Investments/Trading Stocks/E-Trade.. Can anyone explain just the BASICS in all of the terms and "strategies"?

Question

I am very eager to start an account on E-Trade or similar, and basically use the money I have now, invest it, and create more funds in this way.

Before starting I would like to know what I am doing, and know what things like stocks, futures, options, bonds, and brokerage mean. If anyone could just give a brief explanation on these sorts of terms I would really appreciate it. Thanks.

Answer 1

Before starting, you definitely want to know what you are doing.  There are plenty of books and online tutorials out there that can help you learn a lot.  One of my favorite websites is Investopedia ( http://www.investopedia.com/ ).  Anyway, here's the definitions you requested.

Stocks are shares in the ownership of a company, representing a proportionate claim to the company's earnings and assets.

Futures are agreements to buy or sell a set amount of a commodity or financial instrument at a certain price on a predetermined date.

Options are contracts that give the buyer the right to buy (call) or sell (put) a predetermined quantity of an underlying security during a specific period of time at a predetermined price.

Bonds are investments in a government or corporation that are structured like a loan, the difference being payments are made to individual bondholders rather than to a lending institution.

Brokerages are firms that charge a fee or commission for executing buy and sell orders submitted by an investor.  You will need a stock broker to be able to trade stocks.

If you are looking for a cheap method of investing, you should use a discount online broker instead of a full-service broker.  Etrade is one but I would prefer an even cheaper alternative.  Firstrade ( http://www.firstrade.com ) is cheaper than the big name brokers like Etrade, Ameritrade, Schwab, and Scottrade.  They also do not require any minimum deposits so you can try investing without risking a lot of money.  I would definitely recommend you to check them out.  However, I would not recommend you to use Zecco.  First of all, they do not give you the 10 free monthly trades unless you deposit more than $2,500.  Second, their website is not user-friendly at all, making them not suitable for beginners.

As for trading strategies, I find stocks to be the easiest to start learning.  Long term investments tend to be less riskier.  If you decide to invest long term, you might want to also look into dividend reinvestment (DRIPs), which are also offered at Firstrade.  However, if you are looking for even less risk, you can look into ETFs or mutual funds.  For more information about ETFs, visit here: http://www.firstrade.com/public/en_us/kn...  For more information about mutual funds, visit here: http://www.firstrade.com/public/en_us/kn...

Regarding your question about how you can buy or sell, when you sell stock, you must wait for 3 days for your funds to settle before using them to trade again.  However, this does not apply if you are a "pattern day trader."  But in order to become a "pattern day trader," you must have at least $25,000 and a margin account.

Answer 2

The last thing you need is a brokerage account.  

Unless you learn what you're doing, why you're doing it and how to do it, you will loose money.  Take the time to educate yourself, and you're not going to get any education by asking simple questions here on YA that require complex responses

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, The first book you should read is Rich Dad Poor Dad by Robert Kiyosaki

Then try some of these

What Works on Wall Street by James O'Shaunessey

Beating the Street by Peter Lynch

One Up on Wall Street by Peter Lynch

The Warren Buffett Way by Robert Hagstrom

How to Make Money in Stocks” and 24 Essential Lessons for Investment Success both by  William O’Neil

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/ )

While at MSN following the strategy lab analysts to get a feel for what the pros are doing and why.  This site has some basic information for beginners. If any site offers free information, take it.

Other website that can provide instructions and help with procedures and terminology are

Investopedia - http://www.investopedia.com/  Stock Charts - http://stockcharts.com/

http://www.investorshub.com/  http://www.1source4stocks.com/



Visit some of the more professional websites like Zacks - http://www.zacks.com/

Smart Money - http://www.smartmoney.com/  Schaeffer’s – http://www.schaeffersresearch.com/

Some of these web sites will have advertisers who are worth looking into also.  And remember, if they offer free information, get it.

Answer 3

Use an online brokerage firm that has good beginner qualitys {like tutorials or easy to understand set up}, i use zecco, better then schwab, etrade, etc. they are the only ones with free stock trades, no minumums..all the others will charge you fees for trading, but compare and see for yourself. Good luck and happy investing!

http://friends.zecco.com/r/a7a2877caab81...

Answer 4

The compliance (regulations) governing places like E trade are actually quite lax.  If you do not know anything about investing but only want to pay a smaller fee, there are accounts that you can pay a fee for at a brokerage house and get all the financial knowledge that your broker has to offer.  

A brokerage house is a place where investors can buy and sell publicly traded companies, mutual funds, etc through there personal accounts.  If you do not have an IRA or a 401k (retirement funds) you can open one of these here and start to save for your future.

A stock is ownership in a publicly traded company.  You are entitled to dividends, voting for the board of directors, and voting for stock mergers.  Go with Blue chip stocks or companies that have been around for a long time that will not go bankrupt.  ie clorox (everyone needs to clean their bath.

Futures & commodities are you betting on companies that may do well in the future.  These are risky.

Options are complicated and if you are not an experienced investor I would suggest you stay away from these unless you get a book and study them.  

Mutual Funds was something curiously missing from your list.  What a Mutual Fund is, is a company that invests in bonds, municipal bonds, cash, options, index's all depending on the type of mutual fund.  Basically all your eggs are in one basket but the basket has multiple compartments.

If you want more info on this contact me.

Answer 5

I would put your money in a 3 month CD.  Then I would buy a couple books on investing...like the Warren Buffet way, or Investors business daily Guide to the Markets.  Check out Charles Schwab website as well.  This will give you a better understanding of the process.  After that feel free to enter the market!  Its fun!