How do I become a more active investor?

Question

It might be self explanitory, but I really don't know where to start. My thought was to use Morningstar as my guide. I was able to create my own search criteria based on one of their books and had planed to buy stocks at Morningstar's recommended purchase price and then sell at the Recommended Selling Price. Is there a better approach?

Answer 1

I think you need to rephrase your question to "How do I make more money as an investor?"

If so, you need to learn how to pick your investments and not rely on media. To do this, you need to invest as much as you can based on your conclusions, and lose as little money as you can along the way.

Hope this helps.

- Jim http://jsforex.blogspot.com

PS

If you are going to invest in the stock market, I think you need to see this report first-- http://homeruntrades.blogspot.com/2008/0...

Answer 2

Eric,

Good question, but I think you meant a "more successful" investor.  Right?

You mentioned Morningstar, and someone slammed the firm.  I've used it since the 90s and find great information there.  One of the reasons I use Morningstar is that they are sooo cautious.  And the first rule of investing is "don't lose."  I do compare their research with my own & others.

As for Morningstar not paying enough attention to a fund's allocations ... you do that.  When you target a particular fund and call up info on it, there is a button to click to discover the fund's top holdings ... scroll down and another button will show you all the holdings.

The answer from Common Sense contained plenty of great ideas.  I'll echo his and further recommend a web site that is highly educational:  http://www.money-and-investing.com/ ... check it out.

I wish you luck!

Uppity Wench

Answer 3

First off, Morningstar is probably one of the worst pieces of information for you to use, in my opinion.  For the following reasons:

1.  The scoring system is awful.  Most years you will find, looking back.  The best performing funds were mostly the 1-2 star rated funds.  Why? (look at #2)

2.  Morningstar doesn't take into account deviation.  Even though a mutual fund for example, considers itself a Large cap.  It doesn't mean that this mutual fund manager, stayed with the financing principals of a large cap.  It could have easily increased it's holdings in short-term paper, without morningstars notice.

I would use Ibbotson, if you want to really get serious about investing.  Yes, the cost of this program is somewhere around 2k.  But it will show the actual break down of a mutual fund in terms of the investments.  You be able to find a truely large-cap growth fund.  And this will reduce your "overlap" in investments.  Even with stocks.

If you listen to any financial "expert", they will all say one stock is good and another is poor.  No one seems to agree.  The bears are Bearish, and the bulls bullish.  You will always have speculation.  By the time the information has hit the news, or air waves it's already to late to buy.  The momentum is gone, and your limiting your upside.

What I did when I started investing, was similiar to Warren Buffet.  I only invested in companies that I knew, and understood.  From there, I started adding to my portfolio and rebalancing it every 6 months.  By taking away from the gainers, and adding to the losers (If I still believed in the company.)  I also set a targetting sales price.

You can fall in love with people and pets, but never your investments.  They will not only break your heart, but leave you broke as well.

Just my opinion.

Answer 4

if you just want to be a day trader, be warned: more than 95% will lose money in the long run.

but, you could always teach yourself some technical analysis, and try to make some money on momentum in more lightly traded issues.

personally, i think that day trading is a bit over-rated.  there's nothing wrong with buying and selling regularly - it can be very healthy for your portfolio.  but i tend to prefer not throwing away money on so many transaction costs.  i usually have a handful of open positions, and check in every few hours (in addition to having an RSS feed for any news on those companies running constantly).

today, for example, if i was a day trader, i could have made a boatload on Lehman Brothers Preferred Issues L and K by trading in and out all day.  Instead, I just kept an eye on both of them, and was able to pick up the class L's at $7.90, and sell them when they got back to $12 (a pretty nice gain, especially since it was in my IRA!).  I wouldn't necessarily call that day trading, as I only had 2 transactions, but after fees and commissions, I think I came out ahead this way - less is more.

Answer 5

I've been using Morningstar for the past 4 years. I love it.

It would be of no value if you don't have good money management skills and good asset location. Position sizing is also critical.

The first rule of money management is never buy a stock without an exit plan.... with a specific "stop".  If you don't do this all your winners will be over shadowed by high losses. Losing in the market is normal.  Allowing your losses to grow is not.

I shot for being correct on 55-60% of my long term trades. My "winning" amount needs to be 3 times my lossing amount (on average)...................................

Good luck.

BTW:  Start trying to read a book a month to improve your skills...............