what's the best way to being trading stocks?

Question

I have no experience with it, and would be so greatful for any tips or tricks, things to avoid, as well as a general overview of how to "do" it. Any links to specific sites with information would be appreciated too! Thanks so much - you people are my lifeline.

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.

If your company offers a 401K plan at work, 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. If you have children, you may want to consider a 529 plan or other college savings plan that grows tax free.

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.)


529 plans: http://www.savingforcollege.com

Answer 2

Diana, trading stocks is very risky. It is generally considered as one of the highest risks that people invest in. Every book that I have read about investing in stocks, which is quite a few, says; "if you are trying to get higher than a 15% return on your money, then you WILL lose money in the stock market". Some of these books say higher than 10.

With that said I can give a few tips. Go to
www.fool.com (no joke)
and learn way more than I can tell you. Don't buy a stock untill you have been watching it for at least few weeks. Try doing a mock investment. In other words, write down what the stock price is of a stock you would buy and track it. Dont rush things! And GOOD LUCK!

Answer 3

For a beginner to start trading stocks after reading some notes, is financial suicide. People who make a living out of it immerse their whole life in it and have good inside contacts and expensive computer program subscriptions.

Long term the US stock market has made a return of about 10%pa and you should be satisfied with that. Even then it is not certain.

So buy a Vanguard low cost index tracking mutual fund and let them get on with it. You will do as well as Uncle Sam, for sure. If you want greater risk and reward, add some good oil shares (eg. Exxon) and hold on to them for your self and your children. Good luck

Answer 4

When you start out don't trade stock trade mutual funds. It is not very risky and you will get the feel of things and you need to be learning at the same time.
I recommend trading closed end funds or ETF's which are two types of stock baskets that trade like stocks. Most people who trade individual stocks get burned sooner or later myself included.
I will state that I have never lost money buying closed end funds at a significant discount.
I don't have an account with them but I recommend Scott trade. They have local offices and they are only $7 a trade. I have a few friends that rally like them.

Answer 5

1.go to clearstation.com and track the better traders
2. set up your own portfolios and practise trading them on that same site
3. buy fear and sell greed but only buy stocks with good fundamentals.
4. diversification is important
5. only buy a fraction of what you can risk on any one stock or sector then average back and forth
for example I have bought one stock 39 times in the past 2 years and sold it 38 times all for profits of about 20% each time. I am holding one buy from $42 (its trading at about that now) I will sell it at at least $47 or buy more at $34. The stock is worth about $78 but is subject to oil prices.

I have been trading part time for about 6 years and average about 35% a year and thats fine as thats all I need. better traders can do a lot better. Learn about options as they allow hedges. You can buy both a put and or a call on a stock and bounce back and forth between them depending on the market

Answer 6

The best way to begin investing in stocks is to learn as much as possible before you risk any of your money. You want get rich quick. You want make a lot of money in 90 days. You will have to work and put forth as much time and effort as you can. You must approach investing in stocks like you are buying a part of a business and not just buying and selling pieces of paper. Success in the stock market is directly related to your knowledge, so you must learn as much as possible. Below is a list of resources designed to help the beginner that wants to learn how to invet in stocks. All of the information is free. You can also click on the ads to receive free subscriptions and guides to stock market investing.

Answer 7

pick up a couple of books on investing,,,,,read them........I like the ''little book that beats the Market''...........after you read them, decide if you want to trade stocks or invest...if trading is still of interest, pick up a few books on trading...........
if still interested, then trade on paper for a few months and figure out where you were right and where you were wrong...
if you are doing good on paper, try the real thing.start very small...real money can confuse the minds ability to make decisions...........By the way.........trading is fun and a real rush.......a lot of downs too.....keep your disipline..........good luck

Answer 8

Zecco.