Advice for a youngster

[dk333]

Hey all,
I am new to the stock world...A few months ago, i picked up shares in 3 blue-chip companies, which have all dropped about 10-20% since then, bummer. I'm just 19years old and have been reading up on stocks for awhile, only just recently pulling the trigger and picking up shares. I have about 15k, in which i dumped 5k into each of the companies. Probably not the wisest move, and what terrible timing to enter the market. But hey what do I know, I am still so young! :)

My question is...I originally planned to just let all my shares sit for long,long term. Since they are all big companies, I was just wondering if they should all eventually bounce back and I should just keep them, or sell soon to do some damage control.
Oh yeah, the companies are JPM, Nike, Whole Foods.

[wallstreetsedge]

what was your reason for the purchases?

[dk333]

To be completely honest, I had no idea what I was doing, and picked up the shares on a pretty rash decision. But at the time my rationale was basically this:
I had briefly skimmed through some books about Buffett and long-term holding. I remembered reading that if you can see the company being around for a long time, and that there is ethical management, it would be a good pick up. I figured that whole foods in general is a good industry, with the obesity epidemic and all, and Nike...well it's Nike. My JPM shares are actually from Bear Stearns, which I had picked up shortly after it plummeted, which were then converted to JPM shares after the merger. Also, I saw that the stocks had dropped a bit (little did i know that virtually every other stock had also dropped). Being large companies, and even on the Forbes Best 100 Companies to work for, I decided to just give them a try.

Since I was/am planning on holding all the shares for a long term, I was advised to not be caught up with checking the price fluctuations so often, especially since I am young and new and that it might contribute to my daily happiness haha.

And that about sums it up in a nutshell.

And yeah, I know i didn't do nearly enough research. Just basically a young kid who was anxious to get involved in stocks. Hey, atleast I learned my lesson :)

[aiki14]

OK so you were planning on a long term hold, and you picked solid companies (BSC not withstanding) with legitimate reasoning. So what's the problem? Post back in 5 yrs and let us know how they're doing.
If you are playing it Buffet style (Warren, not all you can eat chinese, Buffet) then you should make an appointment to look in on your stocks every year.
If you are long term buy and hold, checking on your stocks every ten minutes will drive you nuts.

[Grundalizer]

Wow I wish I had 15k when I was 19. I just bought my first 5 shares of GE for 147 dollars, not it is also a large blue chip company. I check the price every day, sometimes every hour when I get the chance, and get upset when I don't see a number in green posting a gain. My uncle told me the same thing these guys did, check the price every year or so, and I am betting they will be up from where you bought them. Big blue chip companies are solid companies, and usually pay good dividens, but are already so huge they don't have the massive growth potential smaller companies do. So don't fret over the daily price fluctuation, everything seems to be at a low poin t in America right now, it'll turn around though.

I just got a Peter Lynch book and I have already learned a lot, i think it was, one up on wall street.

Either way he says, if you can't tell someone what the company does and why you invested in it within a minute, you shouldn't buy it.

[dk333]

so long term buy and hold for these 3 companies would be a good idea?

[dk333]

opposed to watching them more short-term, and keep selling when they go up a bit, then pick them back up a few weeks later when they go down. but constantly having shares of them, just picked up for a bit and sold in a relatively shorter time period

[Hirsch]

If this thread isn't resolved yet, dk333 I'm quite in the same boat like you in terms of age. Except I don't have 15k on hand, thank god. Compulsive spending is something I am now controlling. =/

One thing quick about myself is that I focus on investing rather than day trading, which you have put yourself in. Now besides that wallstreetsedge, aiki, and several other members on here can give you advice I could only dream of being able to, so take what I put here with a grain of salt if you want.

From aiki's comment,
"OK so you were planning on a long term hold, and you picked solid companies (BSC not withstanding) with legitimate reasoning. So what's the problem? Post back in 5 yrs and let us know how they're doing." you'll pretty much learn the hard love of the market. On average I read that the market has a 10% gain every year, from averages gathered on the market's movement. Some averages differ and say 8-9%, but mind you all of these are normally based on common or preferred stocks. (That statistic can be checked if you want, wouldn't be surprised if it's wrong, the point still stands though.) That movement is fine assuming you chose the stocks that went positive, and then continue to do so in the future. Sadly Nike, JPM, and Whole Foods while being well known stocks, blue chip you can say, aren't expected to rake in larger than expected returns or ground breaking returns in only a few years or even continuously; long term holding is the key.

So what is a good choice for individuals like ourselves? Read and ask endless questions to the experienced until you and they are blue in the face. Use a simulation of the market, understand how unforgiving the market is. <Risk-free solutions. (You've experienced the market already though.) Families are an excellent source of information.

What if you want to get into something you can feel relatively safe about and not check too often? Then get to know Investing, read about how it works and why it works. Compounding is key. Read about Tweedy and Browne, Vanguard, Buffet and of course, Graham. As for the actual things you'd put your money in: index funds, bonds, t-bills, things that use compounding as the key for growth. Lack of risk is paramount here. (Mutuals you could do, but make sure it's a fund you trust and know about or it's just like a common stock.)

That's my approach at least. But with the current market, I'd say youngsters like us should keep clear of what we see. However if you're curious what you should do with the three companies you have, assuming you haven't sold any of them, cut your losses now and sell. THAT'S MY VIEW, not promising anything from it. You'd be doing yourself a service several decades down the road if you began putting money into an index fund. Maybe you could try some high risk trading here and there, maybe not. Does that answer your question?

If this thread has been resolved, my apologies, sorry for bringing it back up.

[aiki14]

If you're going to be a Buy and Hold long term investor, and you can't really do the due diligence to analyze individual stocks, you are a good candidate for mutual funds or ETF's. Why not let Ken Heebner, or Bob Doll, or Chris Davis, do the leg work? These guys are well respected experts and run successful funds with long term track records and are way more likely than the average investor to make good choices. Or find a manager you like and use that fund.

The funds the aforementioned guys run are:
Heebner- the CGM focus fund
Doll- the Blackrock Lg cap Val fund
Davis- The Davis NY venture fund