Stock Market: Love it or Hate it?

[sleepypost]

The stock market is almost a hoax to many. If you have been following the biotech industry you will see how crazy it can get. Yesterday, OSI Pharm rose from 38.00 a share to 98.00 a share in one day, setting a new record for biotech stocks.

Biotechs are the hottest new stocks now, but many believe they are just as risky as dotcoms. I don't know about that, all I know is that if you have money, invest it in biotechs ASAP. These small companies are coming out with the first wave of new generation cancer fighters.

Onyx Pharm rose from 47.00 a share to 57.00 a share yesterday also. It has since dipped slightly. At the beginning of this year, Onyx was 8.00.

[doctorgonzo]

The stock market in the short term is a popularity contest. The stock market in the long term is a weighing machine.

The stock market is not for getting rich quick. It is for making wise investments in companies that are undervalued and have huge growth potential. Five years ago, that meant dot-com. Today, that means biotech. Who knows what it will be in five years? Giant laser space frisbees?

I only invest in very low expense index funds. I'm in it for the long haul, so I don't care if things shoot up for a day, a week, or even a year. When I retire in forty years I am sure that biotech is going to be a quaint anachronism in history books.

[homer15]

Originally posted by doctorgonzo
Giant laser space frisbees?

i'm investing right now!
while i have yet to invest, i am pretty much along the lines of gonzo... go for the companies where you know there is great growth potential and just wait for it to pay off.

[sleepypost]

Originally posted by doctorgonzo

When I retire in forty years I am sure that biotech is going to be a quaint anachronism in history books.

Okay, i'll hold you to your word. ;)

I can not think of any companies out there that have as much speculated growth potential as biotechs. These are companies who have reported negative profits for over a decade and now are seeing their research pay off. Drugs are now hitting the market (or actually, WILL be very soon) and they are estimating profits from anywhere between 500 million and a billion dollars. For a company that has 65 employees, that is a nice reel in, and nice growth i'd say.

I would definitely like to hold you to your word on that. Pirates of Silicon Valley is a good movie because it teaches people to have outstretching forsight of future industries. Forget 40 years from now, let's talk about this in 3 years and see where you stand on this issue!

(btw, dotcoms failed because they didn't have a lick to offer the public. Biotechs are offering cancer treatments that really treat cancer effectively. See the difference?)

I just thought I'd post this thread because most of us would like to be able to travel back to 1984 and invest in Microsoft and Apple. You know the story...

[doctorgonzo]

Biotech will certainly still be around in 40 years, but it will be a mature industry, and mature industries usually don't have the same growth potential as startups. And not every single biotech company is going to make it.

Go back to 1984. If I knew then what I know now (or if I were Forrest Gump), then Apple or M$ would be good stock picks. But lots of companies from that era turned out to be bad. That year, my family bought the very popular Coleco Adam computer. Commodore 64s were also very popular. Those companies aren't around today.

The same will happen for biotech. Some companies will strike it big, others will fail. Yes, there are a lot of new drugs coming out soon or out already. Some may be very popular and make their companies billions, others might not be. It's hard to figure out which is which, and personally I really don't care to do the research necessary to figure it out. With an index fund, a rising tide will lift my boat too.

I will definitely stand by my statement. In 40 years biotech will be as simple and uncomplicated as taking aspirin is today. I don't know what will come next (cybernetic organ replacements?) but I don't think biotech represents the zenith of medical technology.

[HpiSavage21]

If I am going to investing for the long term (I am 14 now) What stocks/funds should I buy?I have 1000 now..

[mikezel]

listening to other peoples recommendations can be a very dangerous thing...and i speak from experience. Before actually investing, id recommend trying a stock game like www.virtualstockexchange.com to get an idea about it. Also my high school has a 'stock market club' which uses this site and lets to learn alot, see if maybe yours does too.
One book i'd highly recommend before starting to invest for the long term is <u>The Successful Investor</u> by William J O'Neil.
Mike

[doctorgonzo]

Originally posted by HpiSavage21
If I am going to investing for the long term (I am 14 now) What stocks/funds should I buy?I have 1000 now..

If you do nothing else, buy a low-expense index fund like the Vanguard 500. It's expense ratio is only 0.18%. Most managed mutual funds have expense ratios around 2%, which means that at the start of every year you start down 2%. For this reason, an index fund beats over 95% of managed mutual funds over the long term.

