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April 28, 1999

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Subject: A newcomer's question about TMF...
Author: nole1

Warning: long post (but good for new investors)

I was just sent an e-mail that I thought I'd answer in a public forum, so all the other Fools could put their 2 cents in. Together, we may give a dollar's worth!

Here's the question:

I'm new to the Fool. It seems great so far. But I'm just wondering, as another relatively new user, how are you finding it? Has it been useful for your investing? Is it really worth spending time reading through the posts and the Fool-written advice articles?

Personally, I love The Motley Fool. Overall, the quality of posts and the lack of Spam (junk e-mail) is better here than any other financial site I've come across. By reading through the posts, you'll quickly discover that some Fools write stuff that you find easy to digest and just make good sense. Others may come across as completely off the wall. As you develop a better sense of this, you'll notice yourself gravitating toward a few Fools that you put more stock in than others. Be advised, however, that whatever you read is mostly opinion and you should do your own research! This cannot be overstated!

As far as where to find the best info on the site, I highly recommend starting out with the 13 steps of Foolishness:

http://www.fool.com/School/13Steps/StepOne.htm

For more seasoned investors, much of this will be old hat, but if you're new to the investing game, it will debunk a lot of myths that you're likely to have heard. The biggest one is that you are not capable of making your own financial decisions.

I have an additional question that the new Fool may want answered:

How do I start figuring out what stocks to look at as potential investments?

The answer to this one completely depends on you. You have to decide what your risk tolerance is, what you are investing the money for, what time frame you have until you want to use the money, etc. In addition, you may want to consider investing in things you know, vs. taking others' words as gospel when investing in a company that you know nothing about. By knowing the company, the sector and the market as a whole, you are much more likely to have good reasons for investing in a company and will therefore be more likely to keep invested in it when there is a downturn. One of the biggest mistakes you can make is to invest in companies that you have not researched and to become skittish and sell when the stock takes a dip. If you would have done that recently at ATHM, you might have bought at 180 and sold at 120 in less than a week, for instance. It's already back at 160 and you'd be kicking yourself twice!

Besides TMF, the Investor's Business Daily is a good place to learn about sectors and companies and to get good ideas about what to invest in. In addition, several web sites let you do what's called "stock screening", putting in parameters such as Market Cap (large cap, small cap, etc.), sector (tech, transportation, etc.), Price Earnings (P/E) ratio, etc. By putting in these inputs, a list of stocks that meet them will be generated in order of how closely they match. This will give you a list of companies to check out. I use the Microsoft Investor site for this purpose (because I got a 6 month free trial when buying Money '99). They have quite a bit of free stuff on their site, and some premade screens and results are available there free of charge:

http://investor.msn.com/finder/predefstocks.asp

One other good source of stock tips is to look at Mutual Funds that are doing well and seeing what their top ten investments are. Schwab is good for this, since you can screen Mutual Funds there and look at their top ten holdings for free. The mutual fund screening is at:

http://www.schwab.com/SchwabNOW/Exec/mffundperf
[Ed Note: The site is framed, and the link given in the post didn't work. A link direct to the Mutual Fund lookup page is substituted here.]

Once you find the one you want to check out you can click on the mutual fund symbol (I clicked the default large cap growth portfolios ordered by 5 year returns and clicked on the first one to get this link) and scroll down to find their top ten holdings.

Also, look in the profiles of the Fools that you respect and see what their favorite stocks are. To do this, click on the author of a post. Once you find stocks you have an interest in researching, you're ready for your last question:

Any tips on where to find the best info on the site? And, for that matter, where else on the web would you recommend looking for info on investing and finance?

Well, as you begin to understand what to look for, you'll want some tools to do the job. Luckily, the web has a host of sites that provide excellent tools, for free! These tools include charts, news, financial statements, analyst info, insider trading information, etc. Most of the time, if you use an online broker, they'll have some of these, TMF has some (see the drop down list box with "quote" in it by the company name at the top of the page). But I find that different places have different quality offerings for each of these.

Learn about charts

To learn about how to read charts and what all the buzzwords of technical analysis mean, you should check out:

http://www.clearstation.com

You have to register, but the education you will receive with their comprehensive and clear explanations will have you feeling like a Wall Street regular in no time.

Charting tools

As far as charting tools, my personal favorite is on the Microsoft Investor site and is free. The first time you use it, you have to wait for a while, since it downloads software onto your computer. Once this is done, the advantages of this software are clear. Most of the technical tools you learned about on clearstation are there, and you can highlight a section of a chart you want to examine closer to zoom in, you can put your mouse on a particular day and it will pop up a tool tip giving you the date, price, amount gained or lost, etc. Most charts you see are just static pictures, but the Microsoft charts are dynamic.

News

About the best place to get news on the companies you're interested in is the Motley Fool boards. You could use a searchbot, such as Excite's to find customized news for you, but most of these articles end up in a post with commentary given by several Fools in a thread (the original post and responses to the post).

Other info

The best site I've found for insider trading info is:

http://www.excite.com

When you go to their financial section and enter a ticker symbol, you can access their version of all the tools. The reason I like the insider trading info there is that they break it down very clearly as to what is happening (rather than just buy and sell, they have "option exersized" and other categories. One thing I would mention is that insider selling rarely means anything (since they often want to diversify their portfolios, get some cash to buy the hot new yacht, etc.), but insider buying is often a good sign.

The sites I listed also have the companies' financial statements (like the quarterly 10Qs), but much of this is material that you'll need some strong coffee to read. You can get other Fool's takes on them, most times, and find out what parts interested them. That gives you a good place to start in looking at the financial data.

Conclusion

I hope I've given you enough to start your journey into the world of personal investing. I'm sure this post will generate worthwhile comments from other Fools on what their personal favorite sites are to get information, as well as more general investing tips.

Good luck!

Scott (nole1)