Best way for "amateur" investments in US market?

[FixedGear]

I've got a bit of "fun money" in my budget and am thinking of using some to play in the US stock market. (this money is budgeted for entertainment, and I don't need to make a profit on it.) Can anyone tell me what is the best and cheapest way to do this?

I have mutual funds, but other than that, don't have experience with stocks. if anyone can point me towards good books or websites for noobs, it would be appreciated!

Thanks! :thumbsup:

[ercchry]

so is it safe to assume that the amount is in the 4 digits? if so, and you really dont care about the risk... cfd's leverage that shit!

[FixedGear]

Originally posted by ercchry
so is it safe to assume that the amount is in the 4 digits? if so, and you really dont care about the risk... cfd's leverage that shit!

Not sure what that means, but I kinda just want to put some of my fucking-around money into some of my favorite companies, and see what happens to it. LOL. I know there are websites where you can do it for like $8/transaction or something.

[ercchry]

yeah, only thing is with not much money you cant really buy much... like a share of google or apple is $500-$800... transaction (remember you will be charged to buy AND sell) is pretty steep on a per share basis... not to mention best case scenario being a stock doubling... which is super rare... not the best roi imo.

CFDs or "contract for difference" means you can buy commodities, currency pairs, indices, etc with leverage. so you make a trade that costs you $500, well you really just bought $5000-$20,000 worth, so smaller changes mean bigger results... which also means, more risk.

hell, there is one brokerage that i know of that will let you buy fractions of stocks too (not leveraged though)

basically you pick a dollar value you want of one of the stocks on their list and once a day they put in a single order for all their clients and you own whatever percentage of the stock you paid for. can buy and sell it only once a day though

[Super_Geo]

Just go to the casino and put it all on the roulette wheel or one hand of blackjack.

Your odds of making money is higher that way.

[roopi]

Originally posted by FixedGear
I've got a bit of "fun money" in my budget and am thinking of using some to play in the US stock market. (this money is budgeted for entertainment, and I don't need to make a profit on it.) Can anyone tell me what is the best and cheapest way to do this?

I have mutual funds, but other than that, don't have experience with stocks. if anyone can point me towards good books or websites for noobs, it would be appreciated!

Thanks! :thumbsup:

1. Open a discount brokerage account with TD Waterhouse, RBC Direct, Scotia, Questrade etc

2. Fund account with money

3. Buy stocks

Pretty simply actually. Cheapest for commissions with a small amount of money to start of with would be Questrade.

@ercchry - If he doesn't know how to go about buying stocks do you really think he would be successful in commodities, currencies, etc that are leveraged?

[roopi]

Originally posted by Super_Geo
Just go to the casino and put it all on the roulette wheel or one hand of blackjack.

Your odds of making money is higher that way.

Excellent useless advice.

[ercchry]

Originally posted by roopi


@ercchry - If he doesn't know how to go about buying stocks do you really think he would be successful in commodities, currencies, etc that are leveraged?

thats why i said IF he is okay with losing it :rofl:

but the time he is going to spend on this... on an hourly basis even if he is successful i'd but the net rate at ~$2/hr

[woodywoodford]

I can only speak for my RBC direct account, but commissions are 28.95 per trade (that means buying and selling both), so right away on a $1000 investment you need to make a 6% return just to break even, and thats on only one equity. So if I were in your shoes, I'd just throw it all into a long position on SPY (an etf that tracks the S&P500). It's passive investing at its easiest. Alternatively you could buy call options on spy. You're all-or-nothing at that point but can make some pretty nice returns. A basic strategy could be that, since some analysts are forecasting a 12% return on the S&P that would imply around $164 SPY in January '14. Buy some calls today with a January expiration and a $154 strike and you can, if they hit that mark, make 60%+ returns. But if they don't make your break even point (probably around the $151 range) you'll lose it all.

The numbers might not be entirely accurate here, but you get the idea. Long the stock, pretty safe long term investment. Long calls, you're all or nothing by the expiry date.

