I'm interested in shares. What are the things i need to know?

Question

I'm interested in putting my money in shares. What are the things i need to know? What is the minimum amount to buy shares? When will i be able to sell the shares once i got some profit? What kind of shares recommended? Any advices?

Answer 1

If you live in the U S, you might want to go to the book store and buy "Investing for Dummies". It will be a big benefit in giving you a head start.

One thing that many beginning investors due is to buy shares in one or more mutual funds. By doing that there is less risk, of making a really bad investment and loosing a lot of money. Many mutual funds however due have a period of time 30 to 90 days in which they will charge you a redemption fee if you sell the shares.

Many successful investors buy shares with the intention of holding them for a very long period of time. That way if they have purchased shares in growing companies, the value of their shares grows with the companies and continues to grow without having to pay taxes to the government in the mean time.

Mutual funds unfortunately are required by law to distribute their realized gains annually on which one does have to pay taxes. But there is a newer form of fund now available called an index fund that has very little realized gains and therefore little in the way of taxes.

The minimum amout somewhat varies. Some brokers will let you open an account with as little as $500. And some mutual funds have a minimum initial investment of about $500. Many however are in the $2000 to $2500 range and some even more.

The kind of shares I would recommend would be shares in companies that have an established record over at least 10 years and that are selling at a reasonable price relative to their earnings and that pay a dividend.

Answer 2

brite tiger pretty much hit a home run, and easily get's the best answer. The only thing I would add is understanding all the options regarding stock trading, including short sells, hold points, margins, and the rest. The Wall Street Journal has a handbook on stocks - well worth the $10. Barron's and Investor's Business Daily also have more advanced information, but make sure you get the basics down first.

Answer 3

I think the best way to get started investing is to first study what the best traders are buying and selling. This is the idea behind the site 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 4

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Answer 5

Here is a good page to learn investing for beginners:
http://www.best-stock-trading-systems.com/internet_stock_investing.html

Here's a good broker to use if you don't have much to invest:
http://www.best-stock-trading-systems.com/sharebuilder_review.html

Answer 6

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Answer 7

The Three Steps:

1. CHOOSE AN INVESTMENT BROKER: Different brokers offer different levels of service, different commission schedules and different methods of stock trading. Go to the Yellow Pages- it will be stuffed with possibilities- then make some calls. Select your investment brokerage on the basis of the service you need:

On-Line Stock Brokers: On-line stock trading offers the lowest commission. In most cases, there is no "broker" to talk to. Stock traders simply log on and enter their transaction from the key board. There will be a customer service department to answer questions about stocks and trading in general. This type of account is used mostly by experienced stock traders!

Discount Stock Brokers: The discount stock broker executes stock trades, at the customers direction, at a commission rate that is lower than the full service stock broker. On-line stock brokers are discount brokers- but many now offer "full service". The trader is responsible for his/ her own transactions. Sometimes called a "silent" broker service, this service will answer questions about transactions, and advise on the actual order, but not on which stock to buy or when. Discount brokers also provide telephone and on-line trading.

Full Service Investment Brokers: This type brokerage will actually give you advise as to what type of stocks, bonds, commodities to buy, when to buy and when to sell. A full service broker may offer financial planning, tax shelters or advise of new stock issues or special situations. They can even buy and sell on your behalf. Commission will be higher than a discount broker.

2. SET UP AN ACCOUNT: Most brokerage account require a minimum amount of cash to open an account. Minimums range from $1000 to $2500! Once the account is opened, a minimum balance is not required. In other words, you can take part of your money out. NOTE: You will be required to make a trade at least one a year or incure a "non-trading" fee.

Request An Application: Call the broker you decided on and request an account application (or fill it out on-line). The brokerage will ask you about options, mutual funds, margin and perhaps a few other things you don't know about. Simply say you want an application only for stock trades (also include that you don't have a clue about the other items).

Read the Application: If you can't get past reading the application, seek the help of a qualified financial planner, or a CPA. If you can't get past understanding the terms and conditions of the application/ agreement then maybe stock trading is not for you (of course many people never read a loan agreement either!).

Select a "Sweep" Account: A sweep account is an interest bearing account where your un-invested money goes, including your initial amount used to open the account. The options are many and vary from brokerage to brokerage. An example: Dreyfus Fixed Income; this sweep account will yield a fixed daily interest rate while your money is waiting to be invested.

Fund Your Account: Send a check or "wire" the funds to your account. Expect this to take at least a week. Even if you have your bank wire the funds, it may take up to 24 hours before it funded.
Receive Your Password: Your account is funded- you still have to wait for your password to mailed to you. As aggravating as it is, most brokerages mail your password to you via US Mail. You know already know, based on your own past experience how long this will take.

