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Tips For Investing In Shares

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emed
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Tips For Investing In Shares

Postby emed » Wed, 07 Apr 2010 12:44 pm

I wish to invest in shares but i know nuts about this field.



Are there any experts out there who can provide me with experts' tips? Or recommend me any workshops or seminars to level up myself?



Help appreciated!

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Postby beppi » Wed, 07 Apr 2010 1:18 pm

There is no money generated on the stock market (apart from dividents which are usually minimal), just exchanged. So one person's gain there is always another one's loss.
To consistently gain more than lose, you have to be better than the others in terms of market knowledge.
Are you?
Simple statistics tell you that 50% of the participants are better than average, and 50% worse (and thus will lose in the long term). But 100% of participants believe they are better than average (otherwise they would not participate).

Why don't you gamble your spare money in a casino (where you don't need to pretend, since it's just pure luck), after keeping the essential amount in a safer investments?

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Postby emed » Wed, 07 Apr 2010 2:04 pm

agree. guess i am going to be one of the believer. I have been hearing from many people it is pretty profitable.

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Postby Strong Eagle » Wed, 07 Apr 2010 2:08 pm

beppi wrote:There is no money generated on the stock market (apart from dividents which are usually minimal), just exchanged. So one person's gain there is always another one's loss.
To consistently gain more than lose, you have to be better than the others in terms of market knowledge.
Are you?
Simple statistics tell you that 50% of the participants are better than average, and 50% worse (and thus will lose in the long term). But 100% of participants believe they are better than average (otherwise they would not participate).

Why don't you gamble your spare money in a casino (where you don't need to pretend, since it's just pure luck), after keeping the essential amount in a safer investments?


This is not correct. Over a longer time period the market has indeed grown because the companies in which a person invests have grown. Your comments may be true for speculative day trading, and I don't believe the rational market hypothesis but if a company does well and grows, this is reflected in the stock price.

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Postby beppi » Wed, 07 Apr 2010 2:29 pm

Strong Eagle wrote:This is not correct. Over a longer time period the market has indeed grown because the companies in which a person invests have grown. Your comments may be true for speculative day trading, and I don't believe the rational market hypothesis but if a company does well and grows, this is reflected in the stock price.


Wrong!
Does any money flow from the "doing well and growing" company into the stock market? No.
The stock goes up ONLY because buyers are willing to pay more - normally because they believe that a "doing well and growing" company will continue to do so and thus that the price will climb further (i.e. that in future other people would be willing to pay even more for the shares).
In short, only those who can predict better than the average whether a "doing well and growing" company will continue to do so (or rather, will be perceived as doing so) will profit in the long term. It's a gamble on the beliefs of the majority, nothing more nothing less.

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Postby Strong Eagle » Wed, 07 Apr 2010 3:38 pm

You are saying that there is no value created in a growing company, for example, Microsoft when I bought it, and its overall value today. Clearly, there is a value for MS that is much higher today, based upon its revenues and profits.

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Postby beppi » Wed, 07 Apr 2010 4:08 pm

Of course there is value (and money) created in a company which is making profits. But none of it (or very little in the form of dividends) is distributed to the shareholders, and thus it does not directly influence the share price - only indirectly through the beliefs of current or would-be shareholders.

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Postby Strong Eagle » Wed, 07 Apr 2010 4:49 pm

beppi wrote:Of course there is value (and money) created in a company which is making profits. But none of it (or very little in the form of dividends) is distributed to the shareholders, and thus it does not directly influence the share price - only indirectly through the beliefs of current or would-be shareholders.


Well... yes and no. The relationship is direct and is clearly demonstrated when a company is bought by another. The purchase price (per share) is based upon the buyer's estimates of earnings, profitability, and the future, in other words, what does it cost to purchase a cash flow?

And, the price of a company's cash flows has be be somewhere in the neighborhood (with risk factored in) of other investments, be they gold, real estate, or other commodities.

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Postby emed » Thu, 08 Apr 2010 10:58 am

looks like you two are really veterans in this field. Do u guys have related seminars and talks to introduce to me?

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Postby Strong Eagle » Thu, 08 Apr 2010 11:44 am

emed wrote:looks like you two are really veterans in this field. Do u guys have related seminars and talks to introduce to me?


One thing is for sure... most professional money managers cannot do better than the market average... and most, particularly those with loaded funds, do worse than average.

It used to be a fact that 'buy and hold' strategies... for example, buy General Motors or Microsoft and hang onto to it for 10 years... was the way to invest... quality companies... long term view.

But market volatility has changed all that... and the markets are much more volatile for so many reasons... high risk, little understood derivative instruments, high debt loads, bubbles in commercial and private property, the ups and downs of metals and oil prices... all this means that you could buy Microsoft today... and watch it fall 30 percent due to a market downturn... then it will take you years to just to get back to the point where you bought in.

I actually agree with a lot of what beppi says. The very fact that people invest money in stocks drives up the price in and of themselves... the dot com bubble is but one extreme example... people bought stocks with price earnings ratios in the hundreds.

You need to start with basics... first, a sound understanding of stock types, and basic measurements of company performance... P/E ratios, revenues or earnings as a percentage of assets, or employees... debt ratios, trends... there are literally hundreds of different ways of looking at a company to determine if its stock price is fairly valued... some very arcane.

Then, start looking at various kinds of businesses... things that might interest you... choose a couple to study... what influences the company's stock price... how do they compare to others in the same line... a grocery business is a lot different from an ire ore producer.

Then, start looking at how trades are executed... buy/sell/stop orders/ short selling, and options.

Start with some simple websites... like Motley Fool... or the Stock Gumshoe... and get informed.


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