Sunday, April 16, 2017

Time to Enter the Stock Market

It is time to put our money down. Internet brokers make this easy to do.

From here on, I will try not to serve as an advisor, but as a guide to where I have been and how anyone, including myself, can continue to learn what is needed as each investment situation arises, to comfortably, enter, remain, and leave (profitably, I hope) the stock market. (Even if you do not put money in, you can still learn to save, invest, and gamble with a trading game.)

1.    Search
2.    Click Invest Your Way
3.    Scroll to the bottom of the screen and under Research, click ETFs
4.    Hover over SPY (lower right side of the screen under Most Popular ETFs)
5.    Click Interactive Chart (center of popup screen)
6.    Look around the S&P 500 ETF chart.

You will find something different than the chart I have here. My chart is capturing some of the human aspect I have stumbled on to. Also see Investopedia for an understandable perspective of terms.

The story I have found goes like this: After each large decline or correction for whatever reason, investors and gamblers become accustomed to what at first was really uncomfortable. Investors hold steady.

Traders start to take bigger gambles that pay off more. The market becomes more and more fragile until almost anything that formerly had little effect brings down a new correction and a new buying opportunity for investors.

What is worrying people? Why has the several year bull market stalled again in the past few days?

The Mood or Comfort of the Stock Market
Click the blue spots with an N to show the news that people may have responded to and perhaps will continue to respond to. Every bend in the closing share price (red line) has an N flag during the last week. Something has the world concerned.

During the past month the two blue lines have declined; at first both lines. Then the lower line has declined even more. This is an indicator of a bear market. Then a week later, the upper line also falls. It is a bear market.

The market changes from bull, money flowing in and prices rising; to bear, money flowing out and prices falling. I would like to enter the market at the end of a bear market where I can buy the most shares for the pot I have in hand.

The two blue lines show averages of the highest prices and the lowest prices during each day. If people are willing to sell at a lower price or unwilling to buy at a higher price, it makes sense that people are uncomfortable with the situation they find themselves.

The stock market is like many other systems. Slow change is easily tolerated. A quick change can wreck havoc (our flood in Provision Living at Columbia after two days below zero); that ended up with us having a pot to invest. A large drop in the market does the same for many people but is also the time for others to buy. Every trade takes a buyer and a seller. We just need to be in a position that share price variations are to our benefit.

This is Easter weekend. The market is closed. I Googled the European and Asian markets just now to see that they are all down. Is it time to put our pot into the ShareBuilder plan that invests every dollar we put into the account each Tuesday? Or should I wait anther week?

7.    Click transfer money from bank to invest in one lump sum or in periodical deposits (Pending).

Now I too am a gambler. The first choice favors a price rise, for a $3.95 trade. The second choice favors a price drop, for a $3.95 trade each deposit. The third choice is to just wait a bit longer for a lower cost of a share:  A lose of about $2.00/day waiting vs. a decrease of $100/day cost, when buying shares, for each 1% in market decline. [Lucky trading makes money faster than dividends (1.92%) or CD interest (2.30%)]

To see my chart on line:

a.    Click Chart Style and select either Mountain ($, default) or % change.
b.    Click Events and select N for news.
c.     Click Technical Indicators and select Price Channel (bull & bear).
d.    Click 1m at bottom of screen for one month.
e.    Click Frequency: 1 Day.

The expense rate for a transaction is calculated for you ($1000 less $3.95 = 0.40%; $10,000 less $3.95 = 0.04%). A periodic investment of $100 would cost 4% of your money to enter the stock market. (That leaves 2% yield the first year, the CD rate, and 6% thereafter, on average.) There are no other fees or charges until you sell your shares ($235 per share this week with a $6.95 cost per sell of any number of shares.)

One reason for selecting Capital One Investing for this example is that it spans the full range from savings to investing to trading (gambling). Even starting at $100/month makes sense given the depressed interest rates on long term savings.

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