That may seem like a small percentage difference, but it adds up. For example, lets say you invest $2,000 per year for forty years, and your return averages 11% a year. With the low-expense index fund, the real annual return is 10.82%, and you will have $1,227,321 after 40 years. If you invest in a fund with a 2% expense ratio, the real annual return is 9%, and you will have $736,584 after 40 years.

That miniscule percentage is worth an extra half-million over 40 years. If you remember this, you will be better off than the vast majority of investors.

[DragonNOA1]

Whoops, I just sold my BioTech b/c it went up. Shoulda waited huh?

[mikezel]

Biotech is a really easy place to get burned in. Alot of the time it comes down to one day, such as whether or not a drug gets approved. One day will often make or break your investment. Definately not for the faint of heart.
mike

[thorlo6]

That's why I prefer to let my stock picks be managed by an organization that has a reputation of making the good picks. I am investing 4% of my biweekly paycheck and my hospital that I work for matches it. Any other investments are in the form of Gold.thorlo6:)

[HpiSavage21]

If I were to buy them http://finance.yahoo.com/l?s=Vanguard+500&t=M which one? And also how many indivdual "funds" would I buy?

[HpiSavage21]

If I am under aged won't I needa file taxes?

The expense ratio for the Vanguard 500 Index Adm (VFIAX) is @ 0.12%

Vanguard 500 Index (VFINX) this is @ 0.18%

If I purchase the Vanguard 500 Index Adm (VFIAX) @ $105.18 and start w/ 2,000 dollars I will have about 19.1 shares or "holdings" of the fund does that sound right/ok? It has a very low expense/cost ownership and if I put 2,000 per year for the next 40 years it is 80,000 dollars which is not bad considering the money in the end :)

[doctorgonzo]

Whether you pay taxes depends on how you invest it. For the best tax benefits, you should make investments in tax-deferred or tax-exempt account, like an IRA. If you have income, you can open an IRA.

The minimum investment for the Vanguard 500 Index Adm is $250,000, so you probably won't be starting with that. ;) The minimum investment on the other fund is $3,000, and it is usually even lower for IRA investments.

[sleepypost]

Originally posted by DragonNOA1
Whoops, I just sold my BioTech b/c it went up. Shoulda waited huh?

Not necessarily. Unless you are talking about a biotech portfolio here.

I am mainly talking about cancer biotechs here.

[edfair]

Every investment you can pick has the potential to lose your money for you. And the internet is the last place you better use to get investment advice.
Funds allow you into multiple industries at minimal investment levels and save you the need to follow all the pitfalls that can affect an investment. But there are some major potential loss issues with funds, too. what is it "Caveat emptor"?

[Hi Ho]

My aunt and uncle have made millions in the stock market. They now live in a million dollar home in Arizona. If you know what you're doing you can be very successful.

[mystvearn]

For some reason, my aunt always ask me to go & tell her when to buy/sell. Great day, i got her lots of cash. But I hate the place.
Don't want to get involve in that anymore.

[Jaggannath]

Maybe you were her good luck charm mystvearn

I'd be too intimidated to do all that with my money, to tell the truth

[HpiSavage21]

If I Invested in the Vanguard 500 Index (VFINX) and its expense cost stays @ .18% and my average yearly earnings are about 10.82% how much would this mean yearly?

I don't have a steady income but I make enough (2,000) to put into a Vanguard fund... I can take it out whenever I want right? Any other suggestions before I purchase?

1)Do i have to go to Vanguards site and buy them or can I get them on sharebuilder etc..

[edfair]

You might expect around $180 for a year, if you stay invested for the full year. Depends on what other fees, like 12b1.
May be redemtion charges or investment charges.
Look for their prospectus and their offering brochure on their web site.
You might also do a google search for "mutual fund comparisons" to see how they compare with others in their group.
And understand that higher returns may indicate riskier investments.

[mbossman2]

as has been pointed out above (and here: http://forum.pcmech.com/showthread.php?threadid=84140&highlight=index+funds) stock market is a long haul thing.

you can try to catch the next rocket to the stars, get rich and retire at age whatever (biotech is the "in thing" right now) but the reality is that for every high flyer/millionaire maker, there are 100's of out of business, filed for bankruptcy, all your money's gone and all you have is an interesting conversation piece 20 years from now.

there is nothing wrong with speculative buying, but it has its time and its place. You can go speculative when you have a good solid base of investments and you have a little bit (<3% of net asset value) available to play with. with this type of investing you should be playing with winnings not with baseline capital.

