Stocks & the Stock Market..?

Question

Okay so I'll be 21 in July. I am really interested in getting into the stock market BUT I dont know anything about it. How to work it? How to buy stocks, how to trade, how to sell...Can someone help me undserstand it better?

Answer 1

To get started I suggest looking at definitions on http://www.investopedia.com/ maybe th stock market 101 essay.

After you start to understand what a stock is and a stock market start to look at what moves a stock. write back when you know a little more about the basics and I'm sure people would be happy to help.

Just remember stocks can go up or down and you should always thing through an investment before going through with it,

Answer 2

I suggest that you do some practice trading at

http://www.investopedia.com/beginner.asp

You can open a free trading account there and practice trading stocks using virtual money.

http://simulator.investopedia.com/home.a...

Answer 3

Investing in the stock market is, at times, a very complicated affair. It isn't the kind of thing I'd want to learn about from this website. Your best bet would be to visit several brokerage house offices and ask for basic information regarding accounts and trading. This will give you an idea of the very basic knowledge. Read the financial section of your newspaper EVERYDAY and start learning the terminology. Look through the stock listings there. Pick ten or twenty names that you like and watch them carefully each day. Keep a record of the pricing of each. "Play" at the market as if you had purchased 100 shares of each of the stocks and track the value of your "Portfolio" just as if you had purchased the shares in reality. In the meantime, begin saving some money for the day when you finally open a brokerage account. You'll have to decide whether to go with a full-service broker or an on-line trading account which you'll control yourself.

My best piece of advice to you: DON'T invest any money until you have learned about the ups and downs of investing and you are prepared to invest and lose some of the money you've invested. Investing in stocks can be too much like going to a casino -- it's too often a gamble and you should never invest more than you can afford to lose.

There are various methods of trading, also. For example, you might buy and hold either long or short term, day trade, swing trade, options, or some other types. You'll want to learn about them and decide which method is your safest.

Answer 4

You should not buy individual stocks unless you can write a book about the company (per Warren Buffett, one of the greatest investors of all time)

Learn the basics:

1. Do not chase past returns. People that buy funds because they have done well in the past are doing exactly that.

2. Do not market time. Market timing is buying based on your (or your newsletter, or your TV, or neighbor's) guess about what is going to happen in the future. Even if someone knows something, you've already missed the boat. The price already reflects what you just found out.

3. Use index funds. Over time, index funds outperform actively managed funds, mostly because they do not have those high expense ratios. Some actively managed funds do beat their index, but the ones that do usually do not do so consistently. So why gamble? Use index funds. If you want to use a few actively managed funds, make sure that the costs are very low. Vanguard has some good ones.

5. Diversify. Don't put all your eggs in one basket. Own a mix of bonds, domestic equities (large, small and mid cap funds), an international fund and perhaps a REIT (Real Estate Investment Trust) and emerging market fund.  Four to six funds is all you need. Know your risk tolerance and set up an appropriate asset allocation. Rebalance as needed.  

6. Consider taxes. Use the least tax efficient funds in your tax-deferred accounts and the most tax efficient funds in your taxable accounts.

Here's how to set up a good, low-cost, diversified portfolio that many studies prove that, over time, will far outperform the vast number of people playing the market or using 'financial advisors':

http://www.saveyournestegg.com/diy.html

Start now and you'll be retiring in your 40's. :)