I'm just curious. My dad has stock, But sometimes i think it's just another way for the gov. to get more money from us.




I'm just curious. My dad has stock, But sometimes i think it's just another way for the gov. to get more money from us.
If you look at it in terms of short term monetary gain - yes - it is a rip off. I don't have the numbers in front of me, but I feel most individual stock performs worse than a CD (fluctuation and taxes.)
If you hold it longer than a year - then there are some tax problems that disappear and you are left with fluctuation.
I think a diversified portfolio long term in aggregate (mutual fund) can help hedge on inflation... but those need to be stocks that have some trade volume.
"Lotto" stocks are pretty rare.
Most people can make a better return on their money by investing their $5,000 in a mobile car washing system.
The "rich" with stocks make money by creating a company and SELLING stock in the company they created.
Tootsie;
You are doing great by even thinking of investing some of your money rather than simply spending away.
First, Stocks are in no way, shape or form a part of the Government. They are public companies! Now, there are Treasury Bonds that are government issued, but those are different from stocks, and a whole different topic.
A 'CD' is a Certificate of Deposit. You can get these at any bank. You'll have to deposit a decent amount, maybe a minimum of 1,000.00 for a certain amount of time, maybe 1,2 or 5 years. In return, the bank will offer you Both your money back at the end of the time, and a guaranteed payment for letting them keep it (that's 'interest'). Because they know they can have your money for a whole year, they will give you more interest (but not much more) than a standard savings account.
Stocks are a little piece of a company. If you own a stock, you are one of the owners of that company! Really True! Is your club owned by one guy? If so, he has 100% of all of the 'stock'. He gets to enjoy the profits, and suffer any losses, too.
Now, a company like General Motors, or Microsoft is to giant and costly for any one person to completely own. Geez, even the garbage company Waste Management is like this. So, they offer 'stock' to anyone who wants to buy a piece of the company. There is no set price for stock. The price depends on how many people want to buy it at a given time. That's why Stocks go up and down. If today a lot of people want to buy a chunk of Microsoft, the price will go up. If tomorrow nobody wants to buy it, the price will go down. Why would people want to buy or not buy a certain company? They have done research and (think they) know what the company's plans for the future are, and if they think those are good plans or not.
The prices going 'Up' and 'Down' is known as Volitility. Stocks are Volitile!! You can make a lot of money and/or lose a lot in a hurry.
There are things called a 'Mutual Funds' that are a lot like a big basket of stocks. There are a lot of Mutual Funds to choose from, and each basket has a different collection of Stocks in it. At any one time, some stocks in that basket might be doing well (going UP) and some will be doing bad (going Down). What this does is moderate the Volitility; there are not the big ups or the big downs as with a single stock. Mutual Funds are usually a much better alternative than stocks. They are not nearly as risky. Actually, if you buy a Mutual Fund, you are really buying a whole lot of stocks.
You might want to look in the yellow pages under "Investment Securities". Look for a name you recognize, like AG Edwards, Merrill Lynch, Morgan Stanlely or something like that. Call them up, and just say you want to talk to someone about opening an account. They will be HAPPY to talk with you. There is no fee! (They will tell you straight out how they make their money, it is usually by taking a small percentage of the earnings of your investment.)
Remember, any money you invest is YOUR money. You can get it back at any time! What you are doing is just putting your own money in a place where you think it will do better (make you more money) than where it is right now. If you have a thousand in your purse, you will still have a thousand next week (if you leave it there). If you put that into a savings account/CD, you might have 1,001 next week. If you put the same amount into an investment, you might have 1,100 next week, or maybe 900.00. That is why you should talk to a professional at one of the companies mentioned above. All they do all day long is research companies and funds, and choose the ones that have good business plans. If they are wrong too often, they simply get fired. The ones that are there are pretty good. Remember, this is YOUR money, not the government's; you can call and have them write you a check for it at any time.
However, you will probably find that your Investment Account is making you some pretty easy money, 24/7. While you sleep, while you shop, whatever. You should think of it long-term, and let it build and grow.
Sorry for the long-winded answer, but sometimes short questions are really compicated!
Kicks!





