# What are the benefits of investing in stocks?



## Jaredcom (Feb 23, 2011)

I am very interested in investing, but I really don't know how or what the benefits. How does it work in simple terms? I guess I need to read "Investing for Dummies" or something. Basically, if I put $20 towards a stock, if the company is still around in 10 years will I make a bunch of money? Or if I invest in something like Hannah Montana, will I not get anything in ten years since she won't be popular


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## dogleg (Feb 5, 2010)

Jared... : Are you really sure you are ready to start putting your hard-earned money in the market? I wouln't play blackjack unless I knew the odds - like don't draw on seventeen when you play against the dealer ! Anyway good luck.


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## Toronto.gal (Jan 8, 2010)

Welcome to the forum Jaredcom!

Before asking questions about investing, you must at least know the answers to the most basic questions, such as the one you asked, so educate yourself first; might be the best investment [time-wise] that you'll ever make! I would start with the book you mentioned + Peter Lynch's "One Up On Wall Street." Both are easy reads, will teach you a great deal & will allow you easier grasp of topics discussed here.

Stock investing requires *a lot of knowledge* & to answer your question in simple term, investing = committing capital for profit. 

Good luck!


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## Cal (Jun 17, 2009)

Jared there are lots of threads on here regarding good reading material to start with....

All the best.


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## bean438 (Jul 18, 2009)

My recommendations for books are The Intelligent Investor by Ben Graham (newest version with commentary by Zweig), The Investment zoo by Stephen Jarislosky, and The Single best Investment by Lowell Miller.

Also go to Berkshire Hathaway"s web site and read all of Buffet's reports, and letters.


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## Belguy (May 24, 2010)

Have a look around the website www.canadiancouchpotato.com

Couch Potato investing is a good place for the novice investor to start and by setting up a Couch Potato portfolio, you will end up beating the performance of a very high percentage of professionally managed money at a very low fee and fees matter a lot when investing.

Investing in this manner is not complicated but you first need to set up an appropriate asset allocation between cash, fixed income, and equities according to your particular circumstances and personality.

Then, pick four or five index investments for your portfolio by referring to the 'model portfolios' at the above website.

Finally, periodically rebalance your portfolio whenever the original allocation gets seriously out of whack.

Consider setting up a discount brokerage account to manage your investments.

Once invested, be prepared to hold your investments through all market conditions with an eye to the long term and never, ever sell in a panic. You won't need to if you don't put money in the stock market that you might need within the next five to seven years.

There is a very small book out now called 'The Investment Answer' and I have tried here to summarize many of it's conclusions.

Individual investors, and even institutional investors, can seldom outperform the market long term and that is the magic of simply investing in the indexes.

It takes many investors the better part of a lifetime of investing before they figure that out.

Good luck!!


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## Jungle (Feb 17, 2010)

The reason to invest in stocks is so the company can share profits with you. Shareholders are most successful when they invest in a company that provides good purchase value and a positive return on equity, over the long term.

As mentioned, stock investing can very rather time consuming and difficult to successfully pick the winners, over the long term and trust on them for retirement. 

Over the long term, benchmark index investing (such as buying the entire TSX, S&P500, etc) has returned reasonable returns, beyond inflation. 

That's why there is a movement with buying low cost ETFs and just investing in the entire basket. No time given to individual companies, financial sheets, etc.


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## dogleg (Feb 5, 2010)

Jared : I have no disagreement with the advice given by Belguy or Jungle except to say that no investor is ever likely to make any serious money investing in indexes. In my experience if I am going to spend my time figuring out where to invest my money I want a good return. Most of the wealth I have accumulated in the market has come from the careful selection of commodity stocks. However, to each his own and good luck.


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## Belguy (May 24, 2010)

"It's human nature to try to select the right horses. It's fun. There's much more sport to it than just buying an index fund."

--Financial behaviourist Meir Statman, Author of 'What Investors Really Want'

As an index investor himself, Statman doesn't condemn anyone who prefers picking individual stocks.

"Profit is the first thing most people say when asked why they invest. But, if that were the case, they'd simply buy a diversified portfolio of index funds or ETF's. But many investors think that they can actually beat the market over the long run and so they invest in individual stocks. Institutional investors, with all of their resources, are no less eager to play the game--and they aren't much better at beating the market than individual investors", he notes.