Edit: according to my (very rough) spreadsheet, the numbers from last week worked out that

2 contracts, 154 strike, bought for 5.29 each (x100 shares/contract x 2 contracts) is a net investment of $1076. The break even point is for SPY to hit 159.61 before January 18, the expiry, which is a 9% increase over the year. If SPY hits $164, a 12% increase, you're payout would be $1942, a 865 dollar gain or 80%. The key assumption is no arbitrage aka you can sell the calls for future price less strike price so realistically there will be fluctuation, but still... options are where its at.

[Rat Fink]

.

[Super_Geo]

Originally posted by roopi


Excellent useless advice.

So you think the average retail investor has a better shot than 48% in the stock market?

[roopi]

Originally posted by Super_Geo


So you think the average retail investor has a better shot than 48% in the stock market?

Yes I believe so. If I was to randomly pick a stock I believe after 1 day there is a better chance that company and my money will still be there. Of course there is zero chance of it doubling within one day but it is investing not gambling. It's not really a valid comparison.

So before you became an above average retail investor you took all your investment money to the roulette table?

[ExtraSlow]

Originally posted by Super_Geo


So you think the average retail investor has a better shot than 48% in the stock market?
The average net return of playing roulette is negative. Most years, the average net return of the stock market is positive.

[Super_Geo]

Buy and hold had worked for retail investors because we went through a multi-decade secular bull run in equities. The same goes for real estate, both residential and commercial. It's just not as easy to make money in the current market environment. The average hedge fund returned 5% last year.

I would say the first thing to do is build a risk-free interest generating base. Max out your TFSA in a 3% savings account. Then, start buying fundamentally sound dividend stocks in your RRSP. Then start trading as you're describing in this thread.

And roopi, I don't consider myself an above average retail investor, which is why I don't have a lot of money in equities. I truly believethe cards are stacked against you.

[freshvibes]

Open a Questrade Margin account and have at it. Though Canadian brokers blow compared to offshore/american brokers I think for what you're doing it should suffice.

I believe they're still running a promotion of unlimited free trades for 1 month. Otherwise $4.95 flat fee to buy or sell.

[ZenOps]

Best thing to buy from the US right now are nickels.

$98 Cdn for 22 pounds of 25% nickel 75% copper - otherwise known as a box of nickels. Since 2007 it is illegal to transport more than $100 over the Canadian border, so don't go over that amount at a time.

Worst thing to buy: Maine Lobster at $1.25 per pound, unless you actually have a means of shipping live crusteaceans.

US Electronic Stocks? Meh. What are you going to do with it, convert to EBT cards? Every electronic dollar you send to the US is probably going to fund some student half of which will probably default on their loan anyhow. Might as well just donate to charity in that case, Haiti still needs rebuilding.

Interesting statistic: The US creates about 3x more electronic dollars than printed cotton bills.

[tch7]

Originally posted by Super_Geo
Max out your TFSA in a 3% savings account.
Avoiding taxes on a measly 2-3% gain is a waste of the TFSA. Keep the HISA outside of the TFSA/RRSP, and put riskier things with the potential for growth in those tax-free bodies.

Unless of course you have more contribution room than you do money, or zero appetite for risk, in which case you may as well hold a portion of your money in a tax free HISA.

[Super_Geo]

Originally posted by tch7

Avoiding taxes on a measly 2-3% gain is a waste of the TFSA.

I fully disagree.

At the end of the day, it all comes down to how much you're going to make in equities. For the majority of people, I would guess that it's <3% annually, with most of the group in the down 5-15% range.

In a tough market environment, I think the smart move is to make sure you don't squander your TFSA... losing money in your TFSA should be a sin, with the real loss coming from the opportunity cost of reduced future tax shelter capacity when the markets are in good shape again.

