Now that the stock market has dropped drastically over the last year, it’s actually a great time to buy. Remember this sage advice from the world’s most successful investor:

“We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.” – Warren Buffett

Looking at today’s market, many people are fearful – that should trigger the time to be greedy. You would be hard pressed to find someone who’s confident in today’s market, or who’s not apprehensive about what the market is doing. Ironically that is the perfect time to buy. Prices are down, people are on the fence and afraid to buy, and that means bargains are a plenty.

But how does the average Joe go about buying stocks?  If one hasn’t invested in stocks before, where should they look?  The first thing you’ll want to do to be able to buy stocks, is to choose a brokerage. Here’s five, everyday brokerages that have easy interfaces, low fees, and even some great trend and charting features.

Here’s a review of 5 of the most popular online brokerages and banks:

E-Trade. A long time staple in online investing, I think almost everyone has seen one of their commercials. Although after I did some research and dug around their site, I realized it’s a lot of overkill. I found it difficult to find important information on their site quickly because it was cluttered, and offered way too many options for what I was looking for.

• The Good:
  • Lots and lots of account types, and features. Including savings, trading, and retirement.
  • International Trading
  • Great interest rate
• The Bad:
  • Simply too many features and options for me. Personally I like a bank to handle my checking and savings accounts, and a brokerage to handle stock trading.
  • Complicated pricing on stock trades. I hate trying to figure out how much my trades will be based on how many I do and how much assets I have. Just make it simple please.

Zecco. Kind of the new kid on the block – they focus on trading only, and offer 10 free trades per month. I like their philosophy, but wonder if they have lasting power.

• The Good
  • Easy and focused website. They only do trading accounts, so there is no overkill on various other types of accounts.
  • First 10 trades per month are free – as long as your account has at least $2500 balance.
  • Offers international trading.
• The Bad
  • Doesn’t offer other accounts, such as checking and savings, if you’re looking for that.
  • They’ve only been around for roughly 2 years, and might not have the experience or solidity of someone like E-trade or ING.

ING Direct (Sharebuilder). All things considered, sharebuilder is a great site, and ING is a great bank to work with. I have a lot of friends who use them for their online checking account.

• The Good:
  • ING offers many account types (checking, savings, retirement, etc) but separates it’s investing site into sharebuilder.com. I like the separation, it gives me the feeling when I go to sharebuilder, that I’m not bombarded with all kinds of accounts.
  • Offer a nice automatic investing program, for $4 dollars commission, you can buy stocks automatically each month. I like this because if you buy automatically, you 1) forget about it while you’re wealth grows. 2) the average cost per share goes down because you buy more shares when the price is low, and less shares when the price is high.
  • No Account minimums.
  • I like their site. It’s simple, and offers only the essential information without feeling cluttered and bloated.
• The Bad:
  • $9.95 cost per trade, which is expensive compared to zecco.com’s $0.

HSBC is also an online bank, that offers trading as well. They have been in business for a while, and have proved to have lasting power. Although because they are a complete online bank, I found that they offered more than what I wanted in terms of just investing. I found it hard to find what I was looking for, because there was simple so much information on their site.

• The Good:
  • Great savings accounts. I like online banks because they usually offer great rates on savings accounts. As of this writing HSBC offered 3.0% APR on it’s savings account.
• The Bad
  • Offers an “assisted” system for trading stocks. Their first step was to fill out a contact form, for an advisor to contact me. I’m looking for something more hands on, so this wasn’t what I was looking for.

TradeKing focuses on trading and stocks only. This I like. Their site is easy to navigate and offers a nice FAQ and community sections. I’ve read lots good reviews about them. Also they have received numerous awards (for customer service, and their website among other things). If you’re ok with the slightly higher commission than zecco, tradeking is the place to be.

• The Good:
  • Offered “Live Chat”. I love this, and think it’s great when websites utilize it. Of course there wait times, and lag to deal with but the fact that they offer it, I think is wonderful.
  • Offers a nice “community” section of their website, where you can compare, talk with, and befriend other investors. Great idea.
  • Cheap trades at $4.95 per trade.
• The Bad:
  • Online bank transfers take 5 days to clear, that’s in addition to the 5 days taken to verify your account when you first sign up. So you’ll have to be patient when you first sign up, and when making transfers.

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1. Credit Check. This used to be important, now it’s critical. With today’s tight squeeze on credit by banks and lenders, finding out your credit score, and hence, ability to loan at a low rate is vital. You must find out your current standing, and what you can qualify for, as it has probably changed over the last 1-2 years. This includes getting pre-qualified for a loan. In this market, when you find the foreclosure or bank owned property you want, you have to be able to pull the trigger quickly. Double and triple check the pre-loan docs, so you have a fixed rate, and can afford the payments for the life of the loan.

2. Know your locale. Homework is the name of the game here. You need to study the neighborhood where you’re looking to buy meticulously. The better you know the neighborhood, the better you’ll be equipped to find the best deal. If your looking to flip, rent, or live in it yourself, you’ll want to buy significantly under the market value. And the only way to guarantee that is to study the neighborhood and its prices. Try going for a walk around the neighborhood at night. Do you feel safe? You always want to buy in a good neighborhood. Keep in mind: you can always change the property (i.e. painting, remodeling, etc.) but you can’t change the neighborhood. Be sure you’re looking in a good neighborhood.