Reference: 'Why we are such irrational investors' by Ellen Roseman, Toronto Star, February 21, 2011

"Most experts agree that stock picking should be left up to professional fund managers and financial advisors (although there is little evidence that even they are consistently very good at it). These professionals usually have teams to pick their stocks. Individuals must sift through financial reports, look at analyst recommendations and do a lot of calculations in order to make sound stock picking decisions. Not only must they research the information but then they have to know how to use it. With every chosen investment, comes the potential for downside risk or upside reward".

Ryan Irvine, Richard Ivey School of Business, Toronto Star February 17, 2011

Be careful with your money!!


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## dogleg (Feb 5, 2010)

Warren Buffet made an excellent observation about index investing : He said if you are going to sit down and pick a list of ten or twenty stocks you naturally have a first choice and so on. Why then, he asked , don't you just stick with your first choice ?


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## KaeJS (Sep 28, 2010)

I do both.

You can hold an index ETF and also pick individual stocks (outside, or usually not included in the ETF)

I remember when I first started investing (about a year ago), I kept hearing advice such as: "Watch the markets everyday for 6 months", "pick 5 stocks you like and watch them for x amount of time" or "invest at least $5,000".

Now that it has been about a year, I can say that in the beginning, I lost *67%* of my portfolio (which was about $3300). However, through experience, I have been able to turn it around and run a profit. (Not a healthy one for the considered length of time) but I consider it to be a learning curve.

There are some things, I feel, that can only be learned through experience and time spent watching/playing the markets. Remember, the markets are largely based on trends, politics and psychology.

There are a lot of people in the market that have no idea what they are doing (such was myself a year ago) and there are people that know exactly what they are doing 90% of the time. The men will be separated from the boys, and your account balances will reflect this.

I suggest you do some research online (check investopedia, wikipedia, eHow) certain sites that are more recognizable. Grab a book from your local library or go speak with an advisor.

But the best advice I can give you is the advice that was given to me that I rarely listened to. You need to watch the markets. You need to get a "feel" for it. Watch the stock prices. And never, ever, act out of emotional. Stock trading should always be rational. Do not buy a stock because you "need money" or because "everyone else is doing it". You buy the stock when the price is right. When the timing is right. Example: I love the TD Bank stock (TD.TO). I just love it. It's by far my favourite stock. However, It recently hit new highs and ran over $80. There was no way I was going to pay $80 for it. Some people will get caught up in the "Greens" and buy the stock when it is already overbought or overvalued. By waiting, I can now grab the stock (If I wanted to) at $78 and change. And I would bet that the stock price will reach $80 again within a months time.

There is no place for emotions in the stock market.

Time your time, do your research, watch the markets.

Its better to not buy and preserve your capital, than to buy and take an underthought, uncalculated risk.

The benefits of stock investing, however, are that it gives you the opportunity to make significant returns on your investment that you would most likely not find outside of the market.


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## Belguy (May 24, 2010)

This sounds like one heck of a lot of work to me with no guarantee that you will outperform the indexes over the long term. In fact, the research suggests that you are not likely to.

However, there are plenty of folks out there who have fun trying.

There are also lots of people out there who buy lottery tickets. They know that they are up against the odds but they have fun trying.

It's a question of whether you feel that you can outsmart the markets on a consistent, long term basis.

Good luck with that!!!

Actually, come to think of it, you just might!

You might also win the lottery!!


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## dogleg (Feb 5, 2010)

Good morning Belguy : I know we have been down this road a few times . Let me make one last point and use Goldcorp shares as my example. I have made a lot of money on just this stock alone over the last two or three years . I have bought at $23 and sold some at $40, bought at $34 and sold some at $46 , bought at $40 and sold some at $48 , etc. You think this is like gambling ? I don't think so . Tell it to Warren Buffet . I could list ten or twelve more ,similar examples . Have I ever lost on a stock ? Yes but not of any significance. Anyway to each his own but I don't think it is good advice to a young , new investor to tell them the way to financial heaven is through index funds.


