How do I get into investing in stocks?

Question

How do I get into investing in stocks?

Answer 1

Before putting any significant money into stocks, I would recommend spending at least a year paper trading.

It is amazing how much money you can lose trading stocks when you don't know what you are doing!

Answer 2

The best way I know of is to join an investment club. They club will act like a mutual fund, investing in stocks researched and selected by the group.

Taking part in research and presenting results to the group for peer review is an excellent way to learn.

You'll learn what is a good reason to invest and what isn't. You'll probably pick both winners and losers. The goal of participation is education.

Some people