[FixedGear]

Originally posted by freshvibes
Open a Questrade Margin account and have at it. Though Canadian brokers blow compared to offshore/american brokers I think for what you're doing it should suffice.

I believe they're still running a promotion of unlimited free trades for 1 month. Otherwise $4.95 flat fee to buy or sell.

I'm actually located in the US and this will be in the US market. I realize I most of you are in Canada, but I was hoping that some had experience with US. you say canadian brokers blow compared to US - can you make any recommendations for the US? Of course, I plan to do "research" before doing this, I was just thinking that maybe beyond would be a good place to start.

meanwhile, I have people telling me to put money into TFSA. :rofl: As I said, all of this money is coming out of my "fun money." I already have the rest of my budget worked out.

[freshvibes]

Some of the popular US brokers are Interactive Brokers, E*Trade, and Scott Trade.

Unfortunately being in the US means that if you have under 25k in your account, you'll be subject to the Pattern Day Trader rule. This limits you to only 3 trades per week which can be restricting depending on how active you are in the markets especially if you're playing with fun money. You don't want to get stuck in a position you can't get out of.

If you do find this rule to be restricting, there are few ways to get around this. Your first option is to sign up with a prop trading firm and trade with their capital or your second option is to go with an offshore brokerage. If you decide to go this route I highly recommend you check out SureTrader. It's located offshore but it's extremely popular and one of the best options out there for under 25k accounts.

[ZenOps]

You are in the US? One tonne of nickels for $11,634 shipped.

https://portlandmint.com/shop/product.php?productid=3&cat=3&page=1

Alternately, you can now buy "paper copper" through JPMorgan.

http://www.reuters.com/article/2012/12/17/us-jpm-fund-copper-idUSBRE8BG0I820121217

They have 62,000 tonnes for sale which represents 1/3rd of the worlds deliverable supply (currently 183,000 tonnes)

The stock market may not be long for this world. The US technically already hit its $16.4 trillion debt limit. Derivatives are around $650 Trillion, meaning there are not anywhere near enough electronic dollars to cover the derivatives if people should actually start "cashing them in".

US students can no longer absolve their debts through bankruptcy, so every electronic US dollar you use will be placing more and more students into garnished wage slavery (or debtors prison)

Which is allright mind you - if you like that type of thing. It can be very profitable.

But trust me, if nickel is 10x to 30x rarer than copper (geologists perspective) A tonne of copper or nickel is a very rare thing on this planet, especially considering it has been accumulated for centuries to the point where you might have 10,000 to 183,000 tonnes for sale - globally.

IE: By comparison, the US consumes 20 million barrels of oil every *day* a barrel of oil weighing in at 300 pounds (2.7 million tonnes per day) Oil by weight is actually ridiculously abundant when you think about it.

And about the only way Facebook will ever make money:

http://www.pcworld.com/article/2025158/facebook-lets-some-people-email-mark-zuckerberg-for-100.html

And finally: Why be a $ in a 650 Trillion dollar market, when you can say that you own 1 tonne of the last free market availble 183,000 copper tonnes (or even rarer, nickel tonnes) on the planet.

Be Khadafi, you know you want to.

[nzwasp]

Zenops: How much physical silver/copper/gold/nickels do you personally own?

[FixedGear]

Originally posted by ZenOps
You are in the US? One tonne of nickels for $11,634 shipped.

https://portlandmint.com/shop/product.php?productid=3&amp;cat=3&amp;page=1

Alternately, you can now buy &quot;paper copper&quot; through JPMorgan.

http://www.reuters.com/article/2012/12/17/us-jpm-fund-copper-idUSBRE8BG0I820121217

They have 62,000 tonnes for sale which represents 1/3rd of the worlds deliverable supply (currently 183,000 tonnes)

The stock market may not be long for this world. The US technically already hit its $16.4 trillion debt limit. Derivatives are around $650 Trillion, meaning there are not anywhere near enough electronic dollars to cover the derivatives if people should actually start &quot;cashing them in&quot;.

