It is strictly up to you depending on what your goal is. You can set a
goal, say sell after you have made equivalent of 20% annual return or more
depending on what you want. ($114 x .20 = $136.80.) When to sell is the
toughest decision, no doubt. As long as we are making money, we hate to
sell. I really good approach is to buy the stock, then immediately sell a
covered call on the stock. This also takes the sell decision out of your
hand for the most part because if you hit the strike price, it's sold and
you made your goal. And it easier to make your goal because you are get a
premium for selling the option. Another thing is to study the charts on the
stock and use moving averages to determine buy and sell points. With stocks
you have a lot of choice and the only fee you pay is the cost to buy and
sell.


"jm" <john_20_28_2000[at]yahoo.com> wrote in message
news:c67e4bdd.0404211535.71bc2e7c[at]posting.google.com...
- quote -

jm <john_20_28_2000[at]yahoo.com> wrote:

- quote -

The right amount is determined by how much you need to keep your
expenses down to match a mutual fund. *If* you are a reasonable stock
picker and enjoy the process of researching shares, etc., then it may
make sense to pick your own stocks, once your portfolio is big enough
that your expenses are roughly the same (or less) than the expense ratio
in a typical mutual fund. In an index fund, that's a very low bar, only
around .2% per year. For managed funds, a decent expense ration is
still going to be around 1% a year or less.

So figure you need a basket of at least a dozen stocks to get reasonable
diversification, and you will have a turnover of around 25-30% per year.
(the more turnover, the bigger trades you need to make to keep your
costs down). Figure 12 stocks and you will make 6 trades per year (3
buys and 3 sells). If your cost is $7 a trade, then you need to have a
- quote -

fund (at 1%). This doesn't account for losses due to the spread[*],
which will usually cost you more than a typical fund manager (since they
will cut better deals with brokers than an individual non-high-roller
ever could). Because of this, you probably need to double those
numbers. So $40K to match an index fund and 10K to match a managed
fund. That means you'll be trading lots of around $1000 or around
$4,000. Number of shares is irrelevant. If you plan to trade more
often than that, you'd want more money to match expenses.

If you think you can pick stocks enough better than the fund managers to
win with greater costs, think again for a while before you try. Play
with a mock portfolio for a while, or invest with money that can be
considered "play" or "gambling" money that you can afford to lose (as if
you were going to a casino, except you can reasonably expect positive
average returns). Be brutal about accounting your *real* returns after
expenses. Remember that to beat the index, you have to be better than
the typical *professional fund manager* at picking stocks, noting that
they have teams of analysts at their disposal, and all day long to make
their decisions as it is their only job. While there are irregularities
in the way they behave and beating them may be possible in the long run,
it ain't easy and few people manage. Few enough that most of the
examples can be explained by plain old luck.

OTOH, it is *very* easy to get caught up in hype and hysteria and make
stupid decisions. Or forget to diversify your risk appropriately, or
any number of other rookie mistakes that can cost you a lot of money.
The average individual amateur stock picker does a fair bit worse than
the indexes. Given the amount of work involved in getting that *maybe*
extra 1-2%, and the very large risk that you will lose big compared to
buying a fund, it really doesn't make a lot of sense to pick your own
stocks unless you love doing it, and have some low-money or no-money
experience under your belt to demonstrate that you won't bite the big
one.

It's definitely a bad idea for someone who needs to ask the kind of
novice questions that you are asking here to wade right into stock
picking, when plunking on a fund is easy.

Also, much more important than the details of how you buy stocks, is
just how much you should be investing in stocks vs. other investments.

Have you looked at the FAQ here at all? It's important to establish a
solid emergency fund before investing in stocks. It's also important to
stay well away from volatile common stock for money that you will need
within a few years. Stocks are for your long-term portfolio, money that
you will not "need to sell" for at *least* 5-10 years. Even in the
long-term portfolio, it's good to spread your money into different asset
classes. If you do this correctly, you can reduce your overall risk
significantly without giving up any expected return. There are also
different sweet spots depending on how much risk you wish to take on.


Michael
[*] The spread is the difference between the offer and sell prices.
Traders make money on the spread, like bookies on a betting spread. If
a stocks price is $10, that usually means it is the offer price. If you
buy it at $10, the person who sold it probably only gets $9.90 or so.
That difference is the spread and gets split between the market maker
and the brokers on each side according to contract. Since fund managers
move a *lot* of stock, they can usually cut deals that reduce the
spread, or give back some portion of it. Unless you have a portfolio
worth 9 figures or so and a lot of industry connections, this is not an
option for an individual.

You just need to divide the transaction fee (both buy and sell, so $14)
by the number of shares you purchase-1000, and you get .014. So, the share
price needs to move about a penny and a half for you to recoup your costs.
For your $100 stock that would be trivial, with penny stocks it makes more
difference. I generally don't buy fewer than 100 shares of something, so as
to average out my cost among more shares.

David Viles


"jm" <john_20_28_2000[at]yahoo.com> wrote in message
news:fMYhc.5132$w96.719838[at]attbi_s54...
- quote -

"John A. Weeks III" <john[at]johnweeks.com> wrote in message
news:220420040834298504%john[at]johnweeks.com...
- quote -

mutual fund online like other stocks?


---

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In article <c67e4bdd.0404211535.71bc2e7c[at]posting.google.com> , jm
<john_20_28_2000[at]yahoo.com> wrote:

- quote -

This is the reason that I do not suggest buying individual stocks
unless you have a large enough sum of money to (a) buy a
deversified basket of stocks and (b) have enough funds to buy
stocks in large enough blocks where the commission is trivial
in comparison. Until you get there, check out no-load mutual
funds, especially those that track one of the major indexes.

-john-

--
================================================== ==================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ==================

I know this is probably a basic math question, but I am contemplating
going with this place that has seven dollar trades.

I guess that's okay.

Anyway, If I pay $100 for a set of shares and then pay $7 for the
trade fee, then I have paid $107. How much do my shares have to go up
before it makes sense to sell, because I have to pay $7 again, when I
sell.

I am thinking it depends on how many shares and/or how much it goes
up. What is the rule of thumb here? Or am I just supposed to sit on
it for twenty years?
Or am I supposed to be "trader" and not an "investor."

Thank you.