Thursday, October 27, 2011

Stock Market Investing for Beginners

Disclaimer: I receive a referral commission for the following link(s):  E*trade and OptionsHouse

Here are some tips I use when investing:

1) Don't invest money you need in the short term (1-2 years).

  • My feeling is that if you are trying to make money in stocks short term you are most gambling or a professional and then you probably aren't looking to me for tips.  I read a lot about stocks, but I still have no clue what will or won't go up short term.

This is a quote from Warren Buffet in an article in the NY Times during the 2008 Financial crisis

Let me be clear on one point: I can’t predict the short-term movements of the stock market. I haven’t the faintest idea as to whether stocks will be higher or lower a month — or a year — from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over

2) Get a broker with low commission fees.  

  • When you are a small time investor, commissions make a big difference.  
    • A $500 investment with a commission fee of $9.99 a trade means that after buying and selling the stock you have already paid $20, which is 4% of your initial investment.  You would need the stock to go up 4% before you break even.  If you invested $1,000 in the same stock, your commissions would only be 2% of the initial investment, etc.  As you invest more money in each stock commissions are less important.
  • Let's take the same scenario if you got a more discounted brokerage firm like Their rate is $4.75 per trade.  Instead of paying $20 for buying and selling, you are paying $8, which is 1.6% of a $500 investment.  This will make a big difference if you plan on doing a lot of trading.  You also get 100 free trades to start off! 
  • If you like ETFs, there are brokerages that have commission free ETFs  Examples are Charles Schwab and Fidelity.
  • If you have a whole bunch of money that you don't mind sitting around in a low interest savings account ($25,000 or more), you should use Merrill Lynch.  They will give you 30 free trades a month if you have $25,000 in a Bank of America non-investment account or a $25,000 cash balance (not invested) in your Merrill Lynch account

3) Diversify or buy Diversified Stocks/Funds/ETFs 

  • ETFs (exchange traded funded) are funds that invest in a category of stocks (ie - kol is coal mining stocks, uyg is finance stocks) or entire indexes (ie IVV follows the S&P 500).  Some ETFs can be very risky. 
    • For example, the proshares ultra category tries to achieve returns that are double whatever the category they invest in

  • Mutual Funds - mutual funds are like ETFs but they have some different rules:
    • For an ETF, you decide what price you will buy and sell at (as long as someone is willing to sell and buy).  For a mutual fund, you can only buy or sell at the end of the day.  For example, if you want to buy a mutual fund and you put in a buy order on monday afternoon before the end of the trading day (4pm), you will buy the mutual fund at the price it closes at the end of trading on Tuesday.  You do not get to choose your price.
    • Mutual funds also usually have minimum investments that can go as high as $5,000 or more, although many are $2,500 or even $1,000.  They also will often impose a penalty if you sell before 60 days.
    • The nice advantage to Mutual Funds is that you can invest with a specific fund manager who is a good history and you don't have to think about what stocks to invest in, that's what you are paying the manager for.
    • Mutual funds work out deals with different brokerage firms.  The same mutual fund might have a $50 commission in one brokerage firm, 2% of the transaction in another, be free in a third and not be available through a fourth.  
      • Once you figure out the mutual fund you want, look it up in Yahoo Finance.  They do a very good job of telling you where the mutual fund is available for buying.  Here is what you would find under the Mutual Fund ticker HIINX.  You want to look for where it says no load and no transaction fee and that will give you best deal on that mutual fund.

4) Don't pay attention to what you paid for the stock

  • If your stock goes up it doesn't mean it is time to sell.  It could be that it was a good buy at $35 a share but not so good at $45 a share or it may still be a good buy until $75 a share.  It is the same if the stock goes down.  Don't be afraid to sell at a loss if you think it will go down further.

5) Don't try to time the market 

  • It's just about impossible to know when to buy or sell an individual stock.  When you have decided to buy a stock, I recommend buying on a schedule.  For example, buy a few shares every couple months.  This way you won't get burned by buying when the stock was too high.

6) Google/Yahoo Finance -

  • I like to use Google finance.  You put in all of your transactions from any accounts and they will calculate your all time gains and losses.  They also have realtime streaming prices.  On many websites, there is a 15 or 20 minute delay on prices that aren't streaming unless you have an account.