US students can no longer absolve their debts through bankruptcy, so every electronic US dollar you use will be placing more and more students into garnished wage slavery (or debtors prison)

Which is allright mind you - if you like that type of thing. It can be very profitable.

But trust me, if nickel is 10x to 30x rarer than copper (geologists perspective) A tonne of copper or nickel is a very rare thing on this planet, especially considering it has been accumulated for centuries to the point where you might have 10,000 to 183,000 tonnes for sale - globally.

IE: By comparison, the US consumes 20 million barrels of oil every *day* a barrel of oil weighing in at 300 pounds (2.7 million tonnes per day) Oil by weight is actually ridiculously abundant when you think about it.

And about the only way Facebook will ever make money:

http://www.pcworld.com/article/2025158/facebook-lets-some-people-email-mark-zuckerberg-for-100.html

And finally: Why be a $ in a 650 Trillion dollar market, when you can say that you own 1 tonne of the last free market availble 183,000 copper tonnes (or even rarer, nickel tonnes) on the planet.

Be Khadafi, you know you want to.

Dude be honest -- are you schizophrenic? :rofl:

[Frankie88]

You can find much more useful info and disclosed info for US stocks which is one big reason that I like US $tock!:)

[ZenOps]

Originally posted by nzwasp
Zenops: How much physical silver/copper/gold/nickels do you personally own?

Not much personally, I often steer people to the places where they can get metals. Banks of course used to need it as collateral or they would go insolvent (they go insolvent nowadays with or without metals)

http://www.fdic.gov/bank/individual/failed/banklist.html

In Hong Kong of course, Copper is considered to be the equivalent of a Teir 2 asset, and fractionally lendable (meaning that for every $1 in copper you physically own, you can borrow $3 from the Chinese government) Nickel, even though very possibly 30x rarer than copper, is not really considered a tier 2 asset in China, but is considered a Teir 1 asset in both Canada and France (Loonies and Francs being made of nickel for many decades)

The US does not assign metals as assets. They specifically went off the metal standard in 1971, requiring everyone in the US to adhere to cotton as an asset.

But copper and nickel should definitely be on the alternate list for anyone looking to get a second car. Instead of paying $30,000 or so for a second car, you can still get three delievered tonnes of cupronickel in the US (not so much in Canada anymore)

Realistically, a car is only worth about $100 once it goes to the junk lot, usually within a decade - as its just a tonne of iron (Iron is mined at a rate of 2.6 Billion Tonnes per year, and is still $13 in my mind) A car is not an asset, it is a liability. A fighter jet is not an asset. An Anti-aircraft gun is an asset.

There is a very small chance that Canada might introduce a $5 or $10 ~10 gram coin made of nickel (now that it is realistically too expensive to use 7 grams to make $1 loonies and $2 toonies) There is equally, a very very small chance that the US will someday introduce a $20 ~15 gram nickel coin (but they would have to stop circulation on pennies and nickels first) sometime in the next couple decades. There is a almost good chance :) That the US will introduce a 25% nickel 75% copper 8-gram $2 US coin in the upcoming decades.

[themack89]

ZenOps, I see you talk a lot about the supply of Copper and Nickel but talk little of demand, care to share? Does recycling suggest a much greater implicit supply of the metals than you are hinting at?

Why consider Oil as "abundant" in terms of weight when its usefulness is measured (mostly) in energy? Why compare oil against copper/nickel when one is an energy source and the other is, well, not? Returning to the recycling factor, again, why compare?

The million dollar question though, ZenOps, is whether you believe Copper or Nickel is currently mispriced? If so, why?

Note: You can still buy Copper up for delivery in Dec 2017 for $3.50/pound, not sure about Nickel.

As for the debt and derivatives... Have you looked into how many times the "debt ceiling" or "debt limit" has been raised throughout America's history? Have you thought about what $650 trillion in outstanding derivatives actually means? BTW, I just read an article estimating it at $1200 trillion, but who's counting.