3. MAKE YOUR FIRST TRADE: Hopefully you have done some research, read some books, know your risk tolerance and your investment goals. Make your trades. There are several ways to specify your trade. Know them before you make a trade! Your brokerage will help you.

Specify the Type and Amount of Trade: If you've gotten this far on the page, congratulations!
There are many types of trades; fill or kill; day order; market order; limit order etc. Your broker will help- call before you trade (or use the on-line help function). Also, the brokerage will usually send an information packet explaining these types of trades.

Specify the Registration: Registration is how your stock will be registered, or "named". Street Name Registration is common and easiest. STREET NAME means the stock will be registered in the name of the brokerage and credit will be issued to your account. ACCOUNT NAME means the stock will be registered in your name and a certificate issued to you. ACCOUNT NAME or JOINT NAME registration is used when the stock purchase will be used to start a dividend re-investment plan. There are different reasons, advantages and disadvantages to registering in a certain way..again, e-mail me, or ask your broker.

Save Your Account Statements: Store every account statement you receive from your broker! You will need these for tax purposes when you sell! Failure to save your account statements for future record, will cause you great grief when you try to show how much you originally paid for your stock.

The fresher the fish the better the price at the market. The "stock market" is just that- a huge "market" where stocks are traded by many different vendors. Similar to the way other things are traded- like fish or vegetables at the old-world market, or cows at the cattle auctions- stocks are traded "at auction". Prices are determined by supply and demand- by sellers and buyers willingness to buy or sell at a certain price. As demand goes up, the price goes up, and so on.

Imagine, over 100 years ago, brokers literally shouting "I have 100 shares of Pacific Railroad for sale, how much will you offer me?" If a broker had an order to buy some stock he would shout "Someone sell me 100 shares of Pacific Railroad! Who has the best price?" You've probably seen some of that happening- in more modern times- in film clips of the Chicago Board of Trade where wheat, corn and pork bellies are bought and sold. Market trading is more organized now. Computers do the shouting.

Brokers arrange for the actual trades (isn't "broker" a funny name for someone that handles your money). A broker is someone who who sells stocks for a dealer. Charles Schwab is a dealer. The dealer holds inventories of stocks and sells them through the sales guy. The sales guy is the broker or the specialist. If a sell order comes across the computer at an attractive price, the dealer buys (through his agent, the specialist) , and adds this stock to his inventory. The brokers, and specialists, using computers, bring the dealers and investors together.

What makes the price of a stock change? Companies are expected to earn profit. If profits increase, the stock price will likely increase. Even if investors think the earnings will increase, the stock price may go up. If good news comes out on a company, the price, and demand for the stock may go up. With bad news, the price and demand may go down. The price of a stock is even more dramatically affected when supply is very high or very low. It is not so uncommon for certain unscrupulous individuals to "create" news or other financial information, for the purpose of duping unsavy investors into creating a demand situation, into which, the unscrupulous-one "sells into" and makes an unfair profit. Investors beware.

There are several different prices:

Opening Price is the first price paid after trading starts, usually when the stock exchange "opens its trading doors", usually in the morning. Sometimes, opening price is higher or lower than the closing price of the previous day (orders are placed overnight, and after stacking up, affect the demand- and, thus, the opening price.

Closing Price is opposite- its the price of a stock when the market closes- the price "at the close".

Ask price is the price you will pay for a stock (and is slightly more than the trading price because it includes a dealer "commission").

Bid price is what the broker, or agent, will buy your stock for (and is slightly less than the trading price because it includes a dealer "commission").

Spread is the difference between the bid price and the ask price.

If many buy orders come through the specialist, the price for the stock will be increased. If many sell orders come across the desk, the price will go down. Supply and demand drives stock prices. Lots of orders reduces the spread- thinly traded stocks have a higher spread.

Three Different Stock Exchanges:
There are several organized "exchanges" in the US that make up the stock market. They are the New York Stock Exchange (NYSE), the National Association of Security Dealers Automated Quotes (NASDAQ), and the American Stock Exchange (AMEX). For a company's stock to to be "listed", or traded on a particular exchange, it must meet that exchange's requirements of profit, size, employees and the like.

Penny Stocks?
You get what you pay for- not much. Many new investors are drawn towards the purchase of "penny stocks". Penny stocks, as a group, have little demand in the "market" With penny stock, even when there is good news about a company, who is going to buy the stock from you?? Penny stock is rather like Ostridge meat- it may be a good product, but there is no market (demand) for it. The best fishermen sell the best fish.

Teach Yourself:
One of the best investments you can make, up front, is to learn the lingo of the market. Reading articles written by professional analysts and experts will be worth more in the long-run than just jumping in the market willie-nilly. Get some general information about the investment climate, market momentum and direction (up or down) before you invest. . Believe me, this will be of more value than an e-trading account if you don't know what your doing, or why your doing