Expect views of a stock to differ; decide for yourself
Motley Fool
Q: When I’m reading financial periodicals or Motley Fool articles or am watching CNBC, I often see different opinions on various stocks, with some experts saying buy, and others saying sell. What’s up with that? — L.S., Victoria, Texas
A: Anyone evaluating a company can come away with a different opinion about its prospects and likely trajectory. Even the best stock analysts and investors are sometimes wrong.
Note, too, that each can be different in what they’re looking for. Some want undervalued stocks, while others might be willing to take more chances, hoping for a bigger payoff. It’s good to gather different opinions, do research and make up your own mind.
Fool’s School: Cost of commissions
You probably pay your brokerage a commission every time you buy or sell stocks, and that fee deserves consideration.
How much you pay per trade isn’t a critical issue if you trade only a few times a year. But if you buy and sell stocks (or other securities) relatively frequently, the commissions can make a difference in your results.
For example, imagine that you invest $200 in shares of Drive-Thru Dentistry Inc. (ticker: DRILZ), and you pay a $15 commission. Divide $15 by $200, and you’ll get 0.075, or 7.5 percent. That means you’ve invested $200, but at the same time you forfeited 7.5 percent of that value in commissions. If the shares rose 8 percent in the first year, you’d barely break even instead of realizing a meaningful gain.
Frequent traders, such as day traders, can be hurt worse. For instance, if they buy and sell $200 worth of a stock in a day, they’ll pay $15 to buy and another $15 to sell. They will need to have gained more than 15 percent just to turn a profit.
So what should you do? Well, it can help to use a brokerage that has low commission costs (perhaps $5 to $7 per trade, or less), as many do these days. Also, aim to keep your commission costs at 2 percent or less per trade, if possible. If your brokerage charges $20, then try to invest at least $1,000 each time you buy stock. (Multiply the commission by 50 to see what it’s 2 percent of.) If your brokerage charges just $7, your minimum would be $350. You can always save up money until you have enough.
If it’s hard for you to come up with hundreds of dollars for each stock purchase, know that you can also invest small sums regularly through direct investing plans (DRIPs), which let you buy stock directly through companies, bypassing brokerages. Many major companies offer DRIPs.
Name that company
When you think of luxury, you should think of my (long and complicated) name. I’m the result of a 1987 merger, but many of my businesses were launched long ago. One of my wine businesses took shape in 1593, for example. Based in France, I’m a purveyor of wine, champagne, cognac, fashion, leather goods, perfumes, cosmetics, watches, jewelry and more. Brand names under my roof include Chateau d’Yquem, Dom Perignon, Veuve Clicquot, Christian Dior, Fendi, Givenchy, Bulgari, Kenzo, Celine, Hublot, TAG Heuer and Sephora, among many, many others. My market value recently topped $175 billion. Who am I?
Last week’s answer
I came to life as a grocerytrading company in Korea in 1938. After some years, I entered the textile business and later got involved in other lines of work, such as shipbuilding, heavy industry and, in 1969, electronics. I found success with televisions, video recorders, appliances and semiconductors, among other things. I developed mobile phones in the early 1990s and a smartphone in 1999. Today, I’m one of the world’s top brands and largest companies, with more than 300,000 employees and the No. 1 market share in TVs, smartphones, memory chips, refrigerators, display drivers and more. Who am I? (Answer: Samsung)