Stock Market Today

Going to have a nice long run at things if you just got out of school and want to invest over your working lifetime. Congrats.

There are a couple of tacks to take, which you might get some good miles from. One is find companies that are (1) profitable, (2) make a good return on their equity (the part that stockholders own), and (3) have good expectations of the future, sometimes estimated by something called the price per earning to growth, or PEG. You might consider those that pay good dividends, but still have money enough to keep things cooking well.

New Zealand Telecom (NZT) is interesting. Southern Copper (PCU) is a bit pricey, but you get some really good value. Take a look, while you are looking, at Silicon Precision (SPIL) or Houston Wire and Cable (HWCC), a couple of good industrial providers with solid books and solid growth prospects. I’m not overly fond of clothing retailers, but give these two a thought: Cherokee (CHKE) and Limited Brands (LTD).

The other side of the coin is buy a broad basket of stocks, such as what you can get with exchange traded funds, or ETFs. They may be mutual funds, but they have a simple formula without spending money on active trading managers, so the expense fees are dirt cheap. DIA gets you the Dow Jones Industrials. SPY gets you the Standard & Poors 500. You get them warts and all, so if some stink, there isn’t a manager saying minimize these and maximize those. Consider some like NY, the 100 biggest (by market capitalization) companies on the New York Stock
Exchange, or DVY, Dow Jones select dividend paying companies (not the biggest yields, but the steadiest companies consistently paying good dividends), or IOO (100 biggest publicly-traded international companies).

One method is like using a high caliber rifle, the other a shotgun. Either way, choices like these won’t be terribly embarrassing if things go bad in the market.

You might also shop around for some DRIPs, dividend reinvestment programs. A good company that pays good dividends and reinvests them in more stock for you (watch the fees, some programs are better than others), is as close as you will get to compound interest in the stock market. Some people have done amazingly well in this kind of otherwise boring investment vehicle. There can be some difficulties with taxes once the snowball starts accumulating really well, but then that means your investment is starting to be worth a bundle, nice problem to have. Be patient and good luck to you.