How to learn more about finance.

August 20, 2009 9:25 AM

Where/How do you get your best stock tips? What is your routine when studying a market trade? What are some good websites to learn about finance?

I'm barely getting into the market game and I have a lot to learn. Please share any websites for learning finance for free and/or websites that have helped you gain some knowledge on good stocks to invest in. Thanks.

posted by theholotrope to work & money (12 answers total)

I think the first thing for you to learn about is the efficient capital market hypothesis. Basically, you're not going to beat the market, because any "hot tips" you get are already factored into the price. The market always knows better than you. Just buy index funds.

Barring that, everything you need to know is in Mutant's profile.
posted by Admiral Haddock at 9:31 AM on August 20, 2009 [6 favorites]

Don't listen to anyone else's tips, whether you get them from the news or in person.
posted by pravit at 9:33 AM on August 20, 2009 [1 favorite]

Not free, but I recommend The Intelligent Investor by Ben Graham as a primer for 'value' investors - the concept of finding inefficiently priced (cheap) stocks. Use investopedia to define any terms you don't understand.

Immediately distrust any tips from a website or individual trying to sell you something.
posted by uaudio at 9:35 AM on August 20, 2009 [1 favorite]

stock tips?

My only stock tip is to contribute to an index tracker fund. You can buy individual shares, but you should do it for fun rather than money. You're probably not going to outwit the professionals.
posted by I_pity_the_fool at 9:38 AM on August 20, 2009 [2 favorites]

Do you want to gamble or do you want to invest? Your question seems to imply a little of both. There's a difference, you know, and investors don't make decisions based on stock tips.

Though I've been reading and writing about investing and finance for a while now, I haven't actually found (probably because I haven't looked) a site that I would consider a great source for investment information.

Your best bet is to spend a few months plumbing the depths of your public library, looking for books on the subject. Here are some titles to consider (links lead to my reviews of each title):

• The Four Pillars of Investing by William Bernstein
• The Bogleheads' Guide to Investing by Larimore, etc.
• Million Dollar Portfolio by The Motley Fools
• Saving and Investing by Michael Fischer (there's a collection of saving and investing videos from the author linked at the top of this page)
• The Little Book of Common Sense Investing by Jack Bogle
• The Intelligent Investor by Benjamin Graham
• A Random Walk Down Wall Steet and The Random Walk Guide to Investing by Burton Malkiel
• Stocks for the Long Run by Jeremy Siegel
• Yes, You Can...Achieve Financial Independence by James Stowers
• The Only Investment Guide You'll Ever Need by Andrew Tobias
• One Up on Wall Street by Peter Lynch

Investing is a long-term endeavor. Trading and gambling are done in the short term. The above books will help you learn about investing. I'm not sure where to send you for books about trading.
posted by jdroth at 10:14 AM on August 20, 2009 [3 favorites]

Where/How do you get your best stock tips?

In my opinion, no one can consistently give you advice that will beat the market, despite the fact that many people will claim they can. The current stock price at any given time represents the collective opinion of the entire market, and most price fluctuations are based on publicly available news that changes those opinions. The only way to consistently anticipate those moves is to know those sorts of things before the public does, and making trades based on inside information is illegal. So, to make a long story short, any given stock tip is either useless or illegal.

The good news is that you don't need to beat the market, or know anything that the top market investors and forecasters don't know. The market itself tends to go up more than it goes down, so historically anyone who has invested in the overall market over the long term while keeping their transaction costs down has gotten a positive return that beats pretty much any other kind of investment. The reason why index funds are often suggested is that they are low cost and allow you to directly invest in the market as a whole without having to make a lot of transactions or invest a lot of money.
posted by burnmp3s at 10:39 AM on August 20, 2009 [1 favorite]

Three concepts I like.

1) Rebalance portfoilo every quarter. Read up on Swenson and Yale
2) Dollar-cost averaging.
3) Index funds. Read up on John Bogle and Vanguard.

I like them because they are easy to understand.

Good luck! :)
posted by jchaw at 11:44 AM on August 20, 2009 [2 favorites]

Yeah, I'm not sure you'll be able to "pick stocks". I recommend the Random Walk Down Wall St book mentioned above to see why.

I work with people whose job it is to research companies and pick stocks, and even they make mistakes. They're immersed in a company, scouring all news and generating revenue models in Excel, and for each company they're doing that for, tons of other people are as well. There's almost no way you can know better than they will consistently.

Also, keep in mind that any "technical signal" you'll read about has been academically tested and debunked -- i.e. it won't tell you anything about what's going to happen to a stock. There are probably some firms out there that can do such a thing consistently, but they have several full-time programmers based right in NY analyzing it all. So good luck beating them.

All that said, I've had a Scottrade account for about 10 years now. I've picked two stocks during that time, Apple (I was right for the wrong reasons), and Nintendo (right for the right reasons). I was eagerly refreshing a blog when the Wii was announced (then called "Revolution"), and I thought, "Hmm, this has the potential to revolutionize gaming." I called my mom to see if she would play a system where the controller looked like a TV remote and you played games by swinging it around. She said, "Hm, sure, that sounds about my speed". And so I bought it, at $14. The system came out, was a huge success, and the stock shot to $70. (It's since come back down, but I sold it before it went too low, out of luck).

So the lesson from that last paragraph is maybe you can pick a stock if you're passionate about something which all the NY investors are not looking at, and there's a success story hidden that you know will come true, that others aren't counting on yet. When I bought Nintendo it was the company which had made the disappointing Gamecube and got beat out by the Playstation 2 and Xbox.
posted by losvedir at 12:18 PM on August 20, 2009

what do you know? What is your expertise? The only way you are going to come across a real stock tip is if you are an early adopter of a revolutionary product. For example, if you were someone who always bought the latest mp3 player in the late 90's then you would have noticed that the Apple Ipod was going to revolutionize the form when it was released in Oct/2001. The stock was about $9 at the time and it's around $166 today. There are also numerous companies that support the Ipod/Iphone that have skyrocketed as well. Buying stock from industries you patronize or are employed in are best tips for you to go on because you will also be able to tell when the products of these companies are about to be replaced as a market leaders and may take a hit.
posted by any major dude at 12:21 PM on August 20, 2009

Thanks so much, guys. Excellent responses for a novice like me.
posted by theholotrope at 4:02 PM on August 20, 2009

Get the current edition of A Random Walk Down Wall Street from the library and read it cover to cover.

If you're looking for basic implementations, I'm told that Suze Orman's books have not bad advice.
posted by a robot made out of meat at 5:17 PM on August 20, 2009

Suze Orman should be used cautiously. The blogger Felix Salmon had some good posts about her that are worth reading.
posted by dfriedman at 9:27 PM on August 20, 2009