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Originally Posted by 412Z
Would anyone recommend buying BAC right now?
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Not my personal favorite of the financials, but if you buy it on a really bad day you could make some money. My favorite financial that I've bought is TROW.
I'm glad we're finally talking about stocks that are worth buying.
A lot of us can get caught up in the penny/otc stuff because, when it works you can make a lot of money. When it works. 99% of the time, you're not going to make a lot of money because they happen to be priced at what they're worth. The market isn't completely efficient, but it does a pretty good job of things. So if something is only worth a half cent, your only hope of making some money is to wait for the next pump and dump and bail out.
There's nothing wrong with pennies for a small sliver of your portfolio- like 5% or so. It's fun. It's like playing roulette. It's exciting to watch the little ball roll around, and when you win you win big. But the odds suck. The best odds in the house are playing blackjack and following the rules. That means a few things:
Buy good, solid long term track records of growth.
Don't be afraid of really boring stocks with good dividends- money is money.
Systematic investment is king. Dollar cost averaging is key. It's why you'll usually have a hard time beating the rate of return you get in your 401(k) if you're allocated properly.
Take your profits. Don't get greedy- hogs get slaughtered.
Be smart about your losses- use them to offset gains for tax purposes.
Make sure the move is worth the cost- opportunity cost, taxes and brokerage fees add up. Did you really make any money? How much stress did you have for that $150? Was it worth it?
Investing is not gambling- make decisions cold. Don't let your emotions get in the way.
Set your exit points when you buy the stock. Put in GTC orders to take it out of your hands. That can be 10,15,20,25%,whatever. But put in the order so you won't get greedy at the last minute.
Don't get cute. There's a reason the rules work.
And lastly, and most importantly, stop thinking so short term. It's easy when you start out to want to make a bunch of money in a quarter. Most times you'll just give it back next quarter. Look 3-5 years out. Unless you're currently retired, you've got a long enough horizon for that and it's much easier to make money on that scale.