How to invest in stocks?

Question

I'm 20 years old and would like to learn more about investing in stocks. Can someone point me in the right direction on how to get started? I know absolutely nothing about this, so please try to keep it as simple as you can. It might help me to know how you all got started in this game. What were your first moves? What do you consider to be essential information for a beginner? What were some of the mistakes you've made? How much money do I need to start out with?

I'm not really looking for book recommendations because I've already ordered some--just general adivce or guidance that you wish someone would have given you when you first started investing.

Thank you!

Answer 1

I met this crazy Greek lady once. I was expecting to meet with a client who has $6 million to invest. This lady walked into my office, and I thought she was going to kill me. She looked like a bum, she was dressed in what seemed like rags. I was blown away when I found out this was my client.

She could look at a stock chart, and tell you when it would go up, around what price it was going to hit, and even the closing price. I swear, they should grab hold of this woman and study her or something, because she was always pennies off the closing price, right on time with her day expectation, and always right on when something was headed up or down; creeped me right the hell out.

Most of us however, don't really fit that profile. This isn't to say that you can't jump into the stock market unless you have a full understanding of what you're doing. Saying that is like saying you can't go inside a pool unless you can swim. Sure you can, you just have to stay shallow until you learn.

You can search sites like "StockCharts" for terms and investing strategies. Google the term "Defensive Stocks" or "Cash Stocks". These are usually low risk investments, and investments what pay high dividends. It's never to early to jump into the stock market, but it can be a mistake to DIVE into it if you're not ready yet. Take it slow, and take minimal amounts of risk in the begining as you are learning things.

To get a feel for how easy it is to make and then lose money, the most realistic stock chart simulation online can be found at "trade-experience.com". You can make an account for free, watch videos from a real Certified Financial Analyst, and get a feel of some fundamentals to investing.

After you get familiar with some of the tools the site teaches you about in its videos, go to msn.com and build a portfolio selection of stocks you think are expected to do well in the next 10 days. MSN has the same tools you will learn about on the site, and they actually look alot better.

Using MSN, you can explore the outcomes of a hypothetical portfolio and "what if" transactions. By doing this, you lose no money, but get the chanse to learn about trading. After you are done reading your books and doing research online, you should be ready to begin trading medium risk stocks, futures, options.

It's a process that takes time if you don't exactly have a degree in it or do it for a living, but it's really not rocket science. The important thing is not to get demotivated, but not over-optimistic either! You should be fine, trading like a pro in no time!

: )

Hope that helped answer your question.

Answer 2

I was like you though not smart enough to start at 20, good going. Not telling you what to buy, do your own research.

I'm a buy and hold type of investor, you know 3 years or longer, this beats the frequent trader time and time again. Hundreds of studies have shown this, maybe Cramer can make frequent trading work but for peanut investors like me the commissions would eat up any profits.

Just start with a little money and a stock you like. I started with $500 of XOM (Exxon Mobil) i bought directly (without a broker). I continue to buy $50 per month through DRIP program, the dividends are reinvested.

Then i just read a lot and bought some WTR (aqua America) the same way, direct $500 and $50 a month.

Then a few months later i found PNY (Piedmont natural gas) $500 and $25 a month direct in a DRIP.

Now in a few years i have about $5500 in stocks from just these three. It was just taking the first step.

A few months ago i opened a Sharebuilder account, for $4 a month i can buy one stock or an ETF per month. So since then i have bought some TSM (Taiwan semiconductor) and some ETF's like VTI, ADRE, and EFA. I didn't put a lot into anyone of these, just looking for some growth.

Warren Buffet said, to paraphrase, 'I rather buy a great company at a mediocre price than a mediocre company at a great price'

Answer 3

The typical answers with this kind of situation won't help you. The previous responder was right, but it isn't just as easy as, buy low, sell high. If it were that easy, we'd all be millionares or better. Making money on stocks really comes in one of three categories: Selling higher than you bought a stock for, dividends, and buying stocks on margin (basically selling stocks high and buying them back if you expect a stock price to fall). For a beginner, in the name of keeping it simple lets stick with the first two, shall we?

Younger companies tend to reinvest profits back into the company in order to (hopefully) increase the stock price over time. Owners of these type of stocks make their money when the stock is sold at a higher price than the cost basis (what you paid for it).

More established companies might offer dividends, which means that they will share earnings with the common stock holders who own their shares on a per share basis.

