Hi, I want to start investing but I really don't know where to start. I like the idea of buying stock and have a decent amount of information on how it works (basically buy a growing co. then sell when you feel the time is right).
I don't even know where to start really, what site to use, how to even do it. I would greatly appreciate if one can go through the steps with me and give me some tips that I can use to help me as a beginner. Buying stocks is not so simple as finding a growing company and buying it. Companies that are growing quickly have many people wanting to buy them, and the stock can get bid up to crazy levels, often times too high. When the bubble bursts, the stock can crash. Its important to diversify, both across companies and across investment sectors. When the dot.com bubble burst, all the technology stocks crashed at the same time. A wise person spreads his money across many sectors.
Standard investment advice is that you should invest in a diversified mix of stocks, bonds, and money market funds. You want to buy a diversified portfolio of stocks as individual stocks are too risky. Most folks have a dificult time buying a properly balanced portfolio of stocks on their own. They will misbalance their portfolio by buying all small stocks or all growth stocks, or some other misbalanced assortment of stocks. Unless you know what you are doing, it is best to buy mutual funds. I like Vanguard.com, other people like Fidelity, TIAA-CREF, and DFA. Buy no-load, low cost funds. If you are like most people you will invest part of your money aggressively in stock funds, and part conservatively in money market funds and bond funds. Vanguard.com has an on-line questionnaire which will give you an idea of how to do "Asset Allocation," determining how much to put in each type of fund.
If your company offers a 401K plan at work, try to invest the most you can. The money grows tax free, and some companies will match your contribution. Investing in a mutual fund IRA is also a good idea. If you have children, you may want to consider a 529 plan or other college savings plan that grows tax free.
I like index funds. Because of their broad diversification, you are less likely to have a dramatic drop in value. They also have the lowest expenses. For stock funds, I would suggest putting ~70-80% of your money in the Vanguard Total Stock Market Index Fund. and ~20-30% in a foreign stock index fund. However, there are many different opinions out there on what the best mutual funds are. Read the links below and form your own opinion.
If you have high-interest debt, like credit cards, it is best to pay this off first before trying most of the investment ideas above. You should also have 3-6 months of salary saved up as an emergency fund in a bank or money market fund before trying more risky investments.
Believing advice you get on Yahoo answers can be risky, so read these websites for further information. If you find it too confusing, contact a professional financial advisor. They will charge you significant commissions, however.
Sources:
http://www.vanguard.com/VGApp/hnw/planni...
http://www.fool.com/school.htm
http://sec.gov/investor/pubs/assetalloca...
http://www.diehards.org/readsites.htm
http://finance.yahoo.com/education/begin...
http://finance.yahoo.com/funds/basics
Asset Allocation Calculators
(Determining how much to put in stocks and how much into bonds and money markets is a personal decision depending on your financial status. These Asset Allocation questionaires give you a rough idea how to do this. I like Vanguard best, but try some of the other sites as well.)
https://personal.vanguard.com/VGApp/hnw/...
https://ais2.tiaa-cref.org/cgi-bin/WebOb...
http://www.ifa.com/SurveyNET/index.aspx
Web forum: http://www.diehards.org/
(Many investment web forums are overrun by scam artists. This one seems the most legitimate site.)
529 plans: http://www.savingforcollege.com ok first of all read the following books. they will help you out a lot.
1. the intelligent investor
2. security analysis
3. a financial accounting text book
here is some points from" The Intelligent Investor"
1. you can buy stocks that are price below there book value.
shareholder equity divided by the number of shares outstanding.
2. buy stocks below there working capital and pay nothing for the company's fix assets.
current assets minus current debt = working capital
i hope this helps.
case in point i just bought Finish Line a couple of days ago for $2.98 or about $142 million in market cap. its working capital is :
current assets= $380,376 mil
current debt= $142,886 mil
working capital= $237,490 mil
i did not pay any thing for the fix assets of the company which is another $276,260 mil. of which $247,468 is in the property account. cool hugh. A good way to invest (including buying stock) is to buy what you can afford using your spare money (money you don't need to use) and then keep the investment as long as possible.
Consider the spare money you spent on investment as gifts and you're not planning to get back.
Do NOT sell out your investment unless you really need the money.
Do NOT sell out your investment if your investment look like it's about to lose money, things can easily go back up again. Besides, if things are really quite worst, they really need your money. If your money is lost, remember, it's a gift and you're not planning of getting it back.
When to sell out your investment is if you really need the money. If you don't really need the money, you really shouldn't sell.
On the other hand you're really that 'greedy', then sell only a tiny part of it and sell it only once your investment have growed in multiple folds.
Where should you invest? Anywhere you feel like it. It can be a family business, your favorite company, the company that produce the product you use, and so on.
The investment broker you should use is the one you feel the most comfortable, you can use Yahoo! and other search engines to search for the one(s) you're most comfortable.
You can even search it directly in person without using any online media.
If you're really a beginner, then go for investment brokers that sell investment certificates as collectibles. It will be an easy start. You might want to create a "practice" portfolio at http://www.top10traders.com - it's free - each month the site ranks the best performing investors. You should start with creating your own trading account and you will know the rest of trading. http://investment-blog.net/where-and-how... Some places will give away some interesting free suggestions. It is sort of chumming the water in order to get you interested in the really good stuff, for which you need to pay more in order to see what they sifted out.
If you go to Zacks, look for the longer-term things, like their growth recommendations (if you buy, say, their momentum recommendation, they aren't going to tell you when to sell, as when the momentum runs out, nor when they have first already recommended it to subscribers, who get in early enough to make really good money): http://www.zacks.com/
Forbes, is another, like with their free "stock of the week", but watch out on Monday, when the new stock comes out and people are dumping last week's. Again, they have premium services, which is to say you have to pay for them (Prudent Speculator is sensibly good, and I'm almost interested in shelling out for the Special Situation report), but not as expensive as Zacks.
Check out BusinessWeek's site. They put some limits as to what goes for free (or without a lot of ads), but most of the good stuff is available to most anyone: http://www.businessweek.com/investor/
Remember, please, investing and trading are not the same things. Part of the idea for trading stocks is simply the potential that the market price will rise (or fall if you "short" them, but that is another story). The primary idea of investing is that the company's intrinsic value rises, justifying a rise in the market price. When a stock has news that its price fell, the speculator will be glum and in the dumps. An investor in the same company will be elated. Why? The trader wants it higher to dump it right now, while the investor isn't going anywhere, they see it as an opportunity to get more of it for cheap. If a company is in the habit of making profits, and is likely to make more profits in the future, then so what if the price falls for a few days, weeks, or months? In the long run, the worth of the increased shareholder equity will make the company more valuable, so it will eventually have to rise. This is investing. Search for a solid company that you want to be a part of, then buy into it, adding more periodically, and you will do fine. When I started out one of the most important things for me was a low transaction price. Sharebuilder has a decent plan and like most Brokers they offer a lot of information on their website as far as education.
Mostly I would suggest staying informed, read Yahoo Finance and the Business section of your local paper. Start small and pick up some books or videos on investing. |
