Your Questions About Investing

or copy the link

Donald asks…

How can I become an expert in investing & stock market?

Are there any books that will teach me everything, and also give me tips to make sure I never make bad mistakes in stock market investing? Perhaps there are forums, newsletters, online mentors, etc that have helped better your knowledge of investing. Please only helpful answers.

Justin answers:

Read. Start with Investing for Dummies and Random Walk Down Wall Street. Look at your local book store. Expect it to take years. The people who are on the other side of the trades are professionals who have spent years learning their trade.

Steven asks…

How do I start investing as a college student?

Is it possible for somebody with very little cash to start investing in college for their retirement or in general? If so, where do I go and who do I talk to about such things? Will it cost anything?

Justin answers:

You can open up a ROTH IRA for your retirement with as little as 250.00 in some mutual fund companies. It’s great that you want to start investing now, because by the time that you do retire you will have amassed a much larger amount of money than if you had started to invest later. The mutual fund company that I would go with is Gabelli. . Open up a Roth IRA with them in 1 fund that you choose. Research the funds offered by Gabelli in morningstar or yahoo finance. You can put up to 4,000.00 into a Roth Ira each year. You need to remember that you have to have earned income to invest in a Roth IRa- so hopefully you are working while attending college, or working during the summer. Best of luck!

Joseph asks…

How do I start investing in stocks?

I am young and I want to start investing my money although I don’t really know where exactly to get started. Can anyone give me some good tips or books to read to become more informed.

Justin answers:

Standard investment advice is that you should invest in a diversified mix of stocks, bonds, and money market funds. If you are like most people you will invest part of your money aggressively in stocks, and part conservatively in money market funds and bond funds. However, some young people will go all stocks, and some very conservative people will go all money markets. The links below have on-line questionnaires which will give you an idea of how to do “Asset Allocation,” determining how much to put in each type of investment.

You want to buy a diversified portfolio of stocks as individual stocks are too risky. Highly knowledgeable people can buy a properly balanced portfolio, but most folks have a difficult time balancing things on their own. They will misbalance their portfolio by buying all small stocks or all growth stocks, or some other misbalanced assortment of stocks. Back in 2000, Some people bought all Internet stocks; they got burnt when they all crashed together. You have to diversify across industries. Unless you know what you are doing, it is best to buy mutual funds that will diversify for you. Buy no-load, low cost funds. Mutual funds should have expense ratios of less than 0.5%.

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. The Vanguard Total Bond Market Index Fund is good for a bond fund. The Vanguard Target Retirement funds can be good all-in-one stock and bond funds for an IRA. 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.

I will warn you that there is a tremendous amount of stock investing books and websites that teach stock investing strategies that don’t work. Particularly bad are people that teach “technical analysis” systems that sound impressive, but don’t work.

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.

(all links are to non-profit groups or to Yahoo sites. None are solicitation)
Asset Allocation Calculators:

Mark asks…

How many people are investing in banks currently in anticipation for the economy uprise again?

If not banks, what are you investing in right now so when the economy gets back on its feet for good you’ll be loaded rich? What’s your industry?

Justin answers:

I like heavy equipment like Bucyrus and Joy Global, as well as Nucor Steel and Ford Motor.

Paul asks…

How can I start investing in the stock market?

I have no experience in investing at all so explain it to me like a 6 year old. Who do I go through and I do I get shares?

Justin answers:

Well I would strongly recommend learning about Wall Street first by reading a How to book. The reason is when you look at a stock you won’t understand what all the numbers mean. I read the Complete Idiots Guide to Investing. This was a great book as it taught you the basic terminology, strategies and gave helpful pointers. This is a great beginners book and after you complete it you will be able to make educated investments instead of blind investments. After that you can read more indepth books that get into more the strategies and deeper topics.

Inorder to invest you have a couple of options. The first is going through an online company such as Ameritrade, eTrade, and ScottTrade. These companies typically charge a flat fee for trades and have huge amounts of research tools at your disposal. However the draw back to these is the is minimal personal to help you with questions. You control all your own trades and so on.

The second is to go through a broker firm such as AG Edwards (now Wachovia Securities), Charles Schwab, or many others. Here you will be able to work with a finicial advisor/broker to help you make decisions on how and where to invest. The positive side to using one of them is that you get personalized service and are able to call with questions. The downside is that you pay more. Typically trades are much more expensive through them.

The third method is more for Mutual funds. Mutual funds are typically run by huge investment companies like John Hancock, or T Rowe Price. These companies hire someone to buy and sell stocks to make the mutal funds money. These companies typically have several different funds to choose from. When investing in these you can typically contact the company directly, or use a broker, or an online account to purchase mutual funds.

Charles asks…

how do i begin investing in the stock market?

I am interested in investing some money i have recently come into as a kind of ‘retirement planning’ – it isn’t much but i figure if i start now it will mature in the long term; but here is my problem; i know nothing of investments or shares or the stock market. my knowledge of finance is slight at best and I have no idea where to begin researching.

please can someone point me in the right direction and provide some clues as to what kind of specific knowledge i should seek?

many thanks.


Justin answers:

An introductory book like _Stock Markets for Dummies_ is a good place to start. This will give you a basic explanation of most things there are to know about the mechanics of stock investing including useful websites to surf and full-service vs. Self-directed brokerages.

Investors Business Daily (IBD) is a solid daily resource (and its complement, ). It’s a better newspaper than the Wall Street Journal and it is built around a particular approach to trading. You could read _How to Make Money in Stocks_ by William O’Neil too–he’s the founder of IBD.

Search your local library for other books on stock investing. Try to absorb as much knowledge and understanding as you can.

After you have extensively researched and gained a solid foundation/education then look to open a brokerage account and paper trade–this is trading with play money before you put real capital at risk. You should do extensively before you eventually place your first trade live. Your early live trades should be with a very small position size. Only increase position size when you have done well to limit losses when the market has turned against you.

Powered by Yahoo! Answers