Category Archives: Stock Market Miscellaneous

How Much Money Do You Need To Begin Investing In The Stock Market

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Many people who are new to stock market investing wonder how much money you need to actually get started. Fortunately, as a result of the emergence of the internet, it is not as much as you think. Before the internet, most of the people who invested in the stock market were people with access to lots of money and who could afford brokerage fees. For the most part, the average middle income family did not invest in the stock market. As a result, children of middle income or middle class families were not exposed to stock market investing along with other alternative investment strategies. So now you have generations of people who have no idea of how the stock market works.

It pretty much comes down to “access”. The internet has made stock market investing accessible to any and everybody. In addition to that, the internet has added competition to the major brokerage firms, which has forced the “big boys” to reduce their brokerage fees. Essentially, the internet has had a major impact on the stock market investing world.

Moving forward, there are basically two ways to invest in the stock. You can invest through a brokerage or directly through the company. A brokerage firm basically acts as an intermediary between YOU and stock buyers(sellers). A brokerage firm is similar to a real estate broker. They simply facilitate stock transactions on your behalf for a fee.

Here are examples of brokerage firms:

  • Fidelity
  • Merrill Lynch
  • E-Trade (Online Brokerage)
  • Sharebuilder (Online Brokerage)

When you invest directly through the company it is referred to as a direct investment plan. Usually larger, more established corporations have this option for stock investors. The transaction fees for direct investment plans are normally less than transaction fees paid through a stock broker. In addition that, direct investment plans usually require a minimum investment or minimum ongoing investment (automatic investment plan).

So how much do you need to get started?

It depends. Some brokerage firms cater to wealthy individuals so the minimum investment may be $100K. The minimum investment for online brokerage firms like Sharebuilder and E-Trade, who target middle income investors, is significantly less.

As far as the minimum investment for direct investment plans is concerned, you would have to go to the corporate website of each company to determine that amount.

Here are some examples of the minimum investment needed to get started with selected brokerage firms:

Sharebuilder

With Sharebuilder there is no minimum investment required. But you will need to have funds to cover transaction fees. This is the company that I started stock investing with and am very pleased with their service. Here is a link to the transactions fees that are charged.

This is a screen shot of the Sharebuilder website.

E-Trade

With E-Trade the minimum investment to get started is $2000. They have a promotions taking place now that allows for 500 trades for 60 days free. This means that once you start the account with E-Trade you will not be charged any transactions fees for your first 500 trades.

This a a screenshot of the E-Trade website.

Fidelity

With Fidelity the minimum investment to get started is $2500. They charge $7.95 per stock transaction.

This is a screenshot of the Fidelity website.

Merrill Lynch

Merril Lynch requires that you have at least $25,000 before you can use their investment services. Obviously, you have to have serious cash to start investing with these guys.

This a screenshot of the Merill Lynch website.

As you can clearly see the amount of money it takes to get started investing it depends on the stock brokerage.

Here are the direct links to the brokerages list above:

Merrill Lynch

Sharebuilder

Fidelity

E-Trade

Hope you enjoyed the post. Stay tuned for the next post.

You May Be Kicking Yourselves In 10 Years

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A couple of weeks back one of my facebook friends wrote an interesting post. Here is the screen shot below:

He says that,”Apple shares (trade) now around $600 a share. In 2002, they were around $8.” Then he says,”Imagine if you bought at least 1000 shares back then?”

First off he is referring to the company that makes the iPod, iPhone, and the MacBook computers. Yes, that Apple. The Apple Computer Company. The stock ticker symbol for AAPL. You can actually see for yourself what the stock price of Apple computer was by going to these 2 websites:

This is a screenshot of the historical stock prices of Apple Co. from Nasdaq.com.

As you can see from the above screenshot the shares of Apple Computer were trading between $7 and $8. So lets take a look at some of the calculations here. If you bought 10 shares of Apple stock in 2002 at $8 per share and just held those shares for 10 years, then you would be looking at a profit of about $5920. This profit will only be realized if you were to sell.

How did I calculate that profit of $5920?

The price you paid for the stock is $80 in 2002 ($8 times 10 shares). And the market value of that stock today is $6000 ($600 times 10 shares). The difference between the price you paid and what the stock is worth now is $5920.

Do you realize that the return on your investment is about 7400%? Can you reap these types of returns in a simple savings account?

The Key is Investing in Strong Companies

There are plenty of companies like Apple that if you had been involved in the stock market in the stock market early you would be reaping the rewards right now. And many would say, “Well what about the recession?” Yes, even with the recession or depression you would have made money in the stock market. The key is if you invested in strong companies.

