Point-blank question - Why has Moderna's stock seen so much more growth than JNJ and Pfizer? I haven't done much research and know little about that market (never invested and dont necessarily plan to), but am curious.

    Thank you!
     
    #1 Dr1v3n, Aug 12, 2021
    Last edited: Aug 12, 2021
    StockJock-e likes this.
  2. StockJock-e

    StockJock-e Brew Master
    Staff Member

    Joined:
    Apr 3, 2016
    Messages:
    9,524
    Likes Received:
    3,526
    Generally speaking, for majority of people in the stock market, simply buying the S&P 500 and not touching it for 20yrs is the best strategy. Being diversified across sectors and industries lowers your risk to any single stock failing.

    Daytraders and active traders who watch the charts and news will tell you something else. Buy the stocks you are following, take profits when they are overbought, buy when they are oversold and be more active in your trading.

    During a bull market like the one we are seeing, its easy to pick a big name stock and be right about it.

    A lot of investors and traders panic, its a natural emotion.

    Fundamentals most likely. Take Blockbuster video, the most dominant force in rental videos that had massive growth in the 80's! When Netflix came along, not everybody could understand that in a few short years Blockbuster would cease to exist. If a company fails get traction, profitability or just has bad marketing, but also if a competitor comes along and does it better, that company may never see growth.

    Market cap of MRNA is/was much smaller and therefor moves faster.
     
    SPP and Dr1v3n like this.

Share This Page