I'm 16 years old, and I would like to learn how to invest in stocks?

Question

I have no prior knowledge whatsoever about investing, stocks, compound interest, etc. Can somebody give me an overview about all this? Is it even legal for me to invest on my own? How do I go about it, and how do I determine what to invest in?

Answer 1

Congratulations on getting started. It’ll help you more than you know!

Your first dollars should be spent on getting educated on investing. You don't have to train to trade them professionally, but we are talking about your future here. So the more you learn, the more it'll help you! So let's start there.

You ask a very broad question, so be prepared for a pretty long answer. Just take it in chunks!


How to invest depends on what you already know. We'll assume that you're beginning since you say you're a newbie!

A good primer is How to Make Money in Stocks by William O'Neil. You can get it cheap just about anywhere. It’s widely available new or used.

Another good one is one of Jim Cramer's books (he’s got a few).

But books will only get you so far. At some point, you'll also want to get at least a little training. There are some great education companies if you want to make the investment. Investools.com or optionetics.com are both very good companies as is tmitchell.com

For free, you can start by visiting thestreet.com and investopedia.com. That'll get you a pretty good primer so at least you'll understand what the markets are and what a stock is, etc.

If you get a chance, watch Mad Money on CNBC. Don't trade any of his picks until you track many of them over time. Just use the show to get you to understand some basics and get a feel for the market itself.

Next, subscribe to something like Investorsbusiness daily or something like that that can help you identify good stocks.

Once you understand stocks, go to 888options.com. It's a website that'll help you understand options (what they do, how they work, etc). You don't need to trade them, but the more you know, the more you'll see how options can really be the safest way to invest (once you're educated).

For discipline (which is crucial to successful trading), probably Trading in the Zone by Mark Douglas or Mastering the Trade by John Carter

I know that’s a LOT to absorb. Just take it one step at a time for now. Start with a book or two to give you an idea of where to begin. Take your time, and let it seep in.

As you get up to speed, you should papertrade to practice (highly recommended). This should help reduce your losses in the beginning as you get used to buying/selling.

You can practice for free on almost any reputable broker site (optionsxpress, scottrade, thinkorswim, etc).

Start slow, then as you figure things out, you can buy more shares.

Congrats again on getting started. If you have any questions, please let me know.

Hope this helps!

Answer 2

Start investing. You'll need your parents to open the account and they may incur some additional tax obligations if you do pretty well. As a 16 year old, if you blow your savings on bad investments, you have a long time to start over and recover. On the other hand, if you get real good at trading, then you will be way ahead in life. I would recommend you really study options trading. You don't need a lot of money because you are only paying premiums for the most part instead of buying the underlying stock in many cases. The rookie mistake in options trading is buying deep out of the money options because they are cheap. However, if you stick with in-the-money options, you pay a bit more but you have a greater chance of the option expiring with some value. Learn about the concept of delta in options trading. Deltas are calculations of the probability of the stock expiring with value. Also, learn an options trading concept called spreads. Basically, you buy an option to buy a stock at a price you believe the stock will be higher than while simultaneously selling the option for the same thing at a higher price and collecting the premium. If you get it right, you make money with limited risk. So, in summary, learn options, learn options deltas, learn spreads. Once you got that stuff down and are successful at it, you will naturally gravitate toward learning other strategies. Options also give you some indication of where the market sentiment is with a particular stock.

Answer 3

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Answer 4

read, rerad, read then take a free learning quiz on morningstar.com's web site. I think some sites require your age to be 18 (etrade does just looked) but then again i'm not sure on that. But a lot require minimum deposits to invest and I recommend starting small then growing after that. Stay within your means.

Answer 5

You can probably ask your parents to open a Coverdell College Savings account at Scottrade. They charge $7 per online trade.

For investing ideas, I think the best way to get started to watch what the best investors are buying - investigate the stocks, read the recent headlines. This is the idea behind http://www.top10traders.com - this is a free site that lets you create a portfolio of stocks with $100,000 in "play" money. Each day the site ranks the best performing portfolios, so you can see how your picks perform compared to other investors. You can also read posts on investing from the best traders, as well as share your own investing ideas.

Here are this month's best traders:

http://www.top10traders.com/Top10Standings.aspx

Good luck!

Answer 6

This penny stock service has years of proven experience. Ultimately it is the best service for beginners to use https://tr.im/YfuuI
You will have to wait between 3 and 10 days to get into the system in most cases. When I signed up it took 8 days. I wished it was faster, but if you can wait a week or two to start earn life changing money than you will have what it takes to make it in this business.

Answer 7

Penny stocks are loosely categorized companies with share prices of below $5 and with market caps of under $200 million. They are sometimes referred to as "the slot machines of the equity market" because of the money involved. There may be a good place for penny stocks in the portfolio of an experienced, advanced investor, however, if you follow this guide you will learn the most efficient strategies https://tr.im/ed075

Answer 8

At 16 I don't think you will even get a social security card or drivers licence since you are under parental support. You cannot even open a Bank Account without these ids. If somebody inherits you some wealth then you will be allowed to handle it least only when you reach voting age that is 18 or 21or some Trust will handle it till then. So forget dreaming to be Warren Buffet or Graham and Dodd at this age. Concentrate on your studies and choose the right majors and you will be there.

Answer 9

Hey. As far as age, I only have one year on you. I started off by reading Investing for Dummies to get an elementary level understanding. On top of that, I would join online simulators (such as the one on Investopedia.com) in order to trade capital I would not otherwise have access to. Once you have the fundamentals down, you can try to determine the type of investor you are (growth, value, income, etc.) The stock market can seem impersonal and intimidating, but it is reassuring to know that nobody can predict trends in stocks with absolute certainty. As far as actually investing your money, you might have to open a custodial account under your parents name. There are many online brokers that are good (I use TDameritrade.com which I like a lot). Some have higher commisions than others, but on the same token, they might also have better research to assist you in making better buys. Good luck with everything!

Answer 10

Go to investorpedia.com to learn the various terms and styles of play.

You can't own stocks under your name yet, but you should be saving that money. It will go quickly enough. The first investment advise is to have three "accounts." The first is an emergency cash account that will be 3-6 months of your annual pay. If you are living in a house or an apartment and you get fired, you will have to funds to live on till you get another job. It would also help when that appliance breaks down. The second is a "short" term investment like buying your cars and computers for "free." The third account would be the Roth IRA account for your retirement. The Roth account lets you invest where your profits aren't taxed, but the money you put into it is taxed. It also has other advantages than a 401K and regular IRA (including that the profits are tax free and you aren't restricted when you can take the money out).

For compound interest go here:
http://www.moneychimp.com/calculator/compound_interest_calculator.htm

For strategies, look at cash flow, moat (how resilient the company is to competition) and where you think the company will be when you plan on selling. Look at ETFs with the best fall back being SPY (the SP 500), which tends to outperform the majority of active mutual fund managers over the long term. The best way to keep track of the company is to buy the products they sell. If you hate the shoes XYZ sells, chances are XYZ is not the company you want to invest in. Likewise, you can see when a company goes from making great stuff to making junk or you could have seen Apple was going to hit it big with the IPOD before the craze even started.

Answer 11

I am so proud of you!!!! Please talk to my teen! You will find investment clubs listed on line. Beat rule of thumb , look at what you use. Invest it that. So much is intuition.Good luck. You WILL go far.