Appreciate your insights as always, Zen.

[ZenOps]

I don't think copper is mispriced. Its about 5,300x less than gold, which is exactly where it should be.

Nickel is underpriced by at least a factor of 8x.

The US makes it quite a bit harder for the average person to use copper as leverage. In China, if you had access to copper, you would *always* get the copper and then borrow Yuan against it as collateral for investment.

Think of it like this: A $25 box of copper pennies in the US or Canada really holds about $75 worth of copper, of which if you use it as collateral - many banks around the world will let you borrow $225 for investment.

If you are willing to lose your $25 box of pennies and place it all on red or black, it is actually worth $225 to an investment banker outside the US.

OR

You could just sit on the copper and nickel as an asset that has no recurring taxable liability (like real estate does)

[woodywoodford]

Kind of off topic, but I'm so bloody pissed right now.... I had this great idea to buy $12 calls on RIM about a week and a half ago when it was trading at 11.50. Up to 14.68 and those calls have more than doubled in value, but I wasn't able to buy them due to RBC taking their jolly effin time filing my forms. For the third time, my salary is indeed more than 25,000 so give me my damn options!!!! :banghead: :banghead: :banghead: :whipped:

Now I'm thinking about puts, but just don't see the same potential in that direction... guess I have too much faith in BB10..

[nzwasp]

You cant drive to work on a tonne of nickel.

[themack89]

Where do you get the figure of 8x undervalued? And why did you ignore every other thing I asked you about?

I'm just trying to figure out if you are thinking about the things you are saying, or whether you read articles sparsely placed throughout the internet and then proceed to regurgitate facts.

[ZenOps]

Originally posted by nzwasp
You cant drive to work on a tonne of nickel.

Thats why its "second" car.

A smart banker would never buy a "first" car, he would buy $30,000 worth of pennies put it up as a collateral value of $90,000 and borrow $270,000 - Half of which would be invested in the stock market, and $135,000 of which would go toward a financed luxury car.

10 or 15 or 20 years later, when the US dollar investment inevitably fails, he simply forfeits his $30,000 in penny collateral (of course, by "penny" I mean fiscally recognized "London Metal Exchange 1 tonne copper good bars")

Guy who buys a car straight up after 15 years has a $100 lump of sellable iron.

Guy who leases luxury car has to return it and lose copper casino tokens after 15 years.

Makes sense when you consider that "paper copper" does not "technically" have to ever be delivered, just like the US does not technically ever need 2,000 nickels for every $100 bill they make.

Once you accept that the US dollar bill is backed by next to nothing, it makes perfect sense. This also assumes that the stock market is flat or in a "down" market.

[ZenOps]

Originally posted by themack89
Where do you get the figure of 8x undervalued? And why did you ignore every other thing I asked you about?

I'm just trying to figure out if you are thinking about the things you are saying, or whether you read articles sparsely placed throughout the internet and then proceed to regurgitate facts.

8x is just an edumucated guess. Its a rough estimate based on 1.8 million tonnes of nickel and 16.1 million tonnes of copper pulled out of the earth every year.

Its common knowledge for any first year geology student. They get to figure out the relative commonality of oil, natural gas, silver, gold, copper, etc.. Its why the oilsands work by burning natural gas. If natural gas was rarer than oil, the oilsands would never be feasable.

Why is everything made of Iron (including coins now)? Because they pull out 2.6 Billion tons out of the earth every year (1500x more common than nickel)

Metals like gold and nickel are really only worth what someone else will pay for it. Silver and copper still have quite a few industrial uses, meaning they are not "pure" money, and have actual use value.

Everything in life is regurgitation of facts in some form or another. If you pay $200,000 per year at Harvard does it make it any more right or relevant than a person who reads it from a book without paying a cent?

[themack89]

Originally posted by ZenOps
Everything in life is regurgitation of facts in some form or another. If you pay $200,000 per year at Harvard does it make it any more right or relevant than a person who reads it from a book without paying a cent?