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## the-royal-mail (Dec 11, 2009)

Hi dogleg, I understand what you wrote, but I've read a lot of comments here and elsewhere that seem opposed to chasing returns, which is what you are describing. Are you saying you disagree with those comments?

Also, I don't quite see why index funds are a bad thing for new, young investors. I have risky sector funds with higher fees (due to my age) AND I have index funds. If the stats show that managed funds do not usually outperform the index, why not pay lower fees and let the index keep your investment afloat (barring chasing returns)?


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## the-royal-mail (Dec 11, 2009)

dogleg said:


> Warren Buffet made an excellent observation about index investing : He said if you are going to sit down and pick a list of ten or twenty stocks you naturally have a first choice and so on. Why then, he asked , don't you just stick with your first choice ?


I personally agree but a lot of people seem to be saying it's not good to chase returns, so I dunno.


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## kcowan (Jul 1, 2010)

Index funds are an excellent way to achieve average returns. In areas where you have no knowledge, they are a good choice. BRIC countries for example.

If you want to spend the time to play the market, then you should get a discount broker and spend some time and money on research before buying individual holdings. Once you buy individual companies, they treat you like an owner and then you will get their annual reports. Read these and absorb what they are telling you. You should strive for more than 20 holdings in the Canadian market to spread risk. And don't load up on a given sector by accident.


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## Toronto.gal (Jan 8, 2010)

The OP is just indicating his interest in investing, but not yet a beginner investor even, so we should assume from his post, that he might not yet be familiar with a lot of the language used here and all this talk/arguments between yourselves might in fact just discourage him from the subject.

Best advice IMO is for him to first read a couple of *basic* books [that makes sense to him] as he himself has recognized that he must do. Once he has the basics, investment terms & definitions, he can move to other books such as "The Intelligent Investor" and then we can advise/answer his questions accordingly. 

If I would have come to this forum without any prior knowledge of investing, I certainly would not have known what index, BRICK, ETF, etc. were & would have appreciated simpler language.


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## Toronto.gal (Jan 8, 2010)

dogleg said:


> Good morning Belguy : I know we have been down this road a few times . Let me make one last point and use Goldcorp shares as my example. I have made a lot of money on just this stock alone over the last two or three years . I have bought at $23 and sold some at $40, bought at $34 and sold some at $46 , bought at $40 and sold some at $48 , etc. You think this is like gambling ? I don't think so . Tell it to Warren Buffet . I could list ten or twelve more ,similar examples . Have I ever lost on a stock ? Yes but not of any significance. Anyway to each his own but I don't think it is good advice to a young , new investor to tell them the way to financial heaven is through index funds.


I have to agree with this post. I do the same type trading & do not consider it gambling nor do I like to be called one because investing/trading is serious business and not a game; there are players of course. 

Needless to say, trading is definitely OUT of the question for beginner investors.


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## dogleg (Feb 5, 2010)

All interesting comments. I have no problem with investors putting some money in index funds but it shouldn't be the focus of their investment strategy. And to use the phrase "chasing returns" is not a reasonable or fair way to describe what a serious commodity investor does. For example there is a big chromite play in the making in Northern Ontario. Some in the industry believe it will be bigger than Sudbury. One of the principals is Cliffs Resources ( CLF:US) and it has bought up some of the adjacent smaller properties. I have researched this from square one and bought Cliffs shares at around $30. now around $100 and KWG at 5 cents now around 13. Is this 'chasing returns ' ? I don't think so. I could recount a similar story for Goldcorp in Red Lake etc. I love to golf and wouldn't waste my time researching stocks unless I could make a serious buck at it . When I started to invest and only had a few dollars I made all the usual mistakes : two of the biggest were depending on so-called investment advisers and buying mutual funds . Live and learn. Good luck to all.


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## Belguy (May 24, 2010)

Nobody has to take my word for anything that I write on this forum.

However, new investors might do well to pick up the latest book on the subject which is really very brief and to the point.

It is called 'THE Investment Answer' by Daniel C. Goldie, CFA, CFP & Gordon S. Murray (who unfortunately recently passed away from a brain tumour).

It will take you about a half hour to read the entire book but it sums up their years of experience in professional money management.

Just to give you one example of index investing, the iShares S&P/TSX SmallCap index returned 33.57% last year.

