Your Questions About Investing For Dummies

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Steven asks…

The Intelligent Investor?

I’m 14 and I’m almost finished with Value Investing for dummies. Would The Intelligent Investor baffle me or can I handle it? I have the termonolgy almost down.

Justin answers:

I didn’t find it difficult at all, but I was 18 when I read it. You can always try. Reading material that is demanding is the best way to increase knowledge.

Thomas asks…

Do you invest in the stock market? What kind of investing strategy do you use if you do?

I’m a college student taking BS Business Administration with major in Entrepreneurial Management and planning on investing some of my savings. My mentor told me about investing in the stock market, rather than in a bank.
Please share your ideas about this.. Thank you very much.

Justin answers:

Yes I do invest in the stock market and have been doing so since I was eleven years olds and have been working in the stock market for 45 years. Based on my experience, you mentor is correcct.

BUT – Before you spend $0.01 on any investment, you must know what you’re doing, why you’re doing it and how to do it. Before you invest in any security, the first investment you should make is in yourself, and the best investment you can make is by educating yourself.

Start your education by learning why you should invest and the importance of being able to make your own decisions or how the pro’s make theirs.
Here is some reading material that can get you started in the right direction, You don’t have to read all of them, but at least look at them and select those you may have an interest.
Beating the Street by Peter Lynch
Bulls Make Money, Bears Make Money, Pigs Get Slaughtered, by Gallea
Investing for Dummies by Eric Tyson
How to Make Money in Stocks” by William O’Neil
24 Essential Lessons for Investment Success by William O’Neil
The Intelligent Investor, by Benjamin Graham
Common Stocks, Uncommon Profits, by Philip A. Fisher
One Up on Wall Street by Peter Lynch
Stocks for the Long Run, by Jeremy Siegel
The Interpretation of Financial Statements by Benjamin Graham
What Works on Wall Street by James O’Shaunessey
You Can Be a Stock Market Genius by Joel Greenblatt
Your Money and Your Brain by Jason Zweig

Get into the habit of making daily visits to some websites like MSN Money and Yahoo Finance. (http://moneycentral.msn.com/home.asp , http://finance.yahoo.com/

Other website that can provide instructions and help with procedures and terminology are Investopedia – http://www.investopedia.com/ Visit some of the more professional websites like Zacks Research – http://www.zacks.com/ Smart Money – http://www.smartmoney.com/ Investors Business Daily – http://www.investors.com/default.htm?fromad=1
Naveller – http://navelliergrowth.investorplace.com/portfolio-grader/
Some of these web sites will have advertisers who are worth looking into also. And remember, if they offer free information, get it.

Attend all the free seminars you can, just be careful and don’t get pressured into anything you really don’t want or need. Most schools offer courses in finance and economics, but very few will have courses on the mechanics of the investment markets, if they do try taking the course. You may want to consider on-line courses, the New York Institute of Finance use to have such courses. Try to get some fee information from the stocks exchanges they all have (had) free booklets, SIAC and some of the regulators (FINRA SEC MSRB CBOE) may provide some free literature.

And when you think you want to invest/trade, try some paper trading to test your skills without spending you money http://simulatorinvestopedia.com/ http://www.moneyworks4me.com/
and/or http://www.tradingsimulation.com/

You at least have made the right decision to start investing, this is the first big step and it won’t be your last. Keep taking those steps forward and along the way never take the advice from people that are not in the market or try to tell you not to invest.

Good luck on your journey, study hard and you’ll invest well.

Charles asks…

What information do you need to feel confident about investing?

What information do you want to have in order to feel empowered and/or confident about investing or making a specific investment?

Someone telling you what to buy?

Someone telling you when to buy it?

Someone telling you how to buy it?

Justin answers:

Definitely not listening to anyone else unless you have researched the source, can have a free trial and are wanting to gain knowledge. If you do choose that path make sure the strategy sounds logical to you and the person tells you that not every pick is a winner.

Really the best way to invest is to educate yourself about the investment vehicle. All the “Dummies” books are great for that.

If you’re speaking about stock investments, books and some websites are a great place to start. I recommend Stock Investing for Dummies (no offense). It’s good book for understanding the basics. I would also recommend How to Make Money in Stocks by William J. O’Neil. It’s also a good one because it tells you what kind of fundamentals to look for in a stock, a bit about how to look for patterns in stock charts and how to protect your capital. It’s the first book I read when I started my stock trading and a very good place to start. Any questions about terms or anything go to Investopedia.

Feeling confident about investing comes from knowledge and having a plan. For example, with stock investing you want to have answers to questions like: how will I choose a stock, how much of my portfolio will I invest in any one position, when will I get out of a stock and more questions like these. If you have the answers to each part of investing in and maintaining an investment you will have the confidence you need.

David asks…

How to invest in the stock market?

First time using the stock market. What should I invest in? How do penny stocks work? Is investing in penny stock worth it? How can I invest the least and gain the most? What would be good for my 1st investment?

Justin answers:

Do some research on investing first, before doing anything else.

Start with some basic books to teach you the fundamentals. Two excellent reads are The Complete Idiot’s Guide to Investing and Investing for Dummies. Before doing anything, make sure you have enough in savings in case things go south for at least 6 months.
You need to learn also some important concepts in investing, such as dollar-cost averaging and compound interest – two of your best friends to make money for the future.
Also you need to think of what you are investing for exactly.
You first need to pick a company to invest through. Some of the best are Vanguard, T. Rowe Price, Fidelity, and Schwab. Avoid the big banks like the plague. Don’t let them rip you off with loads (sales charges) and fees. Check how much the company charges you as an expense ratio. A good one might charge you 0.2-0.8 %. If they charge more than 1% than go somewhere else. And if they charge any kind of 12b-1 fee, hold on to your wallet and RUN.

The question you need to answer is WHY you are investing. Different people have different goals. Is it for more income? For retirement? For someone’s education? Plus how old are you and how long do you want to invest? How much risk are you willing to assume?

These are all very critical questions and they will determine what kind of investments are right for you. Don’t believe anyone who has a “one size fits all” kind of investment. For stocks typically you are talking about at least a 5 year investment period. If less, consider getting into bonds or a bond fund instead. Many people choose an appropriate mix of the two.

If you want to get into the market but don’t know what stock to pick, consider an index fund. Instead of throwing all your eggs into one basket (one company), index funds can invest you in dozens, hundreds, or thousands of companies all at once and so there is less risk. This protects you if any one company or industry runs into trouble. For bonds, the returns are less, but more solid.

If you are thinking of retirement, consider a Roth IRA. Your money grows tax free, and when you retire you can withdraw it tax free as well.

Getting individual stocks make more sense if you really want to buy stock at a place you work at, or want to really get involved and are the hands-on investor type.
Penny stocks are really the sewers and ‘hoods of the internet – few people make a lot of money there, and even fewer newbies.
If you want to be more passive and have things grow over time, index funds make more sense. If you want to see some of the variety out there, for more information, try looking at
https://personal.vanguard.com/us/funds/vanguard/all?sort=name&sortorder=asc
and play with it, comparing funds with more or less risk.

Do some reading online such as
http://www.vanguard.com/us/insights for some important investment truths.

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