Tag Archives: stock market

Missing the Boat

Published / by Annie / 2 Comments on Missing the Boat

One of the first stocks I researched happened to be the company that originally owned the store I work in. Since they had sold my company off I decided not to buy, but since the owners of my franchise happened to also own another store that was involved in the company, I set up some news alerts just to keep abreast of how they were doing.

The other day my inbox started buzzing. The trading volume on this stock was insane! I loaded a live chart of the action and watched the price of the stock climb higher as new 52-week highs were reached. This stock that originally traded for around $13 in March at their 52-week low was now selling for over $20 a share and going higher!

By the time it was done the company in question had been bought out by another company at over $32 a share. If I had purchased 100 shares of this company at its 52-week low, I would have netted a $1,900 profit.

But I missed the boat.

So what have I learned so far with these two experiences? I’ve learned to always wait to make sure that a stock has bottomed in price before investing. I’ve learned that, while cutting dividends to pay down debt or grow a company may be a good thing that investors don’t agree and the price drops drastically as a result.

I have learned the value of patience and research.

I’ve also learned that I am on the right track. I can invest in dividend-producing companies at their 52-week lows (after checking into why the stock dropped to make sure it is a good investment), hold onto the stock until it reaches a new 52-week high then sell at a profit, receiving dividends while I wait.

I’ve also learned that there is an odd chance that I might get very lucky and make a mint like the one I lost out on. I’m not going to count on that, however. Stumbling upon a coup like that is kinda like winning the lottery, in my opinion.

I’m finally starting to form a game plan. The proof will be in the pudding, however. It will take about a year before I learn if this method will work or not.

I can wait.

A Stock Market Ouchie

Published / by Annie / 3 Comments on A Stock Market Ouchie

While I was digging through the bargain bin at the Stock Market I stumbled across a company with a LOT of potential. This media company, while it has its fingers stuck in traditional media sources like television and radio stations, not only creates its own content but has been slowly transitioning to embrace the new way people receive media. I dug through their financials. They had a lot of debt but were otherwise doing okay. Even better, they had realized that the times were changing and, unlike other companies I’ve researched, they were adapting.

Due to the significant dip in their stock price, the dividend was very attractive, enough so that I continued digging. I realized that this company had something in the works to not only reduce its debt but to continue the transition that I’d discovered. I didn’t know what the plan was but I decided to buy in. I scrounged up every penny I could and bought 191 shares, planning to round it out to 200 shares as my finances allowed.

This stock was trading around $5 a share. I ended up investing close to $1,000 in it. Satisfied, I sat back to see what would happen next. Considering that this company, in the years it had been on the exchanges rarely traded for less than $9 a share I figured I could hold it a couple of years and then sell for a tidy profit while receiving dividends for my trouble.

I woke up one morning a couple of weeks later to discover the stock price completely tanking. My pulse went through the roof as I stared. What the hell? I hit the news feeds. As I had predicted, this company had taken some drastic steps to reduce its debt. It had not only written down the value of some assets in order to save money on taxes by reporting a loss for the quarter, it had used that legal jiggery-pokery as an excuse to slash the dividend payout. The money saved would be used to aggressively pay down its debt.

Oh, the financial reporters were screaming! I could almost see them shaking with rage as they ranted against the dividend cut online. This stock had been considered a staple in dividend portfolios yet the company had the nerve to actually slash it–how dare they! Retirees had been counting on that dividend!

As I watched the value of my investment tank I ran the numbers on the new dividend amount. At the price I paid for the stock the return was still a reasonable 5%, yet people were ditching the stock in droves. I watched as the value of the stock dipped lower and lower, debating. Should I sell and then re-buy when it finally bottomed? I’d already lost over $150 in value when I’d discovered the mess. What should I do?

I sat back, took a deep breath, and let it fall. When last I looked the stock was trading at $3.49 a share. It has lost almost $250 in value since I purchased it. I’ll finish up my lot and perhaps buy even more once it hits bottom, if only because I can tell even now that the company is a scrapper. They are paying down their debt while they work out the best way to navigate the challenging media landscape. While I’ve no idea how this will pan out I’ve got faith.