Okay, that is the background. Now, if you want advice, experience is the best teacher. The best way to gain said experience without losing your shirt in the process is to poke around some investment style publications and learn what you can about some companies that interest you. You can also get a free membership to morningstar.com who is repected for their ratings of different financial products. When you find some companies that you'd consider investing in, put them on your watch list and track how you did. Be brutally honest with your results and keep up with how much you made or lost.

Most experienced investors know that the key to your profits in stocks are when you buy them, but be careful. This is not the same as timing the market. People that try to time the market are those who try to buy it at its very lowest and sell at its peak. This sounds ideal, but getting greedy is the downfall.

The last bit of advice I'll give is remember that actual gains and losses don't occur until you sell.

My first move was to pick a handful of stocks out of the newspaper and "bought" a thousand dollars of each with imaginary money. I tracked how I did and I scored on some and lost on others. I didn't lose any real money, but I gained some valuable insights. Insights like, I really need to dig deeper than historical values into the financial information and strategic advantages. If you aren't willing to invest some time into understanding the business you are investing in - you are coming from a dangerous place. The amount of money to start out with really depends on what you are comfortable with. Unless you have a license with the SEC, you will also need to get to know a few Brokerage houses. I do my dealings through Charles Schwab. There are also ways that you can buy and sell through the internet trading companies.

No advice would be complete without an understanding of the tax consequences - be sure that you understand the tax liability associated with long and short term capital gains from the sale of your stocks.

Welcome to the wonderful world of trading - and good luck.

Answer 4

Find a site that lets you study individual companies for their sales, liquidity, cost of shares, dividend payouts, whether they are a sound company with a good financial history. Most stock exchanges can allow you to look for this information on their sites, and will offer tips on what to look for. If you open an account with an on-line broker, they will also have helpful tools. It won't cost you anything to open an account - they only charge for actually buying and selling for you. I would think you need a minimum of $1000 to start with, but don't invest anything for a few months. Then pick a couple of companies you are interested in, and watch their performance on the market for a while. Also watch how the rest of the market is performing in comparison. Once you've bought, don't panic if you see the price slide a bit. If you've bought into a sound company, in the long term you will gain.

Answer 5

Open an account at some discount brokerage like Scottrade or whatever.

When you log in there'll be lots of basic information about submitting buy and sell orders, with options like stops and limits, to specify the max price you're willing to pay, to trigger automatic sales if the price of your stock drops below a set price etc. It's a good idea to to use these.

The hard thing is picking the right stocks. Yahoo has a lot of free stuff you can use in their Finance section to check out individual stocks, including a screener to filter out stocks with the kinds of statistics you're interested in. Look up what statistics like PE ratio and market cap mean, btw.

Most important: Read everything you can about stocks until your eyes bleed and don't believe a word of it. Stock traders, analysts, advisers are completely full of crap. Most of the time. Sometimes they're right, and even honest, just to throw you off. But you won't know when.

Even More Important: Don't bet money you can't afford to lose. This is gambling, don't kid yourself.

Answer 6

Never buy on emotion or product loyalty.
Your dad drives a Ford. That alone is a poor reason to consider investing in Ford.

You are impressed with the measures Ford has taken to improve profitaility? Good reason.

Subscribe to "TheMotley Fool, on line. ." Surf their web site. They cater to the new investor.
Their name comes from, A Fool and his money are often parted. " Frequent, timely, easy to read, and free,

Realize no investment is without risk.

Stay in one area.Even professionals will tell you, it's impossible to know everything about everything.

Define your goal,low risk = low return, high risk, high returns or big losses.

How I got started?? I worked for a co which offered stock options. On a certain day, you committed to invest a %% of your salary for 3 months, at a certain price.
I didn't make a lot of money, but I did turn in a small profit. Worst mistake. Not buying Berkshire Hathaway at 38.

Best of luck.

Answer 7

Find a a broker/adviser where you can set up a money market account and a buy mutual fund on a dollar cost averaging basis. For example. the broker/financial advisor will help you pick a good fund for you and you will buy $100 of the fund per month. Over time you will pay a higher per share price some months and a lower per share price in other months. You win when the market goes up (profit) and you buy shares at a lower price when the market goes down. For many buy and hold investors this is a good way to invest.

Answer 8

Open a brokerage account at Zecco and invest in Sony, Microsoft and Nintendo.

Answer 9

Buy cheap... and keep it for many many many years.

Below the best place i have ever found that has all the info you will need to get started... and they don't complicate matters.

Answer 10

Check out Charles Schwab and TIAACREF