All this stuff im studying is good and all…Now I want to start trading a little bit, maybe freelance and research some companies but i dont know how to start. I want to do Value Investing but i dont know where to begin, where to start looking. I know that once i begin I will be able to keep the ball rolling. Any help or ideas?
Trading or investing? Two totally different things lol
Investing
Investing typically involves substantially longer holding periods than trading, if you feel the need to “do something”, then trading may be more appealing than investing.
If you want to practice, I’d open up an account at Interactive Brokers, build an asset allocation with ETFs, and rebalance monthly, just to get started. Then you might carve out 10% to do some stock picking using what you know and get a feel. Or run a paper portfolio, which is not quite the same as a real one because you don’t have to manage your emotional reactions. Also, others don’t always respect the results of paper portfolios, because it’s always possible to run 20 of them and then brag about whichever one happend to do well: when it’s real money, it’s hard to play that game.
but paper portfolios can be good for your own use: figuring out if you gravitate to one investment style or another more.
When I’m low on ideas I use Yahoo’s stock screener to play around. Run a few screens using some value metrics and see if anything pops up that piques your interest.
trading vs investing is like having sex and making love…sometimes you confuse the two…
I disagree with everything said. Study security analysis for 2 years. Build some experience running a paper portfolio as if your own money was in it. When you feel you’ve achieved a decent level of insight…then and only then use real money. Then again, it depends on how good you want to be.
Paper portfolios are lame. You don’t need to go balls to the wall, but you should have some skin in the game.
You need to be good enough before putting any skin in the game. Otherwise you’ll probably lose it and your gains will be luck anyways.
So what? It’s only money. One of the worst feelings in the world is having a paper portfolio perform well. Nothing like nailing a pick and not benefiting.
always use real money if you can. you only start to truly feel what its like to win or lose on the trade with real money. personally, winning or losing on a paper portfolio would have no psychological effect on me so what’s the point and how does that count as true experience? the best traders are not necessarily the smartest guys, they’re just the guys who have been down every road before and don’t let emotion run their trades (on the flip side, you can’t be robotic and you have to be able to adjust your trade strategically when needed which is difficult to do when feeling the brunt of emotion as well). that said, my commentary is more on trading (i.e. choose 1-5 names and go all in) versus investing (i.e. choose 20-30 names) as investing has less to do with emotion than trading.
I agree that the effect of trading with fake money is not the same as real money. Also, unless you are extremely thorough, a fake portfolio doesn’t expose you to some complications of real trading - commissions, illiquidity, margins, etc. A novice will not know enough to take these into account when doing a fake portfolio.
Plus, most likely, you will lose interest in the fake portfolio and stop doing it after a while. Most people cannot maintain sufficient motivation over a long time with fake money.
Real money is better, but paper trading is good in the beginning.
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for a few days or weeks to make sure you understand how the order entry system works.
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if you are not sure what your preferred investment style is, and you don’t have enough capital to run 5 different styles to find out.
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to build up at least some confidence in the idea that you might know what you are doing.
Again, others won’t give your paper trading accounts much credence, because they don’t know if you are cherry picking paper portfolios that perform well, and because managing your emotions when you are making money or losing money is a key part of the process that paper portfolios don’t include, but that doesn’t mean that paper portfolios can’t be useful to you.
The point here isn’t to generate good performance, so cherry picking, simulation of real effects, and liquidity aren’t relevant. Liquidity is rarely relevant for most investors unless they’re investing in tiny pink sheet microcaps, commissions can be simulated easily on google finance. And if you don’t feel a paper portfolio will keep you interested, perhaps you’re not that serious about getting better.
The point is to practice, over and over and over again, until you’re reached a level of ability that’s going to generate money consistently, which is very difficult for a beginning investor. This isn’t supposed to be fun. (i’ve been studying investing since maybe 2009, and only now am I starting to see how to think about this stuff).
The point everyone is trying to make is that a paper portfolio is not a perfect simulation of reality. While you might want to start off with a fake portfolio, like bchadwick suggests, eventually, you should move to real money.
It is nearly a perfect simulation of reality. Given that he’s not trading but investing, and he clearly noted value investing. He is barely going to trade very much and have long holding periods.
To the OP - you have a lot of studying and reading to do before you invest your real money. In value investing there’s no feedback mechanism, you don’t find out whether you’re right or wrong until a lot later (shorter for special situations and asset plays). Also, a big part of value investing is discipline and patience and controlling your urges…
Paper trading is a good idea for the first few months, especially if you never traded before. Take one step at a time, it’s not a sprint. The market is still going to be there centuries from now and there will always be opportunities.
i agree with palantir’s first comment, study security analyst first for some time, but i disagree regarding using fake money…
Thanks a lot, a lot of great advice here. I want to take a modeling course first and i while im doing that im going to practice my stock picking abilities. Maybe not with real money at first but i want to get a feel of it. Besides IB brokers, what other brokerage account do you guys recommend?
Interestingly enough, some experiments show that traders exhibit the same behaviors in simulations as in real markets with regards to bubbles. But for the most part, I’m pretty sure research says fake money is nothing like real money in terms of the psychology. And I know from personal experience, it was much harder to make and keep my gains on my real money portfolio.