I cannot believe that I am taking this so calmly. Maybe I have what it takes to be an investor after all.

Why I Won’t Invest in Index Funds

Published / by Annie / 8 Comments on Why I Won’t Invest in Index Funds

I’ve had a lot of recommendations concerning Index Funds as of late. It seems that many people believe that they are the way to go.

I happen to disagree, especially with current market trends.

An Index fund is a business that buys shares in some (weighted funds) or all of the companies listed on the stock market. As a result, the value of your investment goes up and down in relative sync with the stock market itself. These have become famous in recent years as Warren Buffett and others began recommending them for folks who don’t know much about the stock market.

I have a big bone to pick with them, however. When you purchase shares in an Index fund, you don’t own a piece of the individual companies. Instead, you own a piece of a company (or fund, whatever you want to call it) that happens to own pieces of individual companies. You don’t actually own a bit of the individual companies themselves.

I prefer to cut out the middle man because I’m ornery like that. Why pay someone else big bucks so they can buy and benefit from the stocks? If I wanted to go that route, I’d simply start collecting shares on my own (which I might do someday).

My primary concern at the moment isn’t quite that nitpicky, however. My concern is with the fact that the stock market seems to be on the verge of a bear market. As a result, the value of Index Funds could drop dramatically. It’s gotten to the point that Vanguard no longer allows its employees to invest in their own product, the S&P 500 Index Fund.

When a cook refuses to eat their own cooking you need to run for the hills because something is seriously wrong.

I believe I know what it is. Here is a screenshot of the S&P 500 Index:

See that slow, downwards trend? That’s the value of an S&P 500 Index Fund starting to go down around mid-January of this year.

Here’s another one:

This is the Dow Jones Industrial Average. It’s been trending downwards as well this year. Like the S&P 500, the trend is gradual, but it’s still there. In fact, the only major one still trending upwards this year is the Nasdaq:

The Nasdaq is very tech-oriented, so its gains are doubtless tied to the FANG stocks (Facebook, Amazon, Netflix, and Google). I suspect that upwards trend is about to change. Look at this:

This is a long-term view of Amazon’s stock rise. See how steep the trend is? If there is one thing I’ve learned during my research, the steeper the trend, the less sustainable it is. Amazon is the darling of the stock market but you can bet your buttons it won’t be able to sustain that momentum forever. It will tank, and tank hard. The only question is when. If you look very closely at the chart (just click on the image to see it full-size), you can see that the top is already beginning to round out. This may very well signal that the price is about to drop, though it is a bit too early to tell at this point.

I read somewhere (I really wish I had saved the link), that it is the FANG stocks currently supporting the stock market averages. Facebook, Amazon, Netflix, Google (now called Alphabet), and by extension Apple, Microsoft, and Intel are providing around 85% of current gains on the stock market. As a whole, over 60% of the stock market is down, so when the FANG stocks plunge, those invested in Index funds will see their nest eggs wiped out.

The worst part is, that plunge is already starting. Here is a screenshot from Facebook’s stock:

See that big drop, like the stock fell off of a cliff? It will take them months, if not years, to recover. I suspect that the price of the stock will fall even lower before it’s done since they usually do.

Here is Netflix:

Netflix is on its own roller coaster ride downwards.

Google (Alphabet) is the only one of the primary FANG stocks that seems to be in a stable trend upwards:


So out of the four primary stocks fueling market gains, only one of them seems to have the ability to continue to move upwards for the long term.

In addition to this, as I look through what I call the “bargain bin” I am noticing that many of the stocks there began a major downtrend in January, coinciding with the start of the downward S&P 500 trend that’s starting to appear. My guess is that these companies are the “canaries in the mineshaft”–more sensitive to change than the overall market. I’m seeing stocks that traded for $5, $10,  or more a share prior to that time taking a sudden drop–and staying down despite the fact that nothing within the company has really changed.

