New To Stockmarket Investing

[Allen72289]

I've got some questions..

You have to pay taxes on stocks, right? Or is there a way around this, like tax exempt areas such as Dubai where you could hire brokers there?


I've seen many users here mention commodity stocks, why so?

I haven't read much up on Peter Schiff however, I am curious what kind of investments he suggests.

 

[Eponym_mi]

You'll pay taxes on investments outside of a 401(k), IRA, or similar account. How old are you? Age makes a difference in respect to where you should invest.

 

[Allen72289]

18

 

[liberty_Forever]

I'd stay far away from the stock markets right now. The metrics have gone bonkers. You probably want to be in cash until we get some direction.

 

[Eponym_mi]

I'm very impressed by your age and interest toward investing. You're off to a good start! You're young and have a long investment horizon. You've got nearly 50 years until retirement, but the best time to plan for that is NOW.

Start reading some books on investing...find various authors and get various opinions. You might watch some financial related cable channels like CNBC, Fox Business, Bloomberg, etc.. Don't watch these for "good stock tips", but just to learn about various classes of investments, their risks, their markets, etc.

I'd also encourage you to seek advice from family, teachers, and mentors....people you know, respect, and trust for advice concerning financial decisions. Always be wary of advice from strangers....even professional money managers. You should always research investments and evaluate the risk/reward. Remember, its your money, not theirs...and someone else's bad advice will cost you, not them.

Having said that, and contrary to advice you may get from the financial armeggedon people that hang around this forum, you should be looking at mutual funds and/or stocks...especially now. The best time to buy mutual funds and stock is when there is a lot of doom and gloom like now. Plus you have a very long time to go until retirement. Research financially sound and solid companies that have good management and a history of good returns. Once you've done your research, buy some of the company's stock on a regular basis and hold on to it. Look into opening an IRA account with a online discount broker.

 

[ihsv]

I have a question, and perhaps someone could answer it. If the PPT is in place, and "rescues" the stock market whenever things look ugly, why are people afraid of a stock market "crash", when this working group has the power to stop a crash? Could the market still crash even with the PPT? If so, how?

 

[jclay2]

Allen72289: I am in the same boat. I am 17 years old and have never invested before until a month ago. However like the above poster, the key to investing is starting out as early as possible and using the power of compounding to work for you. The easiest way to get into investing is probably through an index fund through either vanguard or fidelity. Don't worry about investing in comodities yet. Being 18 years old, you probably don't have enough money to put to work in many different areas. That is why I would recommend you invest in an S&P 500 index fund and anyone who tells you a different story than a broadmarket type fund you should stop listening to immidiatly. It gets the whole market and instantly diversifies you. However, before making any financial decisions, it is best to consult someone who you know is very wise with money and you should probably consult a financial advisor. But in all honesty just put it in a broad market index fund and you will be fine. I used vanguard and my sister set it up for me very quickly with a lot of ease. Just go to vanguard.com or fidelity.com and call customer service to help you out.

Good Luck

 

[Eponym_mi]

I have a question, and perhaps someone could answer it. If the PPT is in place, and "rescues" the stock market whenever things look ugly, why are people afraid of a stock market "crash", when this working group has the power to stop a crash? Could the market still crash even with the PPT? If so, how?

The PPT can have some influence in respect to short term panics. It cannot stop a panic entirely on its own...individuals need to do that themselves. The PPT has less influence over underlying fundamentals and negative sentiment that leads to a bear market. Personally, I'd worry more about a very long term bear market than a shorter term panic.

 

[jclay2]

I have a question, and perhaps someone could answer it. If the PPT is in place, and "rescues" the stock market whenever things look ugly, why are people afraid of a stock market "crash", when this working group has the power to stop a crash? Could the market still crash even with the PPT? If so, how?

Ihsv: Yes the market can still crash with the PPT. The government doesn't have the power to bailout an economy. However, there are some industries that the government will bailout. Banks, Bond Insurers, Mortgage Companies, and Insurance are a few examples that come to my mind. I am sure there are many other areas that the government bailsout, I just can't think of any right now. Actually if you listened to the republican debate you would have heard many of the candidates talking about helping out distress mortgages and property insurance in high risk areas.

 

[billyjoeallen]

General consensus on this board is to short (borrow) stocks. That has the effect of profiting when they go down. The technical term is a "put."

The market is going down due to fundemantal weeknesses that would take way too long to explain.

 

[Eponym_mi]

General consensus on this board is to short (borrow) stocks. That has the effect of profiting when they go down. The technical term is a "put."

The market is going down due to fundemantal weeknesses that would take way too long to explain.

The kid has 50 years....give me a break!

