Your Questions About Investing For Dummies

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Robert asks…

What’s the minimum for investing in index funds? Anyone has WellsTrade?

I have been trying to invest in diversified index funds like S&P, Dow Jones, etc. but apparently these funds have high minimums, $250000+. Any index funds have low mins?
I recently opened WellsTrade brokerage but wasn’t able to successfully place an order. I get all sorts of error messages. I’m a complete dummy in investing.
Any tips how to effectively compare funds?
I contacted the bank adviser and the only thing he could tell me was that I couldn’t get those index funds because of the high minimum.
What are the symbols for those index-like mutual funds?

Justin answers:

If you have $3000, you can invest in index funds at Vanguard. Vanguard invented the index fund 35 years ago, and they have the lowest expenses and best variety. However, due to their low expenses, they don’t kick money back to your bank adviser. Since he doesn’t make money off them, he won’t recommend them to you. Go to them at the link below.

Chris asks…

What is 0$ online equity trades and etf trades from merryl lynch ?

I know nothing about investing, if i invest a 100 dollars into something, where would i start, how would i sell, and would i make a profit? i really want to start investing, any recommend dummy books for investing ?

Justin answers:

Check out Investopedia for words you don’t understand.
Read thestreet.com, motlyfool, seekingalpha.
Before you was your money.

Mark asks…

I have $2,000 – Do I get a Mutual Fund, ETF, or Index Funds?

Or stock market…? I’m still in college and i’m not sure where is a good place to start investing?
I’m going to get investing for dummies this weekend – and I’ve been trying to read around but I haven’t gotten a clear answer.

Thanks!!

Justin answers:

OK, you’re really getting the run-around here with some of these answers. The answer to your question depends on your financial situation. If you’re in college, I’m going to assume you have no earned income right now (thereby making you ineligible to contribute to an IRA). I’ll also assume this is all the savings you have. So here’s my advice based on those assumptions:

1. Keep some of it (if not all of it) in cash. You need to have cash for short term goals and emergencies so that you don’t have to rack up credit card debt to pay for that stuff when it comes up. If you’re wanting to go on spring break or vacation, buy a car, or buy furniture for an apartment within a year or so, then you should keep this money in cash to cover those expenses.

2-A. However, if your parents are willing and able to pay for that stuff, or if you have other savings for that, then you don’t necessarily need to have this money in cash (though you may still want to in case you want/need to buy stuff that they won’t pay for or without their knowledge). In that situation I would recommend putting the money in a low cost US stock market index fund. (Remember, you should only invest in stocks if you won’t need this money for several years–otherwise keep it in cash). It can grow untouched for years and you’ll have a nice little nest egg when you want to get your own place, pay for a wedding, or whatever down the road.

2-B. If you DO have any earned income (for 2006 or 2007), then I would open a Roth IRA and put that index fund in there. There are many advantages to this; you’ll read about them in any financial planning book you choose.

Mutual funds, index funds, and ETFs all are different ways to own stocks; in fact you can buy the exact same stocks through each different vehicle. Index funds are a type of mutual fund; the difference is that they passively mimic the market rather than having active managers who pick stocks and try to outperform the market. Because of this they are much cheaper to own and invest in than mutual funds. ETFs are funds that mimic the market, like index funds, but they are traded like stocks through a brokerage account. You’ll be best off with a plain old index fund; most people are. I highly recommend Vanguard or Fidelity; they have the best reputations, lowest fees, and many top rated funds to choose from (index and mutual).

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