[doctorgonzo]

HpiSavage21, go over to www.fool.com and check out their short 60-second guides. They have a lot of good information on the different types of accounts available, tax implications, and so forth. Unlike many financial advice sites, the Motley Fool is no nonsense and tells you what is best for you, not what generates the most commission for financial advisors and brokerages.

[sleepypost]

The Motley Fool (been a member for a while) is filled with good information. But, their forums are filled with amateurs and people answering questions with more questions. Overall that is a good site, but the forums should be thoroughly investigated for speculation and manipulation. LOTS of phony PhDs there!

[mbossman2]

Originally posted by sleepypost
The Motley Fool (been a member for a while) is filled with good information. But, their forums are filled with amateurs and people answering questions with more questions. Overall that is a good site, but the forums should be thoroughly investigated for speculation and manipulation. LOTS of phony PhDs there!

any specific (general advice or guidelines can be vetted against "known" publications...investors daily, WSJ, etc) advice that involves $$$ should be checked, double checked and then triple checked with some who you KNOW (and you have met, have verified their cred's...and even then take the advice with a large boulder of salt)

[doctorgonzo]

I've been a member of the Motley Fool for a long time too, and I never visit the forums. The articles are filled with good information; the forums are filled with people with varying levels of knowledge and who have their own motives. I agree that any specific advice needs to be well-researched on your own. People who tell you to "Buy X or Y" may know what they are doing, or may not. Usually not.

[HpiSavage21]

The Vanguard 500 Mutual Funds contains a basket or an "index" of the following companies.. so if one goes down the others still help it out so I don't loose ehh?
Ten Largest Holdings as of 03/31/2004
1 General Electric Co.
2 ExxonMobil Corp.
3 Microsoft Corp.
4 Pfizer Inc.
5 Citigroup, Inc.
6 Wal-Mart Stores, Inc.
7 American International Group, Inc.
8 Intel Corp.
9 Cisco Systems, Inc.
10 International Business Machines Corp.,

[ScurrilousPrune]

I did a fake stock market project in school and we found out that you can make alot of money from Sony stock. I tracked their stats for about 8 months and it never went down, it kept rising.

[HpiSavage21]

After doing some research on Warren Buffet and the Wilshire 500 funds I have decided I want to buy a few of each, teh Vanguard 500 and the Wilshire. The Wilshire has a .0.94% expense ratio and the Vanguard has a .18% ratio.. My question is were do I buy them? Should I buy the Vanguard funds on vanguard.com and teh wilshire on another site or both on TD waterhouse..?

Also since I am under age how do I do the tax filing thing everyyear?will it be done under my dads name?

[mikezel]

I'd do it through Waterhouse. As for the tax thing, the way I do it is I give my dad the money, and let him handle the physical buying and selling (when I tell him to) and all the tax-related stuff. Its just easier that way. Or, you could get a broker to handle all that, but full-service brokers can be very expensive.
mike

[DragonNOA1]

If you are old enough to own stocks (18) you are old enough to file taxes on them. If you are younger, your parents must set up the account and pay the taxes.

[mbossman2]

Originally posted by HpiSavage21
After doing some research on Warren Buffet and the Wilshire 500 funds I have decided I want to buy a few of each, teh Vanguard 500 and the Wilshire. The Wilshire has a .0.94% expense ratio and the Vanguard has a .18% ratio.. My question is were do I buy them? Should I buy the Vanguard funds on vanguard.com and teh wilshire on another site or both on TD waterhouse..?

Also since I am under age how do I do the tax filing thing everyyear?will it be done under my dads name?

you can buy funds from just about any brokerage house...look for ones that don't charge commissions on mutual funds transactions.

As to taxes: it really depends on how your account is set up:

1) if it is an IRA (roth or regular) and you make no withdrawls then all taxes on earnings are deferred until much later in life (or in the case of a roth...no taxes at all).

2) if you are setting it up as a "regular" account (non-retirement) then you may have some tax liability at the end of each year (the oh so wonderful capital gains distribution) depending upon the activity of the account (did you sell/cash out any $$$...did the fund cash out and incur any capital gains).

If you are a minor, you will want to get your parents involved and a tax expert to make sure that the account is set up properly to ensure that you incur the minimal amount of taxes and impact you and your parents the least.