Questions from a new investor.

[scubaman2151]

Hello,

First sorry if this is in the wrong section.

Well I have $1200 that I would like to invest in the market.

I was going to put $1000 into MCD. I would like this to be a very long term stock. I have no problem leaving it there for a couple years. But would buy and sell to hopfully make some profit here and there.

Now, the other $200. I dont know where to put it. I know well all have our favorite stocks, but im looking for a stock that isnt to expensive, maybe between $5-$20 a share, moves decent whereas I could have fun watching it but at the same time sell it to make a profit. Any ideas?

[Stocktrading101]

Hey Scuba, I wouldn't recommend investing $200 into a single stock, atleast stick with the $1,000 or higher. I don't know what broker you have but to pay $9.99 for instance just to take the position would mean the stock would have to go up 5% before you even got your buy cost covered, and it would cost another $5 to sell as well.

[www.tomarsays.com]

Scuba,
I agree with the suggestion posted above. I dont think you should put $200 in a separate stock bccuz of the commission.

[Zach]

I can't disagree with the other guys, but to help with commission you might take a look at Interactive Brokers (www.interactivebrokers.com). I'm not sure what their minimums are, but commission levels are dirt cheap. Not a commercial :-) I don't get anything from them. I've just used them in the past myself.

[Airelon]

I have to agree with the above posters.

Picking the right stock? Being correct as to the markets direction? Is only about 1/5th of the trick. Investing that much of your capital towards only one stock? Would be violating principles of risk management. Generally, you only want to risk about 3% of your capital towards any one investment.

I started up a forum some time ago (never took off much, friends of mine use it), and I recently have begun posting about what WILL make you money in the markets.

Money management principles. That will make or break you as an investor, and a trader.

[Journal Writer]

Originally Posted by Airelon

Generally, you only want to risk about 3% of your capital towards any one investment.

3%? I'd say 10% is a better number. Not many entry level investors can handle tracking more than 10 stocks at a time. I go as high as 20% sometimes, but then again I use margin and options too.
______
My Trader’s Journal

[Airelon]

Problem is, that the higher you raise this percentage, and especially past 15%, the greater risk you have of entering the Gamblers Ruin Scenario, if you have even the slightest bit of overall system drawdown. Especially in the coming months. In a bull market, it's easy for our systems to pick winners. Historically, 3% has been found by professional traders to be a mathematical safety net for avoiding any such situation. If you raise to around 20%, you run the risk of losing everything.

That being said, I do use 3% as a baseline. I have been known to raise it on occasion, due to trade management techniques; and always according to money management principles. Generally, I do this when trying to capitalize on the Patero Principle. But I would never past 7%.

[scubaman2151]

Well, its offical, I opened my Stock Trader Account today online, deposited money, it should be in there on thursday by about noon. And I am taking all your adivce, so keep it coming.