Question by daniel e : I am wanting to learn more about investing and stocks, what is the best way to start?
i know nothing about about investing or stocks but I was wanting to look into making it a money making hobby. what is the best way to learn? what are the best sites to go to and what other advice can you get into? where should i start? what are penny stocks? how do I know where to invest money?
Best answer:
Answer by tjfinvestor
Go to the library and check out books on investing.
Answer by Chief
To Start Investing
It takes a long time to learn the stock market and it would help if you read some books from your library and information online. It would also help if you did some practice trading with play money. You can do this by using a watch list in Yahoo Finance > My Portfolio. Just pretend you bought some shares of your choice.
No one can tell what you should invest in the market. You need to decide what?s right for you at the present time. Before you start investing, the first thing you need to decide is what risk level you want to take. CDs backed up by the government has about 3-4% annual return for the long term with a low risk. Bonds or Bonds Funds has about 5-7% annual return for the long term with a medium risk. Stocks or Stock Mutual Funds has about 8-10% annual return for the long term with a high risk and are more volatile than Bonds. A person can make more than 10% annual return with the right investment. Usually the more risk you take, the more return you will have, but not always.
The stock market is basally made up of stocks and bonds. Investment managers pick a group of stocks to make a mutual fund or a group of bonds to make a bond fund. They even put a mixture of stocks and bonds together and call it a Growth & Income Fund.
1- MUTUAL FUNDS: Mutual funds have a group of stocks (could be around 100+) invested in different sectors, and manage by a professional. Managers have lots of schooling for investing in stocks, around 8 years. So I think managers can pick stocks better than I can. There are lots of different kinds of mutual funds and they have different risk level. There are 100s of funds that does not charge any fees to buy it?s shares and they are called Noload Funds. There are also some funds called Load Funds that charge about 5% of your investment. You can make a buy or sell order anytime of the day for mutual funds shares but it will not go in affect until the close of the day. Most funds has trading restriction and you may not be able to trade more than 4 times a year. That?s because it makes it hard for the fund to make a good return if there is to much trading in the fund, causing the fund manager to make more buys and sells and keep more cash on hand. Mutual funds are meant for long term investors.
2- STOCKS: Stocks is more volatile than funds unless you spread you money in several different areas and know witch area will do best. There are 10 stock sectors and over 100 sub-sectors to choose from. Stock trading restriction is only a few days, not like mutual funds. If you own stocks, you will need to keep up with all the company?s business so you don?t get stuck with a bad stock. That could take a lots of time. If a person buys just a few stocks he probably is hoping to make a bigger return but he may be taking more risk. If that?s the case, look at the leverage ETFs that represents a large group of stocks. That could be another choice.
3- ETFs (Exchange Traded Funds): ETFs are like a mutual fund but trades like a stock and that is the main differences between ETFs and stocks and mutual funds. There are some ETFs that represents Index?s. An Index is like S&P or DOW. Index?s operate just like a mutual fund with a group of stocks in deferent sectors, manage by professionals. You can?t buy Index?s because they are not for sell. A company owns them. But you can buy a mutual funds or an ETF that has the same stocks as the Index they represent. There are a lots of different kinds of ETFs for someone to choose from. There are some that represent almost every kind of sub-sector. And there are some that have 1x leverage, some have 2x leverage for aggressive investors, and some has 3x leverage for more aggressive investors. If you wish you had more money to invest, the 3x is like having three times the amount of your money in the market. You will make more in an up market but lose more in a down market. One example; S&P500 1x vs S&P500 3x:
S&P500 1x ?? 2010 = +12.8%?..4/29/11 YTD =?+8.4%
S&P 3x (UPRO) 2010 = +36.4%?..4/29/11 YTD = +26.9%
To buy stocks or funds, you need a broker account. You can open an account online or in a broker house and it is free to open. You can find several good discount brokers that charge $ 8.00 and under per stock trade and no fee on Noload Funds. If you only have a small amount of money to invest, it may be best to start in Noload Funds because of the broker fees. Most broker websites have good research tools. Some popular broker websites are Fidelity, TD Ameritrade, E-trade, Scottrade and others. You need a min. of $ 500 to open an account in Scottrade and $ 2,500 for Fidelity. Other sites may very on the min. and you need to be at lease 18 years old. If you not 18, you might could get your Dad to open an account for you.
Self-taught from 24 years of experience. Click my pic if you need more help.
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