[New] Should I...tips?

[EdLeafs]

Hey guys, I'm new here and to real life trading. I'm currently working toward my MBA in finance. I took a lot of courses on finance and stock market material, done intensive group projects on stock trends so I'm fairly comfortable with all of this.

Is it a good idea for starter to pick stocks that are less than $1/share?   I'm planning on opening up an account with an initial amount of $1000 to play with. I'm aware of the possibility of losing it all but it is worth it if it can gives me the experience that I need for the future. $1000 is nothing compared to my tuition and textbook expense. lol.

My basic framework for this is...if I buy 10,000 stock of x for $.08. It would cost me $800 + ~$10 fee + ~1.00sec fee but if that stock goes up by 0.01 then i'll be in the money and obviously the opposite could happen but what I'm trying to say is I'll have a much greater chance to profit from lower priced stock than something like Tim Hortons which cost over $30. Each dime that Tim goes up will have not have much incremental value.

Let me know your opinion please. I hope this is a nice community. Please don't tell me to go away or save up until I have x amount because I need the experience so regardless of what happens I'll still be using it to "play" and that's my decision.

Thanks!

[bryanmcn]

Hi Edleaf

You are very likely to lose your $1000 which won't teach you anything and turn you off trading. If you make some money on low priced stocks, it will teach you that you should play low priced, high volitility stocks! NOt a good lesson.

If you want to start trading, do it on a simulator. Give yourself $50k of virtual money to start. Don't go away. Stay with us and trade on the simulator but put your $1000 in an RSP or a TFSA and add to it until you have a decent portfolio.

Not what you wanted to hear I know, but thats my opinion.
Bryan

[EdLeafs]

Thanks for your opinion. I get that a lot, even from my professors. Any suggestion of any free stimulator out there?

[bryanmcn]

Hi Edleaf
Type "free trading simulator" into Google and take your pick.
Bryan

[garilou]

Hi EdLeafs,

Welcome aboard!

I am somewhat surprised that, while doing a MBA in finance, you had to post such a question.
Is it that all they teach you is only theory?

I agree 100% with Bryan for the first part of his reply.
[ Oups he's faster then I am, I replied again while I was wrting my own reply.]
And if you open an RSSP or a TFSA account, try to open them at a real good inline broker.
I do not want to preach for my own, but TD Waterhouse has recently introduced a pretty fantastic "fake portfolio" where you get, beside every stock you put in them, lots of fast available info: fundamentals, ratings, charts, TA predictions, and many other features.
But there should be more than $1K in those, because of the yearly administration fees for those 2 types of accounts.

There are lots of simulators offered on the Web, but I have never tried them. (Investopedia could be a good place to start: you would find lots of things to learn at the same place)

Try to follow a good sample of stocks, (this is the first difficult part: how to choose them) and trade them.

On the other side, I not sure at all that "playing" on a simulator would be a big help either.

Even if you become pretty good on any kind of simulator, unless you have an instructor sitting at the co-pilot place, I can tell you for sure that when you'll start trading for real, you will be very disappointed.

I will not list all the differences, they are too many.

But since you are close to people experienced in finance, maybe you could ask someone around you to be a sort of co-pilot for you.

I could have told you to follow blindly SSP's strategy, but we have discussed that else where, there is not much you can do if you start capital as not at least $15,000, preferably $25K.

And while you simulate, my best advise would be: go to your University library, or if you can afford it, buy some good books, lots of them, and read, read read! Learn learn learn!
In the course of your studies, you have certainly learned how to read fundamental data.
You might need to learn more about TA (technical analysis).
And learn the experience of good investors and traders.
With the speed of Internet, sometimes the difference between investors and traders becomes blurred.

And (this is free) there is probably also a lot to learn by reading the thousands of posts on the forum.

And when you start for real, be prepared to "trade at your own risks"

Good luck!

Louise   

[EdLeafs]

Thanks Louise for your opinion. Much appreciated. Unfortunately theory, practical, and textbook is all that they teach me which is why I'm lacking on experience big time. In third year, I did play a stimulation game but it was ragged by the institution meaning that it was not real companies. Financial statement were all made up for us as well by the institution so I didn't get the same feeling as if this was real. I treated it more as an assignment/project than anything else.

[bryanmcn]

This is a simple "game" that will teach you how easy it is to lose money. Keep playing it untill you figure out how to do well. 

You actually have to download the game as a small application.
check it out here;

http://www.iitm.com/reg_p2.htm

Good luck
Bryan

[garilou]

EdLeafs,

I love this typo that you made twice: stimulation for simulation...
Freudian typo? (Joking!)

Bryan,
I think I'll play that game too!
Thanks for the reference,

Louise

[DCA]

I am resisting the urge to say what I think about MBA's and the people who teach it....

However,  In dollar range versus profit:  I have the best return with stocks between $5 - 30.  Most of my big gains have been on stocks around $5 and on the other hand stocks around $30 have been the most stable.

There is no magic to this.  It is driven largely by the wants and desires of the larger pension funds.  As a result many large cap stocks hit $60-100 and split back into the $30 range.  (ie Telus) A few refuse or maintain a higher share range.  (ie MG, FFH, and the Sage of Ohmaha guy)

At the smaller end, because many IPO's are for a similar amount of money and are priced in the same $1-3 range there is a corelation between share price and company size at the low end.  (Small companies grow, large companies are better at not declining.)

As for your initial $1K - I would suggest that you pick a single stock in that $10-30 range that is paying a dividend of some sort.  Not as much fun as playing the market but the return will be psychologically nice while you wait to gather enough for a portfolio.

I did not follow my advice and still own my first 'pick' (based on a 'hot' stock tip.)  Currently it has, after accounting for reverse stock splits, a share value of 0.0001 of what I paid for it.  I keep it to remind me of this foley every time I look at my account statements.

D

[bryanmcn]

Ha Ha!
I also have 20,000 shares in a "hot" stock that I bought in 1998. I won't tell you what its worth but it would cost me more to sell it than keep it and I only pay $10 per transaction!
Bryan