In response to 'the gov't getting more money out of us' regarding stocks, let me clarify the US tax picture a bit. The IRS defines certain types of earnings as 'ordinary income' - and these are taxed as income at whatever progressively higher tax rate applies to that person (it's based on the total of all types of taxable incomes). For most dancers who are single, don't have children, and work 3-4-5 nights a week in an 'average' club as an independent contractor, the tax rate they actually must pay on 'ordinary income' is somewhere in the 25-40% ballpark (including SSI tax).
Investments like CD's generate 'interest' payments - i.e. that $1000 one year CD generates $50 in interest. The IRS then considers that $50 to be additional 'ordinary income' and gloms onto 25-40% of that $50. Stocks and bonds also pay interest or dividends that are treated the same way. Additionally, where the underlying value of a one year CD remains at $1000 througout the year, if you purchase stock shares at a price of $1000 and sell those stock shares, the amount you sell them for may be greater than (or less than) $1000.
For the sake of argument let's say that the $1000 in stock generated zero dividends but the share price increased to $1050 (which is exactly the same gross profit as the CD). This leaves you with a $50 gain on $1000 with the stock shares. If the sale of those shares occurred within a year of the purchase that $50 is also taxed at 'ordinary income' tax rates the same as the CD interest. But if more than one year elapses between the purchase and sale of the stock shares, that $50 is considered a 'capital gain' instead of 'ordinary income'. Under current IRS law, 'capital gains' are taxed at a flat rate of 15% regardless of the stockholder's other income. This means that with stock shares with a $50 'capital gain' the IRS gets $7.50 and the investor keeps $42.50, whereas the CD with $50 of 'ordinary income' interest payments, the IRS takes $12.50-$20 and the investor gets to keep say $30-37.50 depending on their overall tax bracket. The lower capital gains tax rate for stocks held longer than one year is a large reason why people with incomes that place them in high tax brackets (say over $75k per year for a single person) prefer stocks to CD's. The incentive is even stronger if they live in a state/city that also levees a state/local income tax, as the lower 'capital gains' tax rate applies to state/local income taxes as well.
I would also point out that the lower 'capital gains' tax rates not only apply to stock shares, but also precious metals, etc. - as long as the asset was owned for more than one year between the date of purchase and the date of sale.
However, I must also point out that, under current law, in 2011 the current 15% capital gains tax rate will automatically revert to pre-GWB 'tax cut for the rich' percentages - which in the past have at times been equal to the tax rates applying to 'ordinary income' - see . This automatic expiration (or earlier action taken to change tax laws by the new congress) could have a significant impact on US stock share prices ....
Last edited by Melonie; 12-15-2006 at 04:48 PM.




The only time anything becomes a rip off is when you're not willing to put the time into it. If you dont want to learn about a stock, mortgage, loan, or anything it becomes a rip off because you don't know how it operates. You also wont know how to best use it to your advantage.
Also, a lot of people who are ignorant about investing may buy a few shares of stock and if it doesn't go up or starts going down a week or two after they buy it they'll sell it.
Stocks are typically for holding onto long-term, but do your research to make sure the company has some growth potential first.
"She has written so well, and marvellously well, that I was completely ashamed of myself as a writer...But this girl, who is to my knowledge very unpleasant and we might even say a high-grade bitch, can write rings around all of us who consider ourselves as writers"
Ernest Hemingway on writer, aviation pioneer and horse trainer Beryl Markham
The stock market isn't Vegas, despite what the common masses may think.
"Have you ever been to American wedding? Where is the vodka, where's marinated herring?" - GB
"And do the cats give a shit? No, they do not. Why? Because they're cats."-from The Onion
Originally Posted by Mia M
The essential humanity of men can be protected and preserved only where government must answer--not just to the wealthy, not just to those of a particular religion, or a particular race, but to all its people.
Robert F. Kennedy
June 6, 1966





The wisdom that preserved the Kennedy fortune was in knowing that if the common man (or, in this case, boy) is investing too heavily in stocks, it may be time to get out.
http://en.wikipedia.org/wiki/Joseph_P._Kennedy,_Sr.Kennedy got out of the market in 1928, the year before the Crash, locking in multi-million dollar profits. Indeed when the 1929 crash did come, he made money due to his short positions. He famously remarked about getting out of the stock market in 1928, "You know it is time to sell when the shoe-shine boy tries to give you stock tips."
"He will come in one of the pre-chosen forms. During the rectification of the Vuldrini, the traveler came as a large and moving Torg! Then, during the third reconciliation of the last of the McKetrick supplicants, they chose a new form for him: that of a giant Slor! Many Shuvs and Zuuls knew what it was to be roasted in the depths of the Slor that day, I can tell you!"
Not if you do it right.
Not sure what you mean about the govt thing.





