Invest in Stocks?

Question

I hear a lot of talk about how people invest their monies in stocks, and how you can see your money grow fast. I'm in my mid 20s, and I haven't started in a career yet (finishing school in 08), but I want to start investing my money for the future. How can I start investing in stocks? Is it easy to start? What do I need to start? Is there anyone I need to talk to first? What are the best stocks to invest in? I know I have so many questions, but I really don't know much about this. Thanks for the advice!

Answer 1

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 portfoilio 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.

Once you start working, if your company offers a 401K plan, 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.

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/planningeducation
http://www.fool.com/school.htm
http://sec.gov/investor/pubs/assetallocation.htm
http://www.diehards.org/readsites.htm
http://finance.yahoo.com/education/begin_investing
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://flagship.vanguard.com/VGApp/hnw/FundsInvQuestionnaire?cbdInitTransUrl=https%3A//flagship.vanguard.com/VGApp/hnw/planningeducation/education
https://ais2.tiaa-cref.org/cgi-bin/WebObjects.exe/DTAssetAlcEval
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.)

Answer 2

If you haven't done so already, sign up and take a class in basic economics, and also one in finance. You'll learn a lot about the basics of how money works. Also, start reading and learning about investing and wealth. I'd recommend you start with anything by Andrew Tobias. Also, look for the books by Thomas J. Stanley about "The Millionaire Mind", and "The Millionaire Next Door".

As far a making your money grow fast - don't count on it. Get rich quick schemes don't usually work. Instead, work on the "get rich slow" method. Unless you are a professional money manager, the best method is probably dollar cost averaging. This means you invest the same amount of money every month, regardless of what the stock market is doing. And even the professionals don't always do better than the amateurs.

I would suggest that you find an index fund that has a very low expense ratio. If you're in the US, I would also suggest you set up a Roth IRA, and invest in the index funds inside this type of savings plan.

If you don't know what these terms mean, then they should be the first things you start researching.

Answer 3

The first thing you must do is educate yourself about investing in stocks. You must also understand that you do not get rich overnight. It takes time to make a lot of money investing in stocks and your success is directly related to your financial knowledge. You must learn as much as possible. Below is a list of websites that offer free information about investing in stocks. Also you can click on the ads to receive and subcribe to free publications.

Answer 4

there became a learn performed with monkeys, kindergardners and inventory brokers. kindergardners picked the shares they knew: Disney, toys'r'us, etc. inventory brokers did it their way. Ststistics, etc. And the monkeys picked shares by throwing darts at a wall.. long tale short.... inventory brokers got here in final. monkeys 2d, and kindergardners got here in first... %. shares you recognize of and purchase products from.