"You should have $10,000 in index funds before picking individual stocks"

Posted by ArteSuave116 on February 07, 2017 (11:57AM)

I heard Jim Cramer say this yesterday in a video. What are your thoughts? Agree? Disagree?

Posted by made to trade on February 07, 2017 (03:29PM)

frankly i don't think you should pick individual stocks unless you are trained in financial statement analysis.

if you are not, i think that you should be in index funds as well

Posted by spshapiro on February 08, 2017 (07:42AM)

The reason for waiting until you accumulate a certain amount of capital before investing in single stocks is that you are likely to put too much into one or two investments, and if you guess wrong, you blow the greater portion of your portfolio. The specific number is of little relevance; it is important to diversify. That is one of the greater merits to index funds; they are by nature diversified (depending on the index picked.)

What is of more importance here is, how much experience you have, and how much time and energy you have to put into this effort. It is far better to use index funds than to not invest at all, but I have always preferred to construct my own balanced portfolio rather than leave that to others.

Posted by BayouSteve on February 09, 2017 (05:23PM)

I have taken quite a few spankings in the market trading it myself plus my advisor but also have enjoyed better growth overall than with diversified ETFs and the like. However I have recently taken the stance that I can't keep track of everything I have to keep track of effectively. 

I have started to take distributions from my traditional IRA and doing a conversion into my Roth IRA which I have at Zacks and it is managed into a wide range of ETFs and their fees are miniscule. I just check in from time to time to see whats going on. You kinda get a feel for their investment advice month to month. Just started so it remains to be seen how they do. 

Posted by ncmike on February 10, 2017 (12:53PM)

If you were to invest 25K today 02-10-2017 in the market and you want to hold only 5 stocks for about 4 years during this Pres. term, what would you buy?

Posted by BayouSteve on February 10, 2017 (04:28PM)

Mining/Oil and Gas, high tech manufacturing, digital media, financials, Steel or cement companies. I have all of those but steel but I know production is up for that building product. 

Posted by the penguin on February 11, 2017 (12:17AM)

The statement taken in isolation is silly.  Cramer is a paid CNBC talking head who is a former hedge fund market manipulator.

Any statement in this business regarding strategy that is said with certainty can easily be shown to be false.  But if you view it with a narrow enough lens, it can seem true.

Playing the market and flipping a coin have stunning statistical parallels, the biggest difference being how much you gain or lose is not a binary event.   You can never know the future, you can only learn what happened, and why, and apply those lessons going forward.

Never stop learning, never take anything at face value, and make your own decisions.

Posted by Azzanadra on February 14, 2017 (02:51PM)

I've heard Cramer say that. He also said unless you do investing all day every day, you should never own more than a dozen to 20 or so stocks, because it's too much data to keep track of. Maybe that's true from an analytical standpoint. But as a buy & hold, low tax strategy investor, that level of detail wouldn't benefit me much post purchase. Perhaps there is one "All in one" ETF that checks all the boxes AND has low fees, but factors like stocks with good dividend appreciation or opportune sector exposures make me want to pick some of my own basket I'm well past that dozen or so recommendation, but the promo offer on trade commission let me diversify better than I otherwise could, short on funds. The plan is to add to those foothold positions whenever there's an intangible panic. 5 months in, so far so good

Posted by accurate on February 23, 2017 (08:41AM)

Bad advice. Most funds are a waste of money for investors. You earn nothing after fees.

What about when he recommended Bear Sterns? :)

Posted by SuccessfulGuess on February 27, 2017 (11:58PM)

So if you aren't going to invest yourself and use a financial adviser, which is most people, I would much rather tell them to buy indexes over ETF's. With the possible exception of Bond Yield Funds because bonds are expensive. The reason being... ETF's make many more trades and generally charge a higher expense ratio IN ADDITION to the broker fees associated with each trade and then the fees your broker charges. Also, it is also plain to see looking at just about any ETF that the value of the fund is grossly less than the sum of it's parts due to that meaning if the ETF isn't paying high dividends it's a money sink. In reality people should invest in individual stocks they've done their research on, yes fundamentals and expected growth, and then check in on the companies to see if they're meeting their expectations. Investing on guts, hunches, and trends is what costs people money. There are tons of great value, large growth, high income stocks out there that are relatively safe but are unpopular because they are not flashy. If you could see most hedge-funds portfolios they have high holdings in these stocks and generally do not make the same "moves" day traders make.

Posted by SuccessfulGuess on February 28, 2017 (12:04AM)

I somewhat disagree that it's of little importance to someone of your trading style. If a company you've invested in isn't achieving the expected results it is almost a certainty that the yields won't be as high and the price will dip. However, if you're aware of this ahead of time you may find it beneficial to locate another stock with great value, large growth potential, and high yield to invest in rather than your current investment. While it may lead to long-term gains taxes, that my not be a bad thing if you have another stock not performing. Sell off losing positions to offset winning positions in your capital gains and then re-invest those funds into another preferred stock. In doing so, you've set yourself up for a much more positive future gain while not paying a price for the moves with the exception of the ~$20 required to do so in brokerage fees.

Posted by RogerLee on March 03, 2017 (06:12PM)

If you want just to trade, you should start with small accounts first.  I blew out two small accounts before getting my sea legs and learning from my mistakes.  Now I have a large account and can avoid the pitfalls I suffered from in the past.

If someone isn't willing to learn the hard way, trading probably isn't for them.  The small accounts that you blow out is your trading tuition.

Posted by Jim8541 on March 05, 2017 (11:19AM)

Just a quick question, How do pension funds or other investors get to invest in companies before they go public? Just wondering. Thanks

Posted by spshapiro on March 06, 2017 (05:31PM)

The underwriters (the brokerage houses that are hired to help bring a company public) generally give the first chance to invest in an IPO to those they wish to develop or cement a financial relationship. They will also turn to those that they feel that can count on taking a large enough position to insurance that the IPO has a good start. Nobody reading this is such an individual, nor should that really matter to you. Even if some make a lot at the open of an IPO, there are many times an IPO goes bad. If a company is going to be a good stock, you will have plenty of time after an IPO opens to buy in.

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