Your Questions About Investing For Dummies

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Joseph asks…

What is the best, easy-to-grasp reference book on financially building assets and investing?

For someone who is financially very conscientious but completely new to the world of building assets and investing, what is a good (current-economy-applicable) intro book that thoroughly explains things in language a non Wall-Streeter can understand and use?

Justin answers:

The best beginner’s book that explains things simply and thoroughly is Investing For Dummies, and it’s probably in your city library. You can also check out The Complete Idiot’s Guide to Investing, and they are neither for dummies or idiots but give a solid basic understanding of investing.

Thomas asks…

How do I start investing in stocks?

I am very new to this. I dont completly understand how but I have an idea. basically how do I get off my feet and start investing in stocks and bonds? Is it worth it? Is it a good way to make extra money? What are the hot companies to invest in right now?

Justin answers:

Learn before you burn.

Go to the library and find 8 finance and investment magazines. Read them until you figure out which one you like the most. Then check out a book on investing. Maybe even the “Investing for Dummies” (not implying you are a dummy). Read that book, front to rear. Subscribe to the magazine. Not one of them will say invest in penny stocks.

Mark asks…

How much money should a beginner start out with before investing online?

I want to invest in stock online. How much money should I start out with? How many different stocks should I buy? Whats the best online trader? Is day trading difficult to do? Thanks

Justin answers:

Your best bet is to get some education and experience before you start putting your hard-earned money on the line. Read a book (Investing for Dummies is a good starting point) or take a course to learn how the markets work, how brokers work, what types of investments you can buy etc. Find a website that will let you create a free “practice account”. This is basically “pretend” investing where you enter buy and sell transactions of real stocks but you don’t actually own them. You can see how your “investments” react over time and whether you made or lost money and then learn from your successes and failures.

As for how many different stocks you should buy, there’s no rule and it’s completely up to you but a good piece of advice is to spread your risk around so that your money is not tied up in the fortunes of just one company. The best way to do this is with mutual funds and ETFs. Mutual funds look like stock in that you buy shares at a particular price and then it either goes up or down and you make or lose money based on that. The difference between mutual funds and regular stock is that a mutual fund owns stock in many different companies, so when you buy mutual fund shares you’re actually buying shares in lots of different companies rather than just one. ETFs, or Exchange Traded Funds, are the same idea except that they are usually tied to an index or a commodity. For example, you could buy an ETF that is tied to the movement of S&P 500 index or one that is tied to the price of oil or natural gas futures contracts.

Whatever you decide to do, don’t ever invest more money than you can comfortably afford to lose. And don’t be in a rush to sink your money into something you don’t really understand. Learn as much as you can first, get some practice experience and seek out the advice of professionals or people you trust who have some investment experience before stepping onto the investing roller coaster. I rushed in when I had some extra cash sitting around and I promptly turned $25,000 into about $5000 by not knowing what I was doing and making rash, emotional decisions. I’ve learned a lot along the way and my investments are slowly recovering, but I sure wish I hadn’t gotten my education the hard way! Lol

Good luck!

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