Tuesday, October 25, 2011

Online Savings Accounts

1) UFB direct - 1.3% on up to $25,000.  $100 minimum

2)  Discover Bank (1.00%) - $500 minimum

3) American Express (0.90%)

Disadvantages to Online Savings accounts:
1) It can take a while to get your money.  There is no way to get your money except by an online transfer which can take a few days.  You don't get an ATM card or checks.

My suggestion:

Have two accounts:

Put any money you will need within the next couple of months into your regular low yielding savings/checking account that gives you immediate access to your money.

Put any money that you don't need in the next couple of months into the higher yielding UFB Direct, American Express or Discover savings account

Tuesday, October 18, 2011

Credit Cards for Groceries

Bank of America Cash Rewards - 2% back on groceries, 3% on gas, and 1% on everything else.  $100 bonus for spending $500 in first 90 days.

American Express Blue Preferred 6% on groceries, 3% on gas, 1% on everything else.  Has a $75 annual fee

American Express Blue
- 3% on groceries, 2% on gas, 1% on everything else. 

Credit Cards for Gas

Penfed credit card - 1% back on everything and 5% back on all gas purchases.

Bank of America Cash Rewards - 3.3% back on gas, 2.2% on groceries, and 1.1% on everything else after 10% bonus for redeeming into a Bank of America account.  $100 bonus for spending $500 in first 90 days.

American Express Blue Preferred - 3% on gas, 6% on groceries, 1% on everything else.  Has a $75 annual fee

American Express Blue
- 2% on gas, 3% on groceries, 1% on everything else. 

General Usage Credit Card

Disclaimer - The Discover offers are no longer valid.

Fidelity American Express - 2% back on everything

Discover it™- 5% back on rotating categories.  0.25% on everything else until $3,000 and 1% above $3,000.  Your 5% can turn into 6.25% when you use your rewards for gift cards.  With many companies (my family get Bed Bath and Beyond cards), you can redeem $20 of rewards for a $25 card.  This effectively multiplies your rewards by 1.25 .
       - You need to sign up quarterly to be eligible for the 5% extra bonus.

Chase Freedom - 5% back on rotating categories.  1% on everything else.
       - You need to sign up quarterly to be eligible for the 5% extra bonus

Fidelity Visa Card/Capital One Cash Rewards - both give you 1.5% back for every purchase.

Perkstreet Financial Debit Card - 2% Visa Debit card on everything. Here is a review of the card.

Monday, October 17, 2011

Great Travel Deals - Travel Zoo is a great place to get deals on anything from vacation packages, airfare, hotels, car rentals and cruises to local entertainment and more. 

Vacation packages are great because most things are included and you don't need to find hotels (anywhere from 3 to 5 star hotels) or flights on your own.

Travelzoo has a Top 20 Section that it is great to check daily, you never know what type of deal might be available.  They also have today's top deals on their homepage.

If you decide last minute to go on vacation they have a Last Minute Section where you can often get even better deals if you aren't picky about where you want to go.  Many of the deals go fast so you usually have to act quickly.

For example: I just saw a vacation package to Italy for 9 nights including airfare and transportation between three cities (Venice, Florence and Rome) for $999 a person plus taxes ($80 a person).  Keep in mind that they try to get you to pay for supplemental travel insurance and many credit cards automatically cover this.  You should do your research about your particular credit card and decide whether you want to include this insurance.

You can sign up for their newsletter (on the homepage) and you can find out the latest deals in your email box.  They have over 24 million subscribers so they must be doing something right.

Tuesday, October 11, 2011

Shrink your Everyday Bills -

Save on many of your most common bills with  This website will give you great deals on anything from the best CD accounts, savings accounts, credit cards and more based on how you use them.

They analyze your cell phone usage, cable and TV needs and suggest the best plan for you.

They analyze your commute and tell you which gas station to go to based on up to date prices (they take into account extra gas required to go out of your way to a different gas station)

This is a very good resource for those who are looking for new providers or their first providers on different products.

Free 1st Birthday Cake from Tops Bakery

Tops Bakery (Western New York Grocery Store) will give you a free birthday cake for your child on their 1st birthday.  If you call ahead, they will even design the cake for you (I don't know if they will put a picture on it for free - although they have that capability).