Is that gambling? I don't think so!! It is investing in a DIVERSIFIED index of many Canadian smallcap stocks and smallcaps have a historic quicker rebound than largecaps following a recession.

Also, so you invest in 20 Canadian stocks and the entire universe of Canadian stocks represents just 4 percent of the world's stocks. And so, I ask, just how diversified are you really???

Much success from investing comes from proper diversification and you cannot achieve that by investing in only a very few Canadian stocks.

However, you can achieve adequate diversification by investing in four or five broad-based index funds.

Obviously, many of us will never see eye-to-eye on this because of our differing circumstances and investing personalities.

That said, if you are an active trader of individual stocks, then good luck to you because that is what you will need over the long run.

In the meantime, you'll find me on the couch!!


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## dogcom (May 23, 2009)

I agree with belguy here for a new investor. In fact if he simply dollar cost averaged and not lump sum into TD e-funds or ETF's using a simple couch potato and did nothing else in 10 years I think he would come out well ahead. If however he goes to the bank and buys the good funds of the last 10 years and holds that for 10 years he may end up nowhere.

I know people always preach be all in now but that can kill you if we get a big drop and it take a long time to come back.


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## HaroldCrump (Jun 10, 2009)

Belguy said:


> Just to give you one example of index investing, the iShares S&P/TSX SmallCap index returned 33.57% last year.


BG, you are touting only the immediately previous year's returns.
Between March 2009 and Jan 2011, you would be hard pressed to find an ETF, mutual fund or individual stock investor that hasn't experienced thumping returns.
One year returns are not a good way to pick an ETF or formulate an investing strategy.
Unless one is able to perfectly market time in and out of individual sectors and ETFs, it is extremely unlikely that such returns can be repeated year over year.

To consider your example: the TSX small cap index has been such a pathetic investment that you could have made more money by buying beer, drinking the beer and returning the empty bottles for a refund 
At least you would've had some fun!
The XCS returns are a platry 1.64% year over year.

It is true that the fund doesn't have a long history.
But if you look at any of the bank managed small cap mutual funds, most of which have at least 10 years of history, the returns are only marginally better, but still well under safe govt. bond returns.

Even the US small cap index mirroed by vanguard has an annualized return of 6.8% - better than Canadian small cap but still only a couple of points above inflation.
Small cap is an area where diversification truly hurts.


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## cosmica76 (Jan 31, 2011)

Hi Jared,
Firstly you have a great new hobby - stocks! I would like to recommend a perfect book about invensting on the stock market for you. It´s yellow book "You Can Be a Stock Market Genius" from November 2010. I think so author is Joel Greenblatt. This book offers a very useful information and right motivation for you. Have a good luck with stocks!


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## Eric (Oct 20, 2009)

People are so nice in this forum! We are so eager to share with others what we are interested in. Poor Jared, he must have been overwhelmed. Unless he is having a good laugh with his teenage friends. 

Before giving him any advice shouldn't we ask how much money he really has to invest. If he does answer and tell us a bit more about himself, than may be we can help effectively.


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## dogleg (Feb 5, 2010)

H....C....: Just read your piece . Amen.


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## Belguy (May 24, 2010)

I was going by the theory that smallcaps and value stocks generally outperform over the long haul.

That said, I am also a proponent of investing in four or five broad-based, lowest fee index products.


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## olivaw (Nov 21, 2010)

It has been almost impossible not to make money investing in Canadian stocks since early 2009. It doesn't matter if you used stock picking or index investing - our market has done very well. 

My vote is for broad based index investing. Asset allocation is more important than stock picking. Saving is more important than chasing returns. Calculating my own IRR is more important than pouring over company income statements.


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## Eclectic12 (Oct 20, 2010)

dogleg said:


> Good morning Belguy :
> 
> [ ... ]
> 
> Anyway to each his own but I don't think it is good advice to a young , new investor to tell them the way to financial heaven is through index funds.


Hmmm ... having watched young, over-confident new investors stick to "high tech" only because they know it or "value is passe" so dividends are useless, I can think many who the index would have saved from tanking while learning their risk profile, investment strategy etc.

Regardless, the way the question is phrased - it seems that there is a steep learning curve with lots of potential missteps.


