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Posted by in The Money, Honey

The Basics of Research

You may be feeling right now that we’ve done this a bit backwards: we talked about buying and selling stock, the actual pragmatic, practical execution of trading, before we talked about how to actually pick a stock to buy and/or sell.

But now we’re going to tackle how you find out about a particular stock you might be interested in buying. It was by purpose that we did these subjects in this order. I reasoned that if you kept thinking while I was describing research: “But what do I do once I find a stock I like? How do I make the purchase?,” you wouldn’t be “listening” to how to do the research. Now you’re ready to find out about research and then make the buy all in one fell sweep, as they say (what is a “fell sweep,” anyway?).

This is going to be a little like those scenes in B movies where some ordinary citizen is a passenger in an airplane when all of a sudden he/she is called upon to fly the plane back to the airport (pilot had heart attack, was shot, fainted, whatever) and land it safely. (But this is easier.) I’m going to take you step-by-step through the process of finding out how to do research so that you will be comfortable to do so on your own.

So follow along with my instructions and you’ll land safely.

First of all, I am assuming, as I’ve said before, that you have familiarity with and access to a computer. The Internet is your friend. (If this is not the case, we’ll talk about some alternative research tools next week that are a lot less high tech.)

While I’m writing this, I have my Firefox Web browser open as I visually go through the steps I’ll describe to you. You might want to do the same thing at your end: go to Safari or Firefox or whatever Web browser you use and be ready to move through it as I lead you.

We’re going to use MSN Moneycentral as our guide through research. Remember that each Web Site has its own format and appearance, so you might want to navigate through others to find the one(s) that you prefer. But for today, go to www.moneycentral.msn.com/home.asp. This will take you to their home page, and we’ll go from there.
Are you with me? (Stay calm. We’ll land this plane!!)

Now, in the upper right corner you’ll see a window box marked Symbol(s). Next to it is a box that says Get Quote, with a pull-down arrow, and next to that, the link GO

Let’s put a stock symbol into the first box marked Symbol. Let’s use Starbucks, whose symbol is SBUX. (More about stock symbols in weeks to come.) Type in SBUX in the Symbol box, and since we are going to get a quote on the stock price, you don’t need to change anything in the next window box. But if you did pull down the arrow, you’d see a few more choices you could make in regards to finding information about Starbucks. For now Quotes will do. After you’ve typed in SBUX, click the GO link.

Now the window in front of you gives you a lot more information about Starbucks. Spend a few minutes familiarizing yourself with the numbers and words. These are your friends.

The first thing you’ll see is the stock price in big black numbers. Next to it will be either a red or green number indicating whether or not the stock price is up or down from the previous day’s market close. As I look at Starbucks, for example, the price showing is 34.95, with a red arrow downward and a minus 34 cents; .96 percent down from the previous day. This figure will, of course, change throughout the time when the stock market is open and Starbucks is trading up and down.

There is a light blue “box” which contains some information that is important: reading from left column top left, you find “previous close,” “open,” “high,” “low,” “volume.” Find it? Good. You’re steering the plane, your hands are firmly on the wheel, and there’s nothing to fear …

Previous close indicates the price at which Starbucks closed the day before, i.e., what the price was when the stock market stopped trading. Pretty understandable, right? “Open” indicates the price at which Starbucks opened this morning. There is after hours trading, which sometimes moves a stock price up or down before the actual market opening at 9:30 a.m. (EST), 6:30 a.m. on the West Coast. “High” means the highest price the stock has sold for that trading day. You can use that indication to see if the stock is at its highest for the day or has come down in price. “Low” is the lowest price it has sold for that day, another good piece of information to have before you make a purchase. “Volume” indicates the number of shares that have traded so far on the day in question. This will indicate to you whether or not the stock is active or quiet.

Okay, okay, your head is spinning. I sense a trembling on the steering wheel of the plane; you’re getting overloaded.

Let’s stop here and continue next week. Baby steps, baby steps.

But remember to continue “searching” and investigating whenever you have time. Keep checking the MSN Web Site or finding similar Web sites.

And meet me here next week!

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