How to start investing
THE MOTLEY FOOL
Ask the Fool
Published: February 13, 2024
Q. I know very little about stocks, but I want to invest in them. How should I proceed? -- J.L., Dothan, Alabama
A. Before you deploy any dollars, take some time to read up on investing. You want to be comfortable with how you invest and confident in your approach. Ideally, the more you learn, the fewer expensive mistakes you'll make.
You could start with books such as "The Little Book of Common Sense Investing" by John Bogle (Wiley, $27) or others in the "Little Book" series. Motley Fool books such as "The Motley Fool Investment Guide" by David and Tom Gardner (Simon & Schuster, $22) can also help. And you can learn a lot exploring websites such as Fool.com and Morningstar.com.
Studying stocks and choosing which ones to buy and when to buy or sell them will require time and skill. But note that you can do very well over long periods simply earning roughly the market's overall return if you invest in one or more low-fee, broad-market index funds (such as one that tracks the S&P 500). When you're ready, you can read about reputable brokerages you might use at sites such as Bankrate.com and (our sister site) TheAscent.com.
Q. What's the "triple-witching hour"? -- L.M., Kalamazoo, Michigan
A. It comes four times a year -- on the third Friday in March, June, September and December -- when stock options, stock index options and stock index futures all expire on the same day. The last trading hour of that day is known as the triple-witching hour, when the market might be extra volatile.
We average investors can safely ignore options and futures, which are generally focused on short-term movements instead of long-term growth.
All Hail Charlie Munger
Warren Buffett's great friend and business partner Charlie Munger recently died a little short of his 100th birthday. Buffett has said that Munger made him a better investor -- via advice such as: "Forget what you know about buying fair businesses at wonderful prices; instead, buy wonderful businesses at fair prices." Here are more nuggets credited to Munger:
-- On investing: "The world is full of foolish gamblers, and they will not do as well as the patient investor." And: "Warren and I don't focus on the froth of the market. We seek out good long-term investments and stubbornly hold them for a long time."
-- On risk: "When any guy offers you a chance to earn lots of money without risk, don't listen to the rest of his sentence. Follow this, and you'll save yourself a lot of misery."
-- On succeeding in life: "It's so simple. You spend less than you earn. Invest shrewdly, and avoid toxic people and toxic activities, and try and keep learning all your life. ... And do a lot of deferred gratification because you prefer life that way. And if you do all those things you are almost certain to succeed. And if you don't, you're gonna need a lot of luck."
-- On learning: "In my whole life, I have known no wise people (over a broad subject matter area) who didn't read all the time -- none, zero. You'd be amazed at how much Warren reads -- and at how much I read. My children laugh at me. They think I'm a book with a couple of legs sticking out."
-- On thinking: "We all are learning, modifying or destroying ideas all the time. Rapid destruction of your ideas when the time is right is one of the most valuable qualities you can acquire. You must force yourself to consider arguments on the other side."
Search for "Charlie Munger" online, and you'll find much more Munger wisdom that might make you a better investor -- or person.
My Dumbest Investment
I got into the market in the 1990s, during the dot-com bubble. I had no idea of the ups and downs of this rational, efficient market, or that its then-soaring values weren't normal. I just assumed that I was a natural at this stock market thing.
My initial stake of $5,000 multiplied to over $50,000 as everything I invested in went up, up and away. "Arrogant" is the least offensive term I could apply to myself during this run-up. One of my holdings spiked from around $5 per share to $30 in a single day, and I borrowed money to buy more shares. Not long after, the bubble burst, and stocks started cratering. I lost everything -- and then some. It took years just to break even. I was humbled beyond anything I could have imagined. My life lessons were expensive, but they are priceless and not easily forgotten. -- John, online
The Fool responds: When you're a new investor, it can be especially hard to distinguish between luck and skill. Opinions are divided on how rational or efficient the stock market is, but it has always been at least a little volatile, and occasional sharp pops and drops are to be expected.
As you learned, investing with borrowed money is extra risky. For most of us, it's best to invest for the long run, to be patient and to not get caught up in speculative bubbles.
Name That Company
I trace my roots back to 1886, when my flagship beverage was first served at an Atlanta pharmacy. Soon, about nine servings a day were being sold. More recently, nearly 2 billion servings have been enjoyed daily. I was the first product shown on the cover of Time Magazine, in 1950. My brands include Sprite, Fanta, Dasani, Smartwater, Vitaminwater, Barq's, Schweppes, Topo Chico, Bodyarmor, Powerade, Costa Coffee, Gold Peak, Minute Maid, Simply and Fairlife. With a recent market value over $250 billion, I employ more than 700,000 people. My ticker symbol is a knockout. Who am I?
Last Week's Trivia Answer
I trace my roots back to 1933, when my founder launched me in Japan as part of his father's loom works business. I was incorporated with my current name in 1937. During World War II, I had to switch from making cars to trucks. I sold my millionth vehicle in 1972, and launched Lexus in 1989. Today, with a recent market value near $250 billion, I'm one of the world's largest automakers, with more than 375,000 employees (almost 50,000 of them in the U.S.). I sold more than 10 million vehicles worldwide in 2022, including more than 2 million in the U.S. Who am I? (Answer: Toyota Motor)
The Motley Fool Take
Pipeline of Potential Profits
The biotech company Moderna (Nasdaq: MRNA) generated billions of dollars in earnings from its coronavirus vaccine, but sales of the vaccine -- its only product -- are on the decline. Still, the company's best days may be ahead of it.
Moderna has a full pipeline of programs, with many in late-stage development. In fact, the company aims to launch 15 new products over the coming five years, predicting they could generate as much as $30 billion in revenue a few years later.
That's ambitious, but even partial success could generate significant revenue. And there's reason to be confident about Moderna's prospects, considering that it brought its coronavirus vaccine from drawing board to market in less than a year -- and has reported encouraging data from other programs in development.
Next to market may be the company's respiratory syncytial virus (RSV) vaccine candidate, awaiting a regulatory decision in 2024. Though it faces two RSV vaccine rivals already on the market, Moderna's candidate is the only one to come in a prefilled syringe -- making administration easier.
Moderna also recently announced a treatment it's developing jointly with Merck, tackling melanoma. With all these programs underway, it probably won't be a one-product company for very long. Investors buying now can get in at an attractive price and may be well rewarded over many years. (The Motley Fool has recommended Moderna.)
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