Cheers


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## HaroldCrump (Jun 10, 2009)

Eclectic12 said:


> Hmmm ... having watched young, over-confident new investors stick to "high tech" only because they know it or "value is passe" so dividends are useless, I can think many who the index would have saved from tanking while learning their risk profile, investment strategy etc.


If you are talking about the dot com crash, didn't the broad indices crash as well like the S&P 500?
As for NASDAQ, I believe it is still under its 2000 highs.


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## Belguy (May 24, 2010)

Narrow range investments are generally more volatile than the broader based indexes.

I guess that then draws into question the whole risk/reward scenario.

If you can pick the right sector at the right time, then you might achieve higher rewards.

But, then again, that brings in the whole market timing question.

Many claim that trying to time the markets, and, in this case, trying to pick the sectors with the greatest potential for short term growth, is a mug's game that even the professionals seldom get right.

And so, that leads back to just investing in the broad indexes, over the long term, and then relaxing on the couch.


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## Argonaut (Dec 7, 2010)

Timing the market and picking the right stocks has been the only way to make money in equity in the past 10 years. Say what you will, but 10 years is a very long time to wait for your portfolio to get back to even.


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## kcowan (Jul 1, 2010)

Why are we discussing ETFs when the OP wants to know about individual stocks?


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## the-royal-mail (Dec 11, 2009)

FWIW, the indexes that RBC has are more geographic in nature, rather than sector. Their index funds are:

Canadian Index Fund
US Index Fund
International Index
plus a couple of geographic bond indexes

These do allow you to relax, while enjoying low fees, but I still say it doesn't have to be all or nothing. There is nothing saying you can't invest in these low-fee indexes with some of your money and in some sector funds or stocks with the rest. That's what I've done, just to keep things interesting. If the sector funds should prove to be too bothersome and I'm losing sleep I can always run for cover back into the safety of index funds.


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## peterk (May 16, 2010)

dogleg said:


> .Anyway to each his own but I don't think it is good advice to a young , new investor to tell them the way to financial heaven is through index funds.


I think it's the ONLY advice for a new investor! All the power to you dogleg, and if you have some specialized knowledge about the workings of precious metals mining companies and geology then why not try to take advantage of it. But how could you in good concious tell someone that has expressed knowing absolutely nothing about stocks that a good starting point is junior precious metals mining?

The whole point of this thread is moot anyways because I bet you all the OP stopped reading after the first page and didn't understand a darn word he did read. 

There should really be a beginner category in this forum that is more aggressively moderated where no technical language is allowed unless it's defined, where new guys can get more hand-holding and less shark-tank-throwing. I certainly would have liked it when I first came here.

Dogleg: I just used a quote from you that caught my eye as being a risky statement towards beginners. But I see your first reply was actually advice to run away from stocks until you know more. So nothing against you personally about your advice given overall. I think this whole thread has gotten away from the original basic topic though


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## Homerhomer (Oct 18, 2010)

Belguy said:


> Narrow range investments are generally more volatile than the broader based indexes.
> 
> I guess that then draws into question the whole risk/reward scenario.
> 
> ...


Ten year investment starting around 2000 in S&P 500, Nikkei, FTSE and many other broad indexes has made no money at all.

Is ten year time period long to enough to say that broad index investing without any attempt to time the market is not be all end all of investing?


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## OhGreatGuru (May 24, 2009)

*What are the Benefits of Investing in Stocks?*

1. Adrenaline rush every time you check the stock listings.
2. Something to brag about around the water cooler every time your stock goes up.
3. Something to moan about around the water cooler every time your stock goes down.
4. Something to obsess about at night instead of wasting time sleeping.


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## Toronto.gal (Jan 8, 2010)

peterk said:


> The whole point of this thread is moot anyways because I bet you all the OP stopped reading after the first page and didn't understand a darn word he did read.
> 
> There should really be a beginner category in this forum that is more aggressively moderated where no technical language is allowed.


Exactly what I said already. The only advice that should be given to someone with no knowledge whatsoever [as expressed by the OP] is to first read a book, not which ETF/Stock to pick.

People here just argued with one another knowing full well that what they posted was not for the OP's benefit & some sounded like a broken-record, lol, don't hit me. 