I may be far from an expert but to me the warning signs are significant enough to pay attention. We may not be in what is called a Bear Market right now (I don’t even think they are calling it a correction yet) but I highly suspect that one is coming. Those who are heavily invested in high-flying stocks like the FANG group or so-called “safe” Index Funds will be hurt the most if I’m correct. Vanguard has apparently seen the writing on the wall but since they will make money on their Index Funds regardless of how well (or poorly) they do, they will continue to market them to the unsuspecting general public as they protect their employees by not allowing them to invest in it.

In conclusion, as a result of my research, my answer is a firm no. No, I will not invest in Index Funds at this time. If Vanguard doesn’t even recommend for its own employees to invest in their product, I refuse to touch it with a ten-foot pole.

I hope you understand my reasoning now. This is why I firmly believe that my best bet is to scrounge around the “bargain bin” for companies already suffering from the downtrend. For the record, all of this could very well blow over–if it does and my concerns are eased, I will consider the investment.

For Further Reading:

Top Economist: Get Ready for a Stock Market Drop

Why the 1929 Stock Crash Could Happen in 2018

‘A storm is brewing’ in the US economy, says economist Diane Swonk

The Challenge of Investing in the Stock Market

Published / by Annie / 17 Comments on The Challenge of Investing in the Stock Market

One of the major challenges of entering the stock market on a shoestring is brokerage fees. These are fees that you have to pay any time you buy or sell a stock. While there are a number of discount brokerages out there, many of them require that you open an account with anywhere from $500, $1,000, or even more. When you live on minimum wage, saving up that sort of money can be daunting!

Once you open a brokerage account the challenge doesn’t stop there. In order to reap a profit you have to factor in those fees. For instance, the last I checked, a popular Dividend Aristocrat, Proctor and Gamble (PG) was trading at $79.28 a share with a quarterly dividend of $0.717.

Think about this. You work minimum wage. If you’re lucky, you might be able to save up $100 to invest every month or so. That means you will only be able to purchase a single share of the stock at a time. Using my brokerage fee of $6.95 as a guideline, in order to purchase a single share of Proctor and Gamble at $79.28 a person would actually have to spend $86.24 for the privilege. If you were just investing for dividends, it would take you over 27 months just to recoup the fee you paid to buy the stock! I’m not including the potentially increased value of the share itself since appreciation is not guaranteed. In fact, the value of your stock can tank overnight so in reality, when one invests for dividends the safest attitude to have is that you might very well lose the entire price you paid for a stock if the market turns. Even if the market didn’t turn against you, in order to receive a profit from that single share you would have to wait until the stock sold for over $93.19 simply to recoup the amount you paid to buy and sell it!

With that sobering reality, it would be better for the shoestring investor to stash their cash in a savings account.

So how do these big dog investors make money then? They buy in bulk, that’s what they do. It costs the same whether you buy one share or 100 shares so they leverage that to reduce their trading fees to an acceptable level.

Using Proctor and Gamble as an example, if a person bought 100 shares of the company the trading fee works out to seven cents a share to buy, or fourteen cents a share to both buy and sell. The first round of dividends would be $71.70, an amount that completely covers the brokerage fee to purchase the stock and netting a $64.75 profit. Every quarter after that would be pure profit. When the stock increased in price just fourteen cents a share, the brokerage fees would be covered even if you didn’t hold the stock long enough to receive a dividend.

There’s one major problem with that scenario, however. Folks on minimum wage generally don’t have $7,928 to invest at one time. While you can adjust the numbers to accommodate purchasing a smaller amount of shares, one has to be very careful. The goal here is to make a profit–not give it all to the brokerage firms!

My goal here is not to just feather my nest. I want to work out a way that an average person on minimum wage can invest in the stock market and receive a profit. With that in mind I am going to rule out the big dogs as an investment option. While I’m good at saving money I have no desire to save up an entire year’s wage before I could invest.

There has got to be a better way. I have noticed that there are a lot of companies who have seen their stock prices tank starting back in January of this year. I am going to sift through this “bargain bin,” searching for quality companies to invest in. To minimize my trading fees I intend to purchase no less than 50 shares at once, though if at all possible I want to be able to acquire a minimum of 100 shares per purchase.