There is a HUGE difference between regurgitating a fact and understanding it as well as communicating that understanding.

I honestly don't care what your rationale is other than that you have one... I'm just saying you would be doing someone a dis-service if you actually have no clue what you are talking about and they interpret what you are saying in the wrong way.


If natural gas was rarer than oil, the oilsands would never be feasable.

This is wrong. Think comparative advantage, factors of demand (including efficient extraction of exhaustible resources) and accessibility. Absolute levels of scarcity rarely translate directly into whats profitable and/or feasible and what isn't.

And as an interesting side note, it takes two BoE to extract one BoE of oil sands in Canada.

[ZenOps]

Originally posted by themack89


There is a HUGE difference between regurgitating a fact and understanding it as well as communicating that understanding.

I honestly don't care what your rationale is other than that you have one... I'm just saying you would be doing someone a dis-service if you actually have no clue what you are talking about and they interpret what you are saying in the wrong way.



This is wrong. Think comparative advantage, factors of demand (including efficient extraction of exhaustible resources) and accessibility. Absolute levels of scarcity rarely translate directly into whats profitable and/or feasible and what isn't.

And as an interesting side note, it takes two BoE to extract one BoE of oil sands in Canada.

Yes, they actually burn the "equivalent" of two bbls of oil in energy in natural gas to extract one barrel of heavy crude.

As a realist, I can only go by what I see. I see that Canada has determined that it is unsustainable or unprofitable to use 7 grams of nickel to make a $2 coin (the toonie) and unsustainable or unprofitable to maintain circulation of a zinc cored or iron cored penny.

I see that the UK is melting down their 5 and 10 pence, even though it is less than half of "spot" value.

The highest value circulation coin that nearly a billion white peeps use, the 2 Euro coin has a higher face value than a Toonie actually has less nickel than a Toonie, but in still considered to be a 8-gram cupronickel coin (They assign 8-grams of circulation cupronickel as an assumed value of $3.20 in 2 Euro form)

Likewise, a US quarter is worth 4.96 cents in metal value as of today, a US nickel is worth 5.16 cents as of today, when measured against spot values.

I can transport as many US $100 bills into Canada as I want, but if I try to transport $101 worth of US nickels into Canada, I may be looking at a five year jail sentence.

The facts are fairly easy to verify. Regurgitation of "the world is round" is valid enough for as long as the majority believes it, same thing with "man landed on the moon." Although as a realist, I do not believe the latter.

Americans believe that everything is profit driven in US dollars. As a realist, rarity and production capacity is what I believe is the limiting factor. You cannot get blood from a stone. You can only fool people into believing that iron is nickel for so long, just like Romans used to try and fool people that copper coins were make of silver and gold for so long.

The US is doing a very "nice" thing by still creating and circulating three nickels per year for every US citizen (15 grams of 25% nickel 75% copper) that is roughly worth its value, and still subsidizing the 20 pounds of oil that the US ciziten uses each day.

Its not like if one threw enough dollars at it that you could create 20 pounds of nickel per day and 15 grams of oil per year..

I swear, all the students with $200,000 tuition in the US are set into the US dollar slavery model and have no clue about reality anymore. Canadians are now richer then Americans, because I think we are finally catching up to "reality". I am behind the Quebec students demanding free $0 post-secondary education. But again, really: Go ahead and use US dollars, as long as I get the 18.8% credit card interest and/or the oil revenue in nickel form - what do I care?

Its the same reason I babble on here for free. You young peeps deserve better, you deserve more than 31 grams of nickel a year.

[thetransporter]

Be smart - bypass the RBC - even the US side still try to take advantage of Canadians

Get a brokerage account with Banc of America Securities/ now Merrill Lynch . (If you can)

Local guy from Scotiabank was just acting as the middle man to the US market and did not work for me, instead mainly for himself.