I like the beginner category idea.


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## marina628 (Dec 14, 2010)

I went to watching BNN because I found many things here was over my head.I like the idea of a beginners forum as well.


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## the-royal-mail (Dec 11, 2009)

sigh.

Why do we always see comments like this from people who rarely post? We had this exact same comment posted on one of my other forums and it erupted into a huge fight, all because someone that nobody even knew wouldn't even use google and do some basic research. And now people here are starting the *bandwagon* effect because of one comment. How nice.

Look, I was a beginner when I came here and I actually still have a lot to learn. That's why I _post and participate _and ask questions. Just because certain individuals choose not to educate themselves, is no reason to further complicate and clutter up the forum or to berate those of us who take lots of time to contribute here. I have never gone wrong when I've taken the time to educate myself and learn on this forum. Just yesterday I started a thread about CRA's reporting processes for TFSAs. In that thread, I don't recall reading any questions or comments from those here who are saying we're talking over their heads. I received lots of very good responses to my basic questions in that thread. 

If you don't know something basic and are connected to the Internet and are on this forum, you have every opportunity, the way things are structured now, to learn. Be it via google, lurking or asking questions in simple terms when you don't understand. 

But yes, it does require a certain amount of listening and personal effort by the poster if they want to get anything out of being connected. This is up to the individual, not the forum.


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## marina628 (Dec 14, 2010)

I think maybe a beginners forum in terms of listing resources all in one place , TV shows ,books ,other forums to read .Not a means of segregation .As you can see from my post count I always ask questions which has helped me learn a great deal.In fact I was beginning to feel badly to ask so much as the more I learn from you guys I realize how much more I need to know.
Also it is a forum so many of us can get side tracked from OP questions .How do i pick stocks , I watch BNN ,I read financial posts , Canada.com and bought a subscription to http://gold.globeinvestor.com/ which is now my homepage in my browser. 
For me I also factor in stability of the areas I am investing in , I love buying stocks that we all tend to use/need like electricity ,Oil and Gas and Tim Hortons !My portfolio right now would give most a nose bleed just looking at it ,but these past 4 months have earned me 30-40%.At the end of the day only take the risks you can afford to take .I like dividend paying stocks and I Drip everything.OP asked advantages of buying stocks , I guess we look at the alternative and not really exciting to get a 2% return from buying GIC and savings.That does not mean you go crazy with penny stocks and risk your security.


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## humble_pie (Jun 7, 2009)

let's not have a beginner's section. There are plenty of books, magazines & online resources out there for new investors.

i always try, here in this forum & when listening to a young or new investor, to speak to his or her voiced needs. And i do find the new investors to be pretty terrific. I never, ever expected so many fine young people to appear here and to be preparing to build their lives with such wisdom & such insight & such responsibility.

to segregate the newcomers in a kiddies' nursery is not a good idea imho. Investing is an exacting milieu & all should learn from the getgo how precious their savings are, and how one mistake can compromise years of careful living, and how it is always better in the beginning to be safe than sorry.

(an aside to marina) dear lady, you greatly under-represent your investing skills. Buying stocks that we all need & use is another way of carrying out buffett's mantra to buy what you know & understand. In essence, it's brilliant. Your pick in CNQ at the time of the mild fire incident recently was a stroke of genius.


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## olivaw (Nov 21, 2010)

> Basically, if I put $20 towards a stock, if the company is still around in 10 years will I make a bunch of money? Or if I invest in something like Hannah Montana, will I not get anything in ten years since she won't be popular


The question is, was the original poster a beginner seeking answers or was there a little tongue in cheek teasing? In 1999 it was popular to invest in dot-com companies with no identified path to profitability. It worked out about as well as investing in the Backstreet Boys.  

The debate between the index investors and the stock pickers salvaged the thread for me. It is an old debate and one that probably gets far too much attention (at the expense of more important things like budgeting, saving and asset allocation) but it is an interesting debate IMO.


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## hboy43 (May 10, 2009)

Hi:

The way I see it the benefits of stocks are:

-historically provide a higher return than FI and real estate.
-liquid (unlike say a locked in GIC or a house)
-opportunity to diversify (unlike say owning one house)
-low MER (unlike say a mutual fund)
-passive (unlike say owning a business or being a landlord)
-opportunity for multiple buy and sell decisions over time, that is DCA on the way into a position, and trim it back when it starts getting large in the portfolio. Try to DCA in on a house purchase some time, or sell the 4th bedroom when the price is up!