3. Hunt. Here’s where you scour the street’s to see what’s available. There are no real secrets here; it just takes time and elbow grease. The best way to get a great deal is to know someone. Talk to your friends and family, build a network so that you’ll know every house coming and going off the market. This way, when a great deal comes along, you can snatch it up. Some other ideas are:

• Craigslist: You’ll sometimes find good deals here, search your local area, and for ‘for sale by owner’
• Drive around: This is sometimes a great way to find properties coming on the market, or that have recently come on the market. When you drive around, look for houses that aren’t kept up, and that look like they may be going into foreclosure soon. Watch them, and as they come for sale, try to talk to the owner about a possible quick sale.
• Foreclosure Auction: There are more and more of these popping up as the foreclosure and bank owned properties have grown. Check out: LandAuctionBid.Com and www.ushomeauction.com.

4. Connect. Connect with other real estate investors, and share your story. Work together with others to get a feel for how they are doing, for understanding their strategy, and how they are playing the current market. It’s said, “What one can do, 2 can do better” so do all you can to develop relationships with other investors. Get business cards made, join networking groups, talk to all the people you know. You want to make as many friends in the field as possible.

5. Proper Documentation. In today’s market of bank owned properties, quick sales, short sales, and foreclosures, you want to make sure you have documented everything properly. Have your real estate agent help you with the forms, but you take the responsibility in making sure he’s crossing his t’s and dotting his i’s. They should be current and they should be official to your state/city/county.

6. Reduce Costs. As you go through the loan, approval, and purchase process, there will be lots of little charges, including the inspection, title/escrow, and realtor fees. Even if you can reduce these by a little bit, you can save a bundle. Go through the charges with an experienced investor or real estate agent, and have them help you find the areas where you can save.

7. Have a Plan. Before you even get your credit checked you should have a plan. Are you going to flip it or are you going to rent it out. Are you going to keep the property as an investment home, maybe for vacations? Are you going to live in the property flat out? You need to know your plan ahead of time, and then organize that plan. Come up with all the different scenarios that might come up during your plan/project. If, for example, your plan is to flip the property – and the property needs a little work. You need to establish what you’re going to renovate and how much you’re going to spend on it. Plan for as much as you can. Write it out on your computer in a word doc, and know it to the letter.

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Photo By rudolf_schuba

I’ve been eyeing SBUX since they started to fall below the $18 range back in February. It’s a well-run company, has an addicting product that keeps people coming back, and has a strong leadership team. Now they are at $9.86, which is almost at their 52-week low of $9.16. Today they reported forth quarter results that included:

• $5.4 Million in earnings (compared to $158.5 million a year earlier)
• Earnings of 1 cent a share (compared to 21 cents a year earlier)
• Profits falling 97 percent.

Let’s diagnose SBUX, based on what I believe as the 3 most important aspects of evaluating a stock: P/E, Dividend, and current price compared to 52-week high/low.

SBUX Diagnosis:

P/E: 15.73. Still a little high. I would like to see this more in the 10 range for a retailer and beverage company. Given the economy, and tight fists on peoples’ money, I believe SBUX will find it harder and harder to sell their product. They still need to close more stores, and cut costs, to get this number down.

Dividend: N/A. Apparently SBUX doesn’t have enough profits, or have simply chosen to not, issue dividends. This alone would keep me away from SBUX. Again, they need to cut costs, and be able to provide a dividend before I pull the trigger.

Current Price vs. 52-Week High / Low: $9.86 vs. $24.40/$9.16:  This is the only real plus I see. The current price is so far below the high, and only somewhat above the 52-week low. Could this be the bottom? With the stock price falling 52% in 2008, this number looks very tempting.

Bottom Line: With 2 out of 3 against the purchase, I would say it’s best to wait on SBUX until some costs have been cut, the P/E is a little lower, and they are able to issue dividends.
Note: this is only my opinion, and in no way should be considered professional, financial advise.

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Photo By timparkinson

As many of you know, the stock market has taken an absolute beating this past year – with a large drop off just this past month. Kind of reminds me of that U2 song “October”:

The trees have sure been stripped bare, and the kingdoms have sure fallen this October. The DOW Jones Industrial Average is down around 40% from a year ago (10/9/2007 = 14,279; 10/9/2008 = 8,579), dropping roughly 13 % in October alone.

 
But what can one do with all this bad news? – or is it really bad news at all. I heard one person mention, that as long as you have a job, and have some income or capital, now’s the time to buy. So if one was looking for bargains on stocks, and ‘blue plate specials’ if you will, what would be some good stocks to buy? Keep in mind, I’m not a certified financial planner, or am not saying any of these stocks won’t drop tomorrow. I’m also not searching for a quick buck on day trading. These are long term companies, who’s stocks have dropped well below their overall value. And I’m simply relaying the research I’ve done on some good companies to own, and good stocks to buy, here’s what I’ve found. (based on the current price, P/E, Dividend and 52 Week Low / High).  Note: these are my opinions only, not recommendations.

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