Here are a couple of examples of strong companies that you could have invested in 2002 and 10 years later you would have made money:

  • McDonalds – The stock ticker symbol for McDonalds is MCD. Right now the stock is trading at around $95 per share. In 2002 it was trading as low at $28 per share. McDonalds is one of the strongest businesses in the world and I am confident that it will continue to be strong for years to come.
  • Procter and Gamble – The ticker symbol for Procter & Gamble is PG. P&G is responsible for some of the most recognizable brands in the world like Tide, Head & Shoulders, Tampax, Charmin and more. At the moment P&G stock is trading at around $67 per share.  In 2002 the stock was trading at around $44.
  • Church and Dwight – The ticker symbol for Church & Dwight is CHD. This company, like P&G, has a large portfolio of very recognizable brands like Orajel, Arm & Hammer, Trojan, and more. The stock is currently trading  at around $49 per share. Back in 2002 the stock was trading at around $10 per share.
  • Altria Group Inc. – The Altria Group formerly Phillip Morris ticker symbol is MO. Altria group is responsible for the largest selling cigarette brand Marlboro. In spite of serious legal trouble and lack of advertising, this company still makes a profit. I know cigarettes are bad, but with regard to making a profit cigarettes are good. The Altria Group stock is trading at $30 per share. In 2002 the stock was trading at around $12.
  • Coca Cola Inc – We all know about Coca Cola (ticker symbol:KO) since it is probably the #1 most recognized brands in the world. This company is not only responsible for Coke soft drinks, it makes Powerade, Vitamin Water, Sprite, Minute Maid and more. The stock is currently trading at $74.  In 2002 the stock was trading at around $50 per share.

As you can clearly see if you invested in any of these companies you would have made a nice return on your investment. “If” you had invested 10 years ago. If you are staying out of the stock market because you do not know where to begin, I encourage you to do something about it so you won’t be kicking yourself after another 10 years of inactivity.

Special Note: You can find out the company’s ticker symbol by going to the company website then find a link that says investor relations or investors. The ticker symbol should be right there.

How To Be A Stock Market Player – Ebook Launch

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I just wanted to announce that we are relaunching the How To Be A Stock Market Player Ebook. If you want to get involved in stock market investing but you do not know where to begin, then start off with this ebook. After going through the ebook then you can become a HTBSMP “Premium” member where you get access to videos, audio, and more on this site. The book is a little over 40 pages and it includes 10 chapters. Here are the chapters that are included in the ebook:

Chapter 1: The Definition of Stock — Common Stock Explained.

Chapter 2: IPO – Initial Public Offering — The beginning of it all.

Chapter 3: How to Buy or Sell Stock, Part I –The Stock Market and its Players .

Chapter 4: How to buy or sell stock, Part II — The different types of transactions.

Chapter 5: How the Price of Stock is Set — The mystery behind the price of stock.

Chapter 6: Researching Stocks — What to look for when buying stock.

Chapter 7: Financial Statements — Profit/Loss Statement, Balance Sheet, Cash Flow.

Chapter 8: What the Financial Statement Reveal — The Financial Ratios.

Chapter 9: Placing a Value on a Company — What is this stock really worth?

Chapter 10: Where to find information on a Company — Resources you can use to research a company.

Another thing the ebook is instantly downloadable and if you are not satisfied with the material I will refund your money back no questions asked. Oh yeah and you can keep the book. Get your ebook now!

Best Wishes,

Omar Best

Stock Market vs. Horse Racing

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So I was talking stock market investing to my family and friends in Panama (beautiful country, beautiful people). One of my cousin’s friends says that the stock market is like horse racing. You are playing the odds…So this guy really got me thinking about the similarities and differences between stock market investing. So let’s start with the similarities:

Similarities of the Stock Market and Horse Racing:

  1. They are both bets. In a sense you are gambling when you put your money in the stock market, however please wait until we get into the differences before you panic.
  2. They both require research. People who bet on horse races perform analysis of all the horses, track, weather, jockey and so on.
  3. You can lose or gain money.
  4. Fraud or Ethics. It is unfortunate but people can manipulate race outcomes just people can manipulate the price of stock. In addition to that, if someone knows before hand if a race is rigged, then that it similar to insider trading, which is illegal.
Now the differences.
Differences between the Stock Market and Horse Racing:
  1. Long Term Bet/Investment. While the stock market in a sense a bet, it is long term. When you bet on a horse race it is a one-time event
  2. You do not lose or gain money in the stock market until you sell. Unlike the a horse race where you will lose or gain actual cash on the spot, in the stock market money is not lost or gained until you sell your stock. (See Paper Gain vs. Paper Loss)
  3. Owning stock is an asset. When you own stock it is an asset that can increase in value over time. A horse race is just a one time event that.
  4. Company is perpetual. Stock is representation of ownership in a company similar to a title to a car or property deed for real estate. As long as a company generate sales and profit it will be in business forever. Look at Wal-mart, Walgreens, McDonalds, Ford Motor Company, or JP Morgan Chase….These companies have definitely outlived their founders. In addition to that, I am sure that stock held in the companies has outlived the original or early stock investors….How long will a horse race last?
So as you can see that while a horse race and the stock market investment are bets, the stock market is the better bet as it is long term, stock is an asset, and stock is perpetual (As long the company is in business stock will always have a value). I would like to thank my cousin and his good friend for inspiring this message.
Wishing you all the best.