I want to Invest...?

Question

ok... so I know NOTHING about investing money into anything!! Completely new to this and 25 years old. I make 12.00 and never invested in my life. I am just now trying to build credit too. Anyways... I was told you don't need alot of money to invest. So I'm like - ok great! What do I invest in? Stock? I have no idea - can someone help me out here, I really want to make money by investing but don't know where to start, what to do, or who to ask... any suggestions?

Answer 1

Start with CDs if you are completely new to investing.

Check out this website to see how they work. It also has loads of interesting links on it.

http://www.financecd.blogspot.com

Answer 2

First of all, congratulations on deciding to take charge of your finances.  Many people don't start thinking about this stuff until their 40's - you are doing yourself a HUGE favor by starting now.

Before you start thinking about any type of investing, the first step is to build an emergency fund.  You can do this with a savings account at your bank, and once you have enough money, you can transfer it into a higher-earning money market account, either through your bank or a mutual fund company.  Conventional wisdom says that your emergency fund should equal about 3-6 months of living expenses (housing, utilities, entertainment, food, etc.).  $8 - $10K should cover it for most people.

Once you have your emergency fund, you should look into long-term investing.  An IRA (or Roth IRA) has tax advantages, but the tradeoff is that you can't touch the money until you reach 59 1/2 years old.  You can set up any type of IRA with a mutual fund company - stock mutual funds have short-term risk, but over the long term these are the best performers.  I would start with an index fund - this will track some sort of stock index (usually the S&P 500, which is made up of the 500 largest U.S. companies).

You should choose a solid mutual fund company.  My favorites are Vanguard, T. Rowe Price, and Fidelity.  Most funds have investment minimums (anywhere from $1,000 to $2,500), but the companies will waive them if you sign up for automatic monthly investments (where you agree to have some smaller amount taken monthly from your checking or savings account) - this is a GREAT way to build a portfolio, and to get into the habit of saving/investing on a regular basis.

I hope that helps.  Good luck!

Answer 3

While it is true that you don't need many thousands of dollars to invest in stocks, it is pretty fruitless to invest until you have a decent-sized pile of cash.  Why?  Because you increase the risk, pay more as fees, and end up with relatively small monetary gains for all the time you put into it.  Let's take these one at a time:

Pay more as fees:  If you have $100 to invest in ABC stock, you must first purchase the stock.  Even at a discount brokerage you may pay $7 for the trade.  Now let's say it did quite well and went up 30%, so you sold.  That sell transaction costs you another $7.  Ok, so now you started with$100, spent $7 to buy the stock (now at $93), stock goes up 30% (now at $121), spent $7 to sell the stock, and now you end up with $114.  So in the end you have a gain of $14, but you spent $14 in trading fees.  That's a pretty terrible ratio.  If you do the same trade with $10,000, you end up still spending $14 to trade, but you end up with $12,984.  So your total gain is $2,984 and your fees were $14.  That's a much better ratio, on the same trade, simply because you had a little volume to it.

Risk:  With less money, you can diversify less because you can only purchase so many stocks.  More risk means you could much more easily lose money.  If you have more to invest with, you can buy several different stocks (I'd say at least 12 for full diversification) and lower your overall risk.

Time payback:  In our first example, you did all that work and ended up with $14 in gains.  That's a pretty low pay rate for the hours you put into the process.  So a bigger account allows you to actually make real money that is worth your time.  Otherwise it is better to "invest" in a second job, as you'll get a much better payback.

Investing in stocks with a very small amount isn't really the way to go.  If you have any debt, pay that off and you will have basically just invested all that money at the debt's rate of return.  If you don't have debt, save up your money until you have sum large enough to invest wisely.  Or, start your own business with that money, and invest it that way.

Good luck.

Answer 4

You're 21, you can invest in stocks and take some risks cause you're young. However, market is rough right now, so you also may want to put a small amount into a Roth Ira. You have to diversify a bit, but balance your portfolio to meet your needs. I might look at ING sharebuilder to start, they let you invest for cheap, and there are no minimums to put it.  Start with 20 bucks and put in as you see fit !!!  Invest wisely my friend.