Stock Trading for Dummies?

This is a discussion on Stock Trading for Dummies? within the Off Topic & Humor Discussion forums, part of the The Back Porch category; Trading stocks is a bit like shooting a gun: most anyone can do it but you have to spend some time and effort to do ...

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Thread: Stock Trading for Dummies?

  1. #16
    Senior Member Array Caertaker's Avatar
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    Trading stocks is a bit like shooting a gun: most anyone can do it but you have to spend some time and effort to do it well. The best advice I can give you is to buy this book:
    How to Make Money in Stocks: A Winning System in Good Times and Bad,Fourth Edition: William O'Neil: 9780071614139: Amazon.com: Books

    The author is a well respected, some would maintain legendary investor, who is the founder of the daily newspaper Investor's Business Daily. The book looks at the greatest winning stocks of all times and identifies characteristics similar to all. There are many systems out there and you need to find one that works for you. Worst case scenario is you buy the book and are out ten bucks.

    With respect to purchasing stocks atm, the market is in a correction and (in my opinion) the safest place to be is in cash. It might jump back up to new highs, it might fall significantly lower. I don’t know anyone who has a crystal ball.

    RGR had a big run up earlier in the year when they announced that they had quit taking orders for guns until they caught up with their backlog. The stock has fallen since hitting a new high and is sitting at 21.12% off that high. Its EPS is rated at 99 (highest possible) and they have a relative strength of 81% which means that the stock is outperforming 81% of listed stocks. None of these facts represent a call to buy.
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  3. #17
    VIP Member Array nedrgr21's Avatar
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    Quote Originally Posted by Hopyard View Post
    One of the peculiarities of investing in these retirement accounts is that there is no way to
    account for losses, or use losses in them to offset taxation on gains anywhere. If you do your stock investment outside of retirement accounts you can balance some of your capital gains (income) against your losses when you file Schedule D.

    The tax bite on retirement accounts can be substantial if you have even a modest income from other sources.

    IMO, investing in retirement accounts (IRAs, 401k, TSP) has been heavily promoted but is in some ways scam and gimmick.

    If I had it to do over I'd probably have done all investment outside of these "tax advantaged" accounts because
    there are too many pitfalls, tricks and gimmicks, prohibitions, gotchyas, and penalties. And if you want the funds
    to become an inheritance for a child, a whole can or worms gets opened up if things aren't handled exactly
    the right way. KISS applies.
    Say what? Not only do you make money on the original investment, growth, and dividends; you make money on the amount you would otherwise pay in taxes. With Roth accounts you never pay taxes on any growth. Fewer and fewer people itemize (about 1/3) b/c of the higher std deduction, thresholds, and minimal home mortgage interest rates. The "tax bite" on retirement accounts is either no different than ordinary income or, more importantly non-existent. Basically, to reap the benefits all you have to do is not take any distributions until you reach a certain age (with a few exceptions to allow for earlier withdrawals). There is also a chance the advantageous capital gains rates are going away soon.
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  4. #18
    Member Array Scramble4a5's Avatar
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    Pick up s book by Ed Slott. he tells you how to get the most out of your IRA/401K while you are alive and how to leave it to your beneficiaries with the feds getting as little as possible. I have been investing in my 401 k for 25 years and have done well. Most years up, a few down, but that's investing.

  5. #19
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    One of the peculiarities of investing in these retirement accounts is that there is no way to account for losses, or use losses in them to offset taxation on gains anywhere.
    Actually, capital losses in retirement accounts reduce ordinary income, because the retirement account has less to distribute ultimately, hence less ordinary income. Counter intuitive.
    Last edited by Rock and Glock; October 25th, 2012 at 11:22 AM.
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  6. #20
    VIP Member Array nedrgr21's Avatar
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    Isn't that only if you liquidate the entire account? and losses are only to the extent the current balance is less than the basis (which is, basically, non-deductible contributions), and subject to other limitations. Of course, now we're getting into Hopyard's "trickery". Of course, the average time to recover from market losses is 2 yrs (current situation has only happened 2x in 100 yrs I believe). Really is best just to wait it out, unless you died or are dying and can't.

  7. #21
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    Isn't that only if you liquidate the entire account? and losses are only to the extent the current balance is less than the basis (which is, basically, non-deductible contributions), and subject to other limitations.
    It really only applies to qualified retirement plans where a deduction or exclusion was taken originally. Liquidation is implicit at some time, yes. Not that I advocate doing anything for tax purposes, I was clarifying a prior point.

  8. #22
    Ex Member Array pscipio03's Avatar
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    I started with Pink Sheet stocks and had a little fun with it. Put in less than $500, made some amazing gains and some loses. Overall, after about a year, I was up about $5,000 which I grudgingly used to spruce up the house with my wife's suggestion. I use USAA for my trades, but you can always got through Scots or any of the other mega-trade companies out there. If you like it, you can move on to the big boys.
    I would wait until next year to start this if you're really interested. See if the long term cap gains tax break expires. Not saying it won't expire at some point, but if it does expire this year, I think you'll see some sell offs and an initial lessening of investing. Will cause stock prices to drop a bit. Good time to get in.
    Two things I say about putting your eggs into one basket-- 1. Diversity saves your a$$ if one company goes under. Ruger gets slapped with some massive class action and they close up. You've lost it all. Hard to believe, but it can happen.
    2. To make any sizable returns, you have to have sizable investments. So, don't think you'll be able to buy $20,000 of Ruger stock and be able to retire 20 years from now. People who you read about doing that buy when a company is either an IPO, or still new enough that the stock price is pennies, not dollars. I don't think Ruger will ever have such an inflated stock price that you'll reap a lot of gains out of it. It's been around for years and barring an asteroid hitting all other gun manufacturer plants, I fail to see Ruger's stock exploding.

