Invest In Stock Market

winswallstree

Can anybody tell the risk of investing in stock market??

Thanks in advance!!

daveb

Yes. You could possibly lose money.

M Quack

There is recent experimental evidence (to the tune of several billions of dollars) that not even highly trained professionals understand the risks of investing in stock market.

What do you expect to learn from a bunch of amateurs?

nucl34rgg

Just remember that if there were an easy way to invest and make money, everyone would do it. Suffice it to say, the risk is high if you don't know what you're doing. Buying stock in a well known, long established company is not so risky, though. :P

russ_watters

That does not follow. It is like saying that since race car drivers crash sometimes, amateurs shouldn't drive. JP Morgan was doing something completely different from what we amateurs do and many amateurs do a fine job managing their investments.

russ_watters

While thats true, it is also true is that you don't need to know much to invest with decent return and low risk. So the key then is self awareness: know what you don't know and don't step put of your depth.

Vanadium 50

If you are talking about the recent JP Morgan situation, those weren't stocks.

DeadOriginal

I forget the name of the professor who showed that over a 25 year period, stocks are actually safer than bonds. You can also expect to have an average gain of 8% on your portfolio over that 25 year period.

This is of course under the assumption that you are adequately diversified and have done the right research to know that the companies you invest in are financially stable.

If you are planning on investing short term to make $3262643264643643 then good luck.. its not happening.

chiro

This is advice that everyone should follow regardless of their financial/investment/fund management experience.

Simply put: if you don't understand what you are investing in, then don't invest in it. Doesn't matter what the 'charts show' or what is said, if you invest in something you don't understand you are effectively gambling and not investing.

DeadOriginal

It was Prof. Jeremy Siegel.

Astronuc

Take a lesson from the FB IPO and don't get zucked!

http://www.fool.com/investing/genera...o-flopped.aspx
http://online.wsj.com/article/SB1000...698374718.html

It was originally priced at $28-35/share, then someone decided it would open at $38/share. First day id went up, apparently as high as $45/share only to close at $38 - it's opening price. Yesterday -day 2 - it closed around $34. Now it's down to $31.

They should have started at $28. Acutally, they should have started lower based on PE.

It also now appears that several banks lowered earnings expectations on FB, while informing some inside investors, but neglecting to inform the public. Sounds like a case of insider trading.

http://finance.yahoo.com/news/facebo...005837993.html

Some folks are down between 25-32% already. They got zucked.

I think their CFO may not be around for long.

Facebook = Faceplant

Office_Shredder

I don't understand this argument. Facebook's responsibility when doing an IPO is not to price the stock so the people buying it can make money off the stock price going up. Facebook's responsibility is to sell the stock for as much money as they can. If people thought that the stock was overpriced (and they should have) they just shouldn't have bought it

Astronuc

The corporate body FB, sold a fraction (~14%) of shares to raise money.

The initial plan: "Facebook plans to raise $10.6 billion, making it the fifth largest US IPO ever, by offering 337.4 million shares (47% insider) at a price range of $28 to $35. At the midpoint of the range, Facebook would have a market cap of $86.2 billion."

Revised plan: "The social networking giant now plans to raise $12.1 billion by offering 337 million shares (47% insider) at a price range of $34 to $38. At the midpoint of the revised range, Facebook would command a market value of $98.6 billion."

An LA Times article indicated that 421 million shares were issued.
http://finance.yahoo.com/blogs/break...172334833.html

The shares opened at $38/share for a total value of ~$105 billion (based on 337 million shares) of which ~$12.7 billion would go to the company treasury (FB might have raised $16 billion based on an increase in shares sold). Zuckerberg cashed in some shares and got ~$2 billion in cash and retained ~$19 billion in stock. However, now that the stock priced has dropped about 25% or so, Zuckerberg's stock has dropped in value to ~$15.5 billion.

The company could have raised the $12 billion by selling more stock, with less shares granted to insiders. But the insiders would have started with less. On the other hand, the started with more, and ended up with less (after drop in stock price), rather than starting with less and getting an increase as share value increased.

An interesting perspective on the IPO - Plenty of Blame to Share for Faulty Facebook IPO: Ritholtz
http://finance.yahoo.com/blogs/break...172334833.html

Facebook Bankers Secretly Cut Facebook’s Revenue Estimates In Middle Of IPO Roadshow
http://finance.yahoo.com/blogs/daily...133648905.html (interesting discussion about selective dissemination - only some got the downwardly revised estimates)

http://news.yahoo.com/insight-morgan...0--sector.html

http://dealbook.nytimes.com/2012/05/...tory-concerns/

http://news.yahoo.com/regulators-pro...--finance.html

Smart investors in the public sector sat this one out.

Astronuc

The can be rewards and losses.

Take a look at the tech bubble in the late 90's early 2000s. Look at equities like JDSU.
http://finance.yahoo.com/echarts?s=JDSU

If one bought prior to August 1999, and sold during 2000, the gains would have been substantial to enormous. If one bought during the run up, and then sold after the collapse in price, the gains could have been mediocre, or the loss could have been substantial to enourmous.

The bottom line is that one must do one's homework - and don't believe the hype.

ThomasT

Yes, something the amateur investor who really can't afford to lose any of the money he might invest should keep in mind.

If you've only got a few hundred grand to invest, then you're probably better off just keeping it in the bank. Or maybe finance some enterprises that you can hands-on influence with every day involvement.

The stock market is more a gamble than an investment, even for those who, supposedly, know what they're doing. Just my opinion.

boomtrain

if you want to make modest gains at low risk, diversify your portfolio amongst the major asset classes: stocks, long term bonds, short term bonds, and gold. It's really rare for all four of those asset classes to lose value simultaneously.

http://crawlingroad.com/blog/2009/10...llocation-faq/
http://crawlingroad.com/blog/2009/02...llocation-faq/
http://crawlingroad.com/blog/2009/01...llocation-faq/

If you want to be lazy about the specific allocation, you can just put 25% of your money into each asset class and forget about it, rebalancing periodically. That mix is known as the permanent portfolio. I'm not a die-hard proponent of the portfolio, but it is something interesting to think about.

russ_watters

That's not really correct/a good investment strategy. It is generally accepted that the stock market is the best place to invest your money long-term. It is where the bulk of your savings should be if you are below retirement age.