The wisdom that preserved the Kennedy fortune was in knowing that if the common man (or, in this case, boy) is investing too heavily in stocks, it may be time to get out.
Quote:
Kennedy got out of the market in 1928, the year before the Crash, locking in multi-million dollar profits. Indeed when the 1929 crash did come, he made money due to his short positions. He famously remarked about getting out of the stock market in 1928, "You know it is time to sell when the shoe-shine boy tries to give you stock tips."
In 1928 Joe Kennedy had the Dow Jones research and shoe-shine boys to point out that economic fundamentals beneath share prices were starting to fall apart. Today we have much better means, i.e. the tracking of selling off their own company stock shares by corporate 'insiders' (google = $131 million sold by 'insiders' in the last 30 days !), Fed regional business activity surveys ( Philly business levels contracted 4% this month vs last month), nationwide bankruptcy filings, and a host of other information sources, to show that economic fundamentals re stock valuations are on 'shaky ground'.
However, today we also have another huge wrinkle to contend with that Joe Kennedy didn't. In 1928, 'shoe-shine boys' VOLUNTARILY invested in the US stock market. In 2006, every employee with an employer sponsored 401k plan is essentially FORCED to invest in the US stock market.
Possibly, but no one forces employees to partake in 401K's either.
I personally think it's a good idea to have a separate brokerage account as well if someone has a 401K, but if someone's maxing out their 401K contributions and say, has a family and/or high living expenses (be they too much self-incurred debt or whatnot) they might not be able to.
"She has written so well, and marvellously well, that I was completely ashamed of myself as a writer...But this girl, who is to my knowledge very unpleasant and we might even say a high-grade bitch, can write rings around all of us who consider ourselves as writers"
Ernest Hemingway on writer, aviation pioneer and horse trainer Beryl Markham





^^^ technically true that employees are not 'forced' to participate in an employer sponsored 401k program ... but with the employer matching 50 cents to $1.00 of every $1.00 contributed by the employee, and with the employer contributing nothing to any sort of other retirement fund, that's a pretty damn strong incentive !
As a follow-up, employer sponsored 401k plans typically have a limited number of fund / sector choices available --- usually an array of stock funds, a bond fund or two, and a money market --- with no 'short' option to profit from a falling market.
The points that really matter re stocks being a good long term investment are that 'joe sixpack's' and their matching fund employer contributions have invested trillions of dollars worth of retirement funding into 401k stock and bond funds - that as the baby boomers reach retirement age they'll need to sell off 401k assets in order to withdraw cash for retirement expenses - that the volume of such sales will really start to increase over the next few years - that there will likely be insufficient 'young' buyers able or willing to absorb such stock sales - thus the stock market in general must decline. The more the value of remaining 401k stock shares decline, the more shares the retiring baby-boomers will need to sell off in order to withdraw the same amount of cash, very probably leading to a snowball effect.
^^^Incentives are all around. Still doesn't equate being obligated. In fact, a lot of financial magazines deride people who don't invest in their 401K's with comments such as "take it! It's free money!" due to the company kicking in money.
The fact of the matter is, very few Americans invest. Too many live paycheck to paycheck. Investing well can be somewhat complicated and for a lot of people they feel it's too complicated, have enough misconceptions to keep them from doing it, or have done everything right and lost their shirts regardless (it can happen).
Caveat emptor, of course.
"She has written so well, and marvellously well, that I was completely ashamed of myself as a writer...But this girl, who is to my knowledge very unpleasant and we might even say a high-grade bitch, can write rings around all of us who consider ourselves as writers"
Ernest Hemingway on writer, aviation pioneer and horse trainer Beryl Markham





My point exactly ... except the 'free money' from the employer's matching contribution is actually 'free stock' in the vast majority of cases. And that 'free money' is likely to be the only retirement benefit that the employees are going to be provided with.^^^Incentives are all around. Still doesn't equate being obligated. In fact, a lot of financial magazines deride people who don't invest in their 401K's with comments such as "take it! It's free money!" due to the company kicking in money.
"She has written so well, and marvellously well, that I was completely ashamed of myself as a writer...But this girl, who is to my knowledge very unpleasant and we might even say a high-grade bitch, can write rings around all of us who consider ourselves as writers"
Ernest Hemingway on writer, aviation pioneer and horse trainer Beryl Markham
"Have you ever been to American wedding? Where is the vodka, where's marinated herring?" - GB
"And do the cats give a shit? No, they do not. Why? Because they're cats."-from The Onion
Originally Posted by Mia M





^^^ IMHO concentrating so much of your 'future' on the continued viability of one company is insane. But even if employees have diversified their 401k investments over a variety of stock and bond funds available under their employer matched 401k umbrella, they are still totally at risk of future drops in the broader stock and bond markets.
And as I tried to point out in an earlier post, when the baby-boomers start retiring en mass some 10-15 years from now, they are going to have to start liquidating their 401k holdings in order to generate cash to pay their retirement bills. In a scenario exactly opposite the 1990's when the institution of 401k's CREATED huge new demand for stock and bond purchases thus causing stock and bond markets to rise, these future sales will create downward pricing pressure on the broader stock and bond markets in the absence of equally high levels of demand for stock / bond purchases by younger Americans (who probably won't have enough left from their meager paychecks and higher taxes to save much towards retirement) and/or foreign investors (who will probably be 'scared off' by the US dollar's loss of 'reserve currency' status - something that is already underway).
A few company 401K's I've seen have some better choices. For instance, Intel offers a gold etf.
"Have you ever been to American wedding? Where is the vodka, where's marinated herring?" - GB
"And do the cats give a shit? No, they do not. Why? Because they're cats."-from The Onion
Originally Posted by Mia M





^^^ extremely cool ... but extremely rare !
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