Understanding the stock market | Motley Fool Stock Advisor | Photo of man in New York reading a newspaper | Photo by Eric Strausman

Eric Strausman

Understanding the Stock Market: Find Help When You Need It Most

•  3 minute read

Stock market investors love to tell stories of how they made it big. Brian Withers heard his fair share of those stories when he worked for technology stalwarts like IBM and Dell during the late 1990s.

“When I started working for Dell, you would hear stories of ‘Dellionaires.’ These are people who made millions by purchasing the company stock. All of that buzz got me excited. I saw Dell as my ticket to retirement,” Withers tells CentSai.

Unfortunately, Withers didn’t enjoy the same massive returns as colleagues who had joined the company earlier. So he started investing in technology stocks outside of Dell. Technology was a sector he thought he understood.

“The stocks boomed in 2000, but they busted in 2001,” Withers explains.

“I thought I had invested in these stalwart companies, but my portfolio was less than half the size of when I started.”

After the massive blow to his investment portfolio, Withers lost confidence. With two growing children, he wanted to secure his family’s financial future, but he didn’t know how. “I felt like I was on a rubber raft in the middle of the ocean,” he says.

 

Getting Help With Understanding the Stock Market

After Withers stumbled through different investment strategies, a friend pointed him to the Motley Fool in 2004.

The Motley Fool is an investment advice platform with free content. At the time, the content included online articles about stocks. Today, aspiring investors can find articles on retirement, stocks, and more, or listen to podcasts like Motley Fool Answers.

Aside from its free content, the Motley Fool also has a paid subscription service called Stock Advisor. Since it started in 2001, the Stock Advisor portfolio has returned 339 percent. During the same time frame, the S&P 500 index has returned 77 percent. Even back in 2004, when Withers looked at the portfolio, the returns were impressive. However, the cost of a subscription held him back.

Instead, he spent months consuming Fool’s free content. But when the Stock Advisor platform went on sale for half off, Withers jumped at the opportunity to join.

(Motley Fool is currently running a promotion on Stock Advisor for $99 a year, more than 50 percent off its regular price.)

How theMotley Fool Stock Advisor Works

With Stock Advisor, Withers receives two detailed stock recommendations each month. It’s up to him to decide whether to buy the recommended stocks or not. His portfolio is tracked on a scorecard, and Stock Advisor keeps him updated with tips on continuing to hold the stock or to sell.

Before enrolling in Stock Advisor, Withers struggled with his strategy. “I would buy stock, and I didn’t know what to do next,” he tells CentSai. “If the price changed, should I sell? Should I get worried?”

Thanks to Stock Advisor, Withers has trusted advice regarding selling or holding a position.

The advice has also given Withers more confidence in his own investing abilities. But Withers doesn’t blindly follow the service’s recommendations. He carefully reads the analysis and chooses which companies to invest in.

The Stock Advisor community discussion forums have also helped Withers better understand particular company stocks and the place those stocks should hold in his portfolio.

Withers’ investment returns also encouraged him to stay on the platform. Today, at age 51, he has a portfolio that’s sufficient for him to quit his corporate job and downshift to a role with lower compensation and less stress.

 

Should You Invest in Individual Stocks, Too?

When you’re investing in the stock market, nothing is guaranteed. In most cases, early-stage investors should look to their employer’s 401(k) plan before starting to invest in individual stocks.

“Investing in index funds in your 401(k) is the easiest way to get started investing,” Withers says. “Once you’re getting the match, you can start directing money to a brokerage account outside of the 401(k).”

Individual brokerage accounts are accounts that allow you to invest in stocks, bonds, or mutual funds. While they don’t offer the tax advantages of 401(k)s or other retirement accounts, individual brokerage accounts have their own advantages. For example, you can withdraw money from one at any time, without any penalties.

If you intend to invest in individual stocks, you’ll want to find a low-fee brokerage company to house your stock portfolio. When you decide that investing in individual stocks makes sense for you, Withers offers one other piece of advice: “Don’t try to go it alone. You need to find somebody who has a long track record of success to ask for advice.”

Withers found his investing mentor in Stock Advisor and its community. While stock market investing is inherently volatile and risky, having a mentor to give you advice will help you weather the storms.