How do you decide on which stocks to invest in if you are an absolute beginner?

Question

beginner to investing

Answer 1

You begin with mutual funds but - most important - you DO begin. Not complicated or few could do it. Open an account at schwab.com or TD ameritrade & get going. IRA (roth or regular) if don't have 1. Can buy SWEGX (if schwab) or similiar index type fund with no knowledge. No need to pick stocks. Do not use confusion as excuse for inaction. Start today! [e-mail]

Answer 2

If you are an absolute beginner it is better to start with Mutual Funds or Exchange Trade Funds. Both give you exposure to a basket of stocks or an index, which means you don't have to pick them yourself.

Secondly, invest regularly, rather the same sum every month, than a lumpsum today. This is a system called "dollar cost averaging" and it helps you to make the best of the ups and downs of the stock market. And important, it shows you if you have the discipline needed to play this game.
Thirdly, start reading about investing. Learn how to choose stocks .

Answer 3

Congratulations on getting started at a young age. It’ll help you more than you know!

How to invest depends on what you already know. We'll assume that you're beginning since that's what you said.

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.

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. 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. 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.

Do a quick search (at the top of the page) on ROTH IRAs. You’ll want to put some money in there.

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).

As you get more advanced, you might want a technical analysis book like Murphy's Visual Investor or A Technical Analysis Course by Meyer.

If it's 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 slow, then as you figure things out, move out of mutual funds into ETFs and/or stocks.

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

Hope this helps!

Answer 4

A beginner in investing shouldn't start thinking about individuals stocks yet. Too many concepts to think about right away. You need to learn about risk, diversification, and corporate industry leaders. That'll take some time to get the feel of things.

If you are dollar cost averaging, use index mutual funds. I'd get 4. A US value index fund, a US growth index fund, S&P index fund, and a foreign index fund. 25% in each. Then start learning and following individual companies with play money. Make fake trades and get a feel for the companies you are following. Over time, you will learn how interest rate changes affect companies, are they over-valued or under-valued and other links between the "market" and your company....

While you are at it, read a Warren Buffett book... He's the best in the business.

Answer 5

If you are an absolute beginner, why not practice your investing your skills at 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(Let's stick with reading first ;)). Good Luck!

Answer 6

You should begin reading articles about the stock market. I like MSN Money and Yahoo! Finance. Read the company profiles of the companies mentioned in the articles and learn what all the terms like Return on Equity and Debt/Equity mean. Doing so will help you learn what to look for in a company.

Don't buy mutual funds. There are too many costs they don't tell you about which cut into your earnings. For example, the fund managers and employees all have to get paid, this cuts into your earnings. As a result, they're less attractive, so they pay advisers to recommend them, further cutting into your earnings. Advisers sing their praises telling you they provide diversification to protect you against a sore period of an industry, and they do, but the cost of that protection is too high. You can achieve diversification on your own by doing a little research, don't be lazy. Do your own research and cut out the middleman.

Answer 7

First thing you do is not to buy or consider any stock. Read a couple of good books on investing. Understand; "Asset Allocation", risk (Macro and Micro), risk tolerance, time horizon, know where the good sources of a solid education on individual stocks is.

Don't ever take stock "tips".... especially from a forum like Yahoo Answers. You never know why or who's giving the advice.

Answer 8

For absolute beginners, stick with mutual funds. To make it even easier, go with an index fund.

Answer 9

Invest in the San Miguel corporation, you'll never lose!

Answer 10

basically throw money blindly into the marketplace and spot what happens. I did this and make over 3K in a week! would not artwork everytime although. basically say, "come on, enormous money!" once you do it.