 

[jclay2]

General consensus on this board is to short (borrow) stocks. That has the effect of profiting when they go down. The technical term is a "put."

The market is going down due to fundemantal weeknesses that would take way too long to explain.

That is not the concensus on this board. The best thing to do is to stay invested and keep investing. It is very hard to predict short term outcomes, however, the one thing you can predict is that long term the market will go up. Don't listen to this short stocks crap. For all you guys know, someone could start a put play and then we could have a bear market rally and then they would pull out and lose big. If you are going to do risky put moves and you think you can call the market short term then you might as well be a trader at goldman sachs.

 

[AceNZ]

You have to pay taxes on stocks, right? Or is there a way around this, like tax exempt areas such as Dubai where you could hire brokers there?

The best way around it is to never sell the stock. You only owe tax when you sell. That's the long-term, Warren Buffett style of investing.

Tax haven countries won't help you. American citizens are taxed on their worldwide income, regardless of where it's earned. Of course you could always expatriate to a tax haven and give up your citizenship in a few years....

Trading is a bad idea. Research your choices carefully before you buy.

I've seen many users here mention commodity stocks, why so?

Because commodities are in a long-term bull market, while stocks are in a long-term bear market. It's a bad time to be buying stocks, especially for a new investor like you.

Commodity or gold ETFs are a good alternative, though.

I haven't read much up on Peter Schiff however, I am curious what kind of investments he suggests.

1. Gold
2. Dividend-paying overseas stocks
3. Certain non-USD currencies
4. Commodities or stocks in overseas commodity-oriented companies
5. Certain overseas government bonds (I don't agree with him on that one)

He also suggests getting out of dollar-denominated assets, especially real estate.

Peter's opinion is in the minority, though. Most people seem to think that he's crazy, but he has made a lot of money for his clients, and most of his predictions for the last few years have come true.

 

[Eponym_mi]

If the people offering advice here reflect Ron Paul's, I hope he never takes office. Unbelievable!

 

[AceNZ]

General consensus on this board is to short (borrow) stocks. That has the effect of profiting when they go down. The technical term is a "put."

A put is a type of option. That's completely different than selling short.

Also, I wouldn't say that there's anything close to a general consensus here that either selling short or buying puts is the best way to profit from this market -- and even if it was, both approaches aren't suitable for a beginning investor.

If the people offering advice here reflect Ron Paul's, I hope he never takes office. Unbelievable!

Peter Schiff is now an official economic adviser to Ron Paul.

 

[Eponym_mi]

Peter Schiff is now an official economic adviser to Ron Paul.

If his advice to an 18 year old would be anything like yours, Ron Paul would be stupid to listen to him.

 

[AceNZ]

If his advice to an 18 year old would be anything like yours, Ron Paul would be stupid to listen to him.

That's a back-handed way of saying that a new investor would be stupid to listen to me as well.

Exactly what part of my advice to him do you consider stupid? If you're going to name-call, at least give me a chance to defend myself.

To summarize my previous suggestions:

1. Don't trade the market. Analyze carefully and buy for the long term.
2. Avoid stocks at this point in the business cycle
3. Consider gold or commodity ETFs

 

[jclay2]

For all we know, gold and precious metals could do exactly what it did in 1981 and a lot of people could get hammered.

 

[Eponym_mi]

1. Don't trade the market. Analyze carefully and buy for the long term.

I can get behind that. Yet, this is exactly opposite of what you've suggested.

2. Avoid stocks at this point in the business cycle

Dumb. Stocks are down and while they might go down further, this is the time to start buying (average in). You're pretending to know this isn't the bottom. Whether or not this is the bottom, he needs research good companies or index funds and start averaging in for the long haul.

3. Consider gold or commodity ETFs

In a diversified portfolio, yes, but this should be a very small part overall.

 

[AceNZ]

For all we know, gold and precious metals could do exactly what it did in 1981 and a lot of people could get hammered.

From a risk perspective, consider the following:

1. Holding dollars is also risky. The currency is being debased at the rate of appx 12% per year in terms of purchasing power, and even more in terms of other currencies.

2. Holding stocks during a recession is very risky, as you can see from any chart of the Dow

3. The Dow is currently selling for around 13.3x the price of gold. In 1980, it was selling for 1.04x the price of gold. Gold is relatively cheap compared to stocks.

4. We haven't seen the end of the subprime mess. Interest rates are going lower, inflation is going higher. More disasters loom ahead, including defaults on securitized credit card loans.


So each investor needs to trade off those risks and choose their capital allocation accordingly. If you're more comfortable in stocks or cash, that's what makes a market, and I for one will be on the other side of those trades.