Investing in a stock is like buying a property

When you buy a property you look at the value versus the price.  You also look at the neighborhood because you can change the property but not the neighborhood.  You also have an inspection done check to see if the systems are intact (HVAC, roof, foundation, etc.).  Lastly you check to see previous owners and check to see if there are any outstanding liens.  

You should do the same for a stock.  The old adage buy low sell high always applies so check to see if the stock is overvalued or undervalued. Instead of the neighborhood check to see what industry and sector the stock is in.  Is this industry declining or going through a rough patch or is it likely to go up (like the marijuana bandwagon).  The “systems” of a stock are the management, facilities, infrastructure, etc.  Look to see the pedigree of the people running the company, are they competent?  How long has the stock been around? What have the returns been?

Finally, if you are going to put a whole lot of money into anything make sure it has some value.  The goal is to increase your holdings not to gamble.

Thoughts on Day Trading

I day traded for about 6 months last year and it definitely is a full time job, you have to analyze charts, moving averages and pick your strategies but you can make some good returns if you focus. I used to listen to Daytrading Rock Star (I still do off and on) and his radio show is cool during the day to help you feel connected to other guys that are trading. You can make money off of $500-$2,000 it depends on your methods. If you trade options you get more bang for your buck but I suggest starting out with simple bid/ask trades before going into greeks and option jargon. I made some good trades and then some bad ones and in the end for me at this moment I don't have the time to follow things like I should so I focus on dividend stocks to get a steady return.

End Of The Year Dividends

So here's another tip that I just figured out... a lot of companies will pay larger dividends at the end of the year, sort of like a Christmas bonus. Just got mine and I'm glad I found out without even knowing.

Just For Fun

I want to take a quick break from the stock talk and show what I think I may buy once I may my first 100k from my stock investments.  This car is fantastic! A perfect blend of motorcycle and passenger car.  It's still in the concept stage but from the article it looks like this one has more of chance than some of the other hot concept vehicles that have graced our screens but never seen the light of day.

Nissan BladeGilder

From $24 to $690,000 In Four Years

In 2009 a Norwegian man bought $24 worth of bitcoins and forgot all about them.  Four years later Mr. Kristoffer Koch checked his account after reading an article and low and behold his 5,000 bitcoins were worth $690,000.  He promptly cashed in around $186,000 and bought an apartment in a sought after neighborhood in Oslo.  Read his story here.

Norwegian Man Buys Flat With Forgotten $24 Bitcoin Investment


It may be worth a look to watch the bitcoin market and get some on the dips.

By digitalart, published on 26 July 2011
Stock Image - image ID: 10051347

Diversifying Your Portfolio and Dividend Yields

To start building your portfolio you should keep in mind that you must diversify. Tempting as it may be to put all your money into that one stock that is paying big dividends, you have to be smart and spread your money around to protect your investment

It's a good idea to put your money into different industries i.e. manufacturing, retail, technology, financial, minerals and entertainment.  This will keep you from being hurt too much when various sectors of the market are experiencing trouble.

I created a list of stocks that I am watching I chose to invest in several of these stocks because of how they look in my technical analysis. Many of them are oversold and are in a good position to rebound.

• Retail – TGT, WMT, DG
• Housing/REITs– ARR, CYS
• Technology – MSFT, ORCL, CSCO
• Manufacturing/Automotive – TSLA, F
• Financial – JPM, WFC, BAC, PNC, UBS, RLI
• Entertainment – SNE, TWX, LGF, DIS
• Communications – VZ, T
• Minerals – GLD

I especially like buying retail stocks right before the holidays they may take a downturn after their earnings report in the new year but at least you have an option to sell before then.

I mostly buy stocks with a high dividend yield however I will buy stocks that don't pay a dividend only if it’s a break out company, Tesla fits that criteria.

I recently read a couple of articles about diving deeper into analyzing stocks for dividend yields.  They talked about inadequate assessment in many of the current stock analyzers.  In order to get the true dividend yield you have to look at when a company distributes their dividend. Go back and look over the whole year to see if extra dividend payments were distributed.  If a company only declares a quarterly dividend then only the distributions over the quarter will be factored into the dividend yield calculation.  This however excludes additional one-time distributions which will sometimes dramatically increase the dividend yield calculation.

In short it pays to do your research.

3 Things to Remember when Trading the Government Shutdown

As we all wait for Congress to get back to work, there are some things to keep in mind about playing the market swings. 

• Never put your money in when there is crisis (unless you found out about it before any one else)
• If you think you found out about the crisis before anyone else, chances are you haven't
• It may be a good idea to buy the dips on solid stocks that have good balance sheets and good management

I wrote a post a while back about shorting the market when it is high.  These situations are perfect examples of why shorting the market is always the most profitable trade.  There will always be an unforeseen crisis that will bring the market down and when the market goes down it goes down fast.  There is nothing that happens consistently that brings the market up fast.  The market will always go up slow and down fast.

The key is to find stocks that are overvalued and their balance sheet and management may be going through some difficulties.  At the slightest sign of market weakness these stocks will drop fast.  Conversely stocks that are strong internally will weather these dips and it is a good long term play to buy the dips on these stronger stocks.  Do your homework before jumping in and I always prefer dividend paying stocks for long term plays because it takes the edge off any potential losses and may even prevent any losses. 

Stocks that may have problems because of the shutdown are those that depend on government contracts like defense, food service, research, transportation, medical, education.  Stocks that may be insulated from the shutdown are those that don't have contracts like clothing retailers, luxury brands, entertainment, etc.

Do your homework and set your stops.  Happy trading!