  9. #23
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    Quote Originally Posted by nedrgr21 View Post
    Say what? Not only do you make money on the original investment, growth, and dividends; you make money on the amount you would otherwise pay in taxes. With Roth accounts you never pay taxes on any growth. Fewer and fewer people itemize (about 1/3) b/c of the higher std deduction, thresholds, and minimal home mortgage interest rates. The "tax bite" on retirement accounts is either no different than ordinary income or, more importantly non-existent. Basically, to reap the benefits all you have to do is not take any distributions until you reach a certain age (with a few exceptions to allow for earlier withdrawals). There is also a chance the advantageous capital gains rates are going away soon.
    I'll stand by what I wrote. If you want to get an idea of the mess you (or your children) can get into with these
    retirement products, just look up "Inherited IRAs" and you'll see what I am talking about.
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  10. #24
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    Quote Originally Posted by DamnitBob View Post
    I ask our company's agent for our 401K accounts about investing in a specific company. To my dismay, he told me that only investments in a group of company's is allowed with our 401K's. I am interested investing in Ruger and possibly Smith & Wesson. Anyone already an investor? Any information would be appreciated.

    Thanks!

    Bob
    I spoke with my finacial advisor about this sometime back and was told that single stock investments should rarely be accomplished, even those investors with large capitol invest in mutual funds so that their investment dollar is diversified to limit the risk, where as a single stock has zero diversification raising the risk of loss, in our current market diversification is the name of the game limit loss and lower risk while still maintaining return on investment of 10 to 12%

  11. #25
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    If you want to get an idea of the mess you (or your children) can get into with these retirement products, just look up "Inherited IRAs" and you'll see what I am talking about.


    You're exactly correct in that regard. It is a snake orgy of confusing rules, and throw in annuities and you could keep me employed full time for a couple of years.

    BTW, FYI and YMMV, I converted my children's Regular IRA's to Roth IRA's several years ago. Better results in 30 or 40 or 50 years. Not providing advice there, folks, just move on......just move on.....
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  12. #26
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    Quote Originally Posted by Rock and Glock View Post


    You're exactly correct in that regard. It is a snake orgy of confusing rules, and throw in annuities and you could keep me employed full time for a couple of years.

    BTW, FYI and YMMV, I converted my children's Regular IRA's to Roth IRA's several years ago. Better results in 30 or 40 or 50 years. Not providing advice there, folks, just move on......just move on.....
    I don't know if my recollection and facts are correct, but I seem to recall that a well screwed up inherited IRA can
    cost the beneficiary more in taxes and penalties than the value of the IRA.

    I have put warning notes, news clippings, Google Downloads, IRS documents etc in a folder my son would
    find if I and Mrs H got hit by a truck and "croaked." I have warned him that he MUST consult with
    both a tax lawyer and a tax accountant, and double check their advice against his own understanding of the
    rules obtained by reading IRS's documents on this matter.

    I have no doubt that Uncle is going to get a windfall. The game is rigged.
    If the Union is once severed, the line of separation will grow wider and wider, and the controversies which are now debated and settled in the halls of legislation will then be tried in fields of battle and determined by the sword.
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  13. #27
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    Quote Originally Posted by Rock and Glock View Post
    Actually, capital losses in retirement accounts reduce ordinary income, because the retirement account has less to distribute ultimately, hence less ordinary income. Counter intuitive.
    That is an interesting way to look at it, but ... a bird in the hand is worth two in the bush. If a young person
    "increases" their income by declaring a loss on Schedule D, the benefit is immediate. Whereas if he has to
    wait till he is considerably older, he loses all that interest on the money he saved today. But, looking at it as you do,
    I suppose one would have to work the numbers (guestimates) on lost future earnings minus taxation on those earnings.

    My head us spinning thinking about this one. It is like the convoluted rationalization of deductions as "tax expenditures."
    Ugh.
    Last edited by Hopyard; October 25th, 2012 at 10:16 PM. Reason: clarity
    If the Union is once severed, the line of separation will grow wider and wider, and the controversies which are now debated and settled in the halls of legislation will then be tried in fields of battle and determined by the sword.
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  14. #28
    VIP Member Array nedrgr21's Avatar
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    and the second mouse gets the cheese ... whatever. The usual reason people run into problems is b/c the advice they follow is from journalists, friends/family, and the guy down at the bar instead of getting the advice of someone in the business b/c they want to pay $3 for a magazine (or nothing for advice from f&f or "some guy") instead of a few hundred to a professional who can tell them not only what to do, but why to do it so they understand their financial plan and can recognize when changes might need to be made. Think about the difference in costs compared to the size of the estate you want to retire with or leave behind. I believe the relevant saying is "penny wise and pound foolish". For another example, if you focus on the interest saved from paying off your mortgage early, you should see a professional financial planner.
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