An Investor’s Guide to Choosing Stocks and Bonds
U.S. News & World Report - 07/06/2016
A couple of generations ago investing in stocks meant buying shares of a big-name company like Ma Bell, keeping them forever and enjoying dividend income along the way. But the boom in mutual funds in recent decades has created legions of investors who’ve never owned an individual stock.
Are they missing something?
In some respects, it’s easier to trade individual stocks now than in the good old days. A trade that once cost hundreds of dollars in commissions can be done online with a deep discount broker for $5 or $10. You can track prices, do research and place orders on your laptop, tablet or cellphone.
With stocks, you can also place short-term bets and play with options, which are the right to buy or sell a block of shares at a guaranteed price for a given period.
But sophisticated strategies and day-trading are not wise for individual investors, says Nicole Boyson, associate professor of finance at the D’Amore-McKim School of Business at Northeastern University. “Day trading is a bad idea for everyone. It’s costly in terms of both trading costs and taxes, and it has nothing to do with fundamental research,” she says.