I really like that last feature, as I have had many positions over the years that were under water for years on end, that I eventually made a decent return on because I kept buying more when it went on sale. I'll be honest, some went bankrupt too, 5 or 6 in fact, but I've done well over the last 10 or 15 years in the whole investing in individual stocks almost exclusively.

hboy43


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## Eclectic12 (Oct 20, 2010)

HaroldCrump said:


> If you are talking about the dot com crash, didn't the broad indices crash as well like the S&P 500?
> As for NASDAQ, I believe it is still under its 2000 highs.


*giggle* - this is why the "over-confidence" comment. Of the six or so that are in the general time frame, the dot com crash was wave two or three of heavy losses. In just about all cases, the white flag of surrender quickly followed, the trading account was closed and the money when back to the financial advisor/planner.

If I could recall their choices it would interesting to see how it would have all worked out though the crash/recovery.

In any case, I should point out that the "index" I was suggesting was a broader index such as the S&P 500 or the TSE 300 for the learning process. While the NASDAQ may have helped, it was still heavily tech based.

One of the 1998 conversations was why I was wasting time buying Enbridge or TransCanada pipe when "tech was it". 


Cheers


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## Eclectic12 (Oct 20, 2010)

hboy43 said:


> Hi:
> 
> The way I see it the benefits of stocks are:
> 
> ...


I'd put some caveats on some of those. 

For instance:

-historically provide a higher return where a strategy or plan has been worked out and tested. 

Prior to the dot com bust, a friend was winning stock market games buying letter A stock, wait for 10% gain, sell, buy letter B stock, repeat. 

Unfortunately he was using his own money when the crash hit. He no longer does his own investing.


Then too there are intangibles that also are IMO part of the strategy.
Do I understand this investment?
How does everyone make money?
Can I sleep at night if the value has dropped?
Where do I want to spend my time (i.e. searching for stock bargains or playing with my niece)?
How quickly can I react to a market crash?
Will I make 500+ trades a year or four?

All of these will play into the many, many different ways of making money investing.

After, one has to live life. IMHO, making less and enjoying life while avoiding settling for mediocre returns is more important than aiming for the big windfall stock/bond/mutual fund gain.


Cheers


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## olivaw (Nov 21, 2010)

Eclectic12 said:


> After, one has to live life. IMHO, making less and enjoying life while avoiding settling for mediocre returns is more important than aiming for the big windfall stock/bond/mutual fund gain.


Agree wholeheartedly about living life. Disagree about the making less. Research suggests that index investors make more than stock pickers.


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## Belguy (May 24, 2010)

But, you will never, ever convince the stock pickers that buying and holding the indexes is 'THE Investment Answer'.

Reference: 'THE Investment Answer' by Daniel C. Goldie, CFA, CFP & Gordon S. Murray.


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## Eclectic12 (Oct 20, 2010)

Belguy said:


> But, you will never, ever convince the stock pickers that buying and holding the indexes is 'THE Investment Answer'.
> 
> Reference: 'THE Investment Answer' by Daniel C. Goldie, CFA, CFP & Gordon S. Murray.


Hmmm ... so because I can't beat the index long term I should avoid a 1 year return of 100 to 300% with dividends of 8 % through 30%, right?

I can't believe I'd make such a mistake.

Next time RIM is a bargain that returns 30% in six months, I'll try to remember to skip it.


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## Eclectic12 (Oct 20, 2010)

olivaw said:


> Agree wholeheartedly about living life. Disagree about the making less. Research suggests that index investors make more than stock pickers.


*shrug* - I've made money in index funds, buying beaten up stocks, on dividends, split shares, index linked GICs, Canada Savings Bonds paying 18%, by having cash available during the dot-com crash, leveragaged investments, trust units etc. The possibilities are endless.


My point is that if you are making a decent return, it's not worth sacrificing family time/your health to push a 100% gain to 200%. If you are not going to be alive to spend it - what's the point?


Cheers


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