On Brokerage Services
Before you start buying a company’s stock, you have to have a platform on which you can do so. There are a ton of online brokerage services out there competing for your business. So how do you choose wisely?
Ultimately, you will have to decide which balance of research, services and fees you want and are willing to pay for. For me, it came down to convenience and a nominal fee. I use Fidelity due to it being an east to-use-tool, reasonable trade fees at $7.95 per trade and it is also the broker I use for my 401K. I find it more convenient to have everything in one place, so Fidelity is (for now) the tool for me. For starters, I also recommend using TradeKing, who have only $4.95 per trade with a minimum starting deposit of just $500.
Minimizing fees is extremely important, and is the largest factor for many in determining a brokerage service to use. Think about it, if you make 100 trades a year at $10 commission, that’s $1,000 being eaten from your return. Add on the short-term capital gains tax and your return doesn’t look too bright. If you’ve learned anything from Sleepy Capital, it is that you (hopefully) won’t be making many trades a year, and will be able to sleep your way to achieving the long-term capital gains tax and have a strong return. For me, I probably make 5-10 trades per year, sometimes much less. I keep my turnover extremely low, thus my fees are kept low.
Ultimate recommendation: Go with the low fee provider. You don’t need the bells and whistles. The investment decisions are made by you, using the knowledge you’ll gain and the free-resources you can read about below.
On researching companies / learning
Morningstar.com: This is a great platform to use for all of your research needs. They have a premium account membership or you can just use the free platform. Go to the website and type in a ticker at the top and start exploring.
Finviz.com/screener: Some investors are against using stock screeners. For me, it is simply another resource to add to my repertoire on ways to find undervalued securities. For example, I used finviz the other week and did my usual screen to see what undervalued securities I could find. Within the list that it gave me was Virgin America, Inc., the airline that was started by Richard Branson. I looked into the company but dismissed it. The very next week, it was announced that Alaska Airlines was in process of submitting a bid to buy the company. Screening is a good way to sift through a lot of companies to find some easy-to-pick undervalued securities.
BamSec.com: For those of you wed to going to sec.gov and typing in tickers, boy do I have a treat for you. Check out BamSec for all of your public filing needs. The free account should be enough for your needs.
Wall Street Journal: Not a lot needs to be said about the WSJ. It’s a phenomenal place to catch up on your daily events and the markets. You don’t need to buy an annual membership to gain access, either. See this link here to learn how to view any article you want: https://goo.gl/pzd1Xn
WSJ 52 week highs / lows: The Wall Street journal posts a list of companies that have reached either their 52 week highs or lows during the week. I’ve found this to be a great place to find some securities that are being mis-priced! Link to the highs/lows here
Investor presentations: Most public company’s have investor presentations that they release annually or quarterly. You can find them on the investor relations page of their website. Here is an example of KraftHeinz’s Q4 2015 investor presentation.
Annual reports / letters to shareholders: In most companies’ annual reports, there is a letter to the shareholders either from the chairman or CEO of the company. To get a sense of the management team and who is at the helm of a company, this is a great place to get to know them. Making a bet on the management team can very well be the start of an investment thesis but is also a difficult place for individual investors like us to assess and analyze. The more of these annual letters that you read, the more you will see that many are generic, overly optimistic and tout the sub-par results they achieved in any given year. Others though are very different and are owner-oriented, speak candidly about their mistakes, and give strong direction for the company. This hedge fund manager is reading through every annual letter and gives an examples of some very good ones you can check out yourself. Link to the article here.