Is this risky? Yes, it is. I could very well lose every single penny I invest in the stock market using this method but that’s okay. The very worst that can happen is that I have to continue working until I die. Considering the fact that I’d have to do that anyway, the fear doesn’t bother me.

This isn’t the first time I’ve risked everything. When I left my husband, all I had to my name was a ratty old mobile home. I didn’t even have a job when I started but I made it work. I risked it all again when I decided to become a full-time writer. I managed to live on my royalties for several years as a result of that leap.

As for this? This is about more than just me. If I can pull this off, if I can figure out how to play this game and make a profit, I can figure out a way to distil what I’ve learned and teach others how to escape the rat race. I’ll not only achieve my own personal financial freedom, but I’ll be able to help others do it as well.

I’ve got to try.

 

A Lesson in Silver

Published / by Annie / 13 Comments on A Lesson in Silver

My silly little silver investment has paid off, not in dollars, but in knowledge. I’ve not only learned how to read price charts now but I’ve also realized that there is a big difference between investing in precious metals and the stock market.

While silver, gold, and other precious metals might go up in price you never know exactly when that is going to happen. It is also something of a chore should you decide to sell. If you don’t sell it locally then you have to arrange for a sale with an online broker, package it all up, ship it to them, then wait for them to pay you.

That alone is a pain in the tukus.

The stock market, on the other hand, is a whole lot easier. You buy your stock, wait a bit for the price to go up, then press a few buttons to sell it. You’ll get paid within minutes. I learned this after making a few experimental trades with my new brokerage account. I made a $40 profit just playing around in the past couple of weeks, while the value of my silver has essentially remained flat.

Even better, I’ve learned that certain stocks issue dividends. Buy these stocks and you will receive a small amount of money every one to three months (depending upon how they do their accounting). They are like buying a cow and then selling the milk!

If I can learn how to combine the two methods of investing for dividends and harnessing stock price increases, I should be able to grow my little nest egg into a tidy profit over time. It won’t be overnight, especially with the current stock market fears, but it’s something to look forward to.

In essence, my silver investment may have ended up being a short-term bust, but it taught me more than I would have learned had I not experimented. I’ve even gotten a little memento to keep in my pocket to remind me of what I’ve learned.

What have you learned from your mistakes? Please share your stories in the comments below.

A New Focus

Published / by Annie / 4 Comments on A New Focus

First off, I want to thank everyone who has commented or messaged me with suggestions. You are awesome, and you’ve given me a lot to think about.

Second, I’ve been burning the midnight oil as I try to work out a way where I, the Shoestring Girl herself, can build up some sort of passive income stream that will support me in the future so that I won’t have to worry about working should I become unable to.

I’ve temporarily ruled out real estate, though it is something I would like to explore once I get my income in a higher range. As it is, with Katie planning to move out at some point in the future, the expense of acquiring a vehicle to attend any real estate purchases is a bit more than I feel my current finances can handle. The insurance alone (since I haven’t had any for several years) would destroy my budget.

My research has revealed that the stock market has a very low entry point; you can start an account with no minimum deposit; a variety of stocks trading there go for a pittance. Did you know that Ford Motor company is currently trading for around $12 a share? I was floored at some of the prices listed. I thought you had to be rich to even enter that arena.

Thanks to Carla for recommending that I read about Derek Foster! I’ve got two of his books due to arrive any day now. In the meantime I’ve acquired several books on the stock market to read while I’m waiting. Here is a list of the titles:

  • Buffetology
  • Investing for Dummies
  • The Intelligent Investor
  • Get Rich Carefully

This is going to be interesting. I know nothing about the stock market except for the fact that my dad invested in it when I was a teen and lost a small fortune. Since he invested with Merrill Lynch I decided to sign up for an account with Merrill Edge, their online brokerage. They have no minimum deposit to start, they have a ton of information available to help beginners, and they charge a flat rate of $6.95 a trade. I found cheaper brokerages out there but sentimentality won out.

Let’s see if this old bird can figure this out.