I am new to investing and would like to know how to begin. I am not sure which brokerage website i should use Etrade, Fidelity, etc. and i don’t know what exactly I need to be aware of.
I know that there are "purchase" and "exit" fees when you buy or sell stocks, but what else do i need to know?
1. Can I transfer money into a new account through the internet through my banking account?
2. Is it better to invest in mutual funds, since it consists of many securities and offer less risk?
3. If i buy a stock at a low price, and it continually drops… but rises to a higher (than the original price) in a year, this means that i have gained $X amount of dollars right? Isn’t this easy then… as long as you hold on to a stock for as long as possible and wait till the price rises. what is the catch?
Sam A 5:01 pm on February 28, 2010
Check Joe’s links and read, read, read.
You might want a fuller service broker to hold your hand till you’ve gotten your feet wet.
Then sign up with a discount broker later.
AM-NM centaur 5:01 pm on February 28, 2010
Lots of questions that are normal for a beginner. I invest through Fidelity. Many answers can be found on their website. In the end, every investment has some degree of risk. The greater the risk, the greater the opportunity for reward.
Safest: Government bills, notes, and bonds (http://www.treasurydirect.gov ).
Very safe: FDIC insured savings accounts when you keep your balance below the insurance limit.
Low risk: index-based mutual funds
Moderate risk: equity mutual funds
Higher risk: individual stocks.
Good luck!
Joe 5:01 pm on February 28, 2010
Standard investment advice is that 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 portfolio 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. You can set up transfer methods over the internet or by phone. Buy no-load, low -expense 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 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://personal.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
richard t 5:01 pm on February 28, 2010
Good Luck with investing…….You sound excited.GREAT………But get a couple of books on investing.read them twice…………..it is for the rest of your life………..be patient
and Good Luck again,there is a lot of money to be made(or lost)
Lantern 5:01 pm on February 28, 2010
A lot depends on what your personal objectives are. For example, are you interested in being an online trader? Assuming you are interested in investing for your future I recommend a strong beginning on the subject of "Risk". How much risk do you want to take? Are you young and don’t mind risky investments while you are learning? Think about the word, "Risk" and all that it implies and how it sets with you. Then…..go for it.
JB 5:01 pm on February 28, 2010
Hello – I was asking these same questions at one point. I researched many investment Websites and found that many of them required a minimum initial investment to begin investing (which was more than I could afford starting out). However, I came across Sharebuilder.com, which had no minimum for initial investments. All I had to do was sign up, establish my checking account with them (they make a small deposit in your account to confirm your account is valid) and then you’re off and running. It works similar to how direct deposit works with your employer.
Also note that ING just recently purchased Sharebuilder, which is another great thing. ING is a solid organization and I happen to have an online savings account with them – so it works out well.
After you sign up and get your banking account situated with Sharebuilder, you’re all set to start investing.
The rest of your questions require more space than what’s provided here. The key thing to remember is that you must DO YOUR HOMEWORK before picking a stock. Don’t just throw darts at a board because you liked the name. For instance, my first stock pick was Sirius Satellite radio. I was new to investing and didn’t know ANYTHING. I just figured… hey, I like the company, I like Howard Stern and noticed XM Satellite’s stock price was way higher. I just assumed it would head in that same direction. Man… I can’t even begin to tell you how wrong this approach to selecting an invest was. Long story short, Sirius stock has tanked (and so has XM’s). It comes down to more than just a cool company and brand. It’s all the financials behind the scene. How much money are they going to make in the future (projected earnings)? How much debt does the company have on the books? In the case of Sirius and XM, there’s a TON of debt!
So the point is… choose wisely. Research the company, research news regarding the company. For example… if you’re looking at a stock like Target. How’s their earnings looking? Are they planning on opening any new stores or have they reached a wall? Will the slowing economy and consumer reluctance to spend money affect earnings for Target?
Anyhow… good luck! Try http://www.sharebuilder.com
Shaun R 5:01 pm on February 28, 2010
This website will give you some good answers and help you learn to trade stocks as well.
bunnycon48 5:01 pm on February 28, 2010
You are getting a lot of advice– some of it good.
You should post on sites that are designed strictly for investment questions, like yours with intelligent posters that can give you the proper input. Be specific, age, financial situation, goals — the more info, the more tailored the answer will be to your situation.
check out http://www.moneyrec.com
great site, good information and free to users. Spam free, too.
Best of Luck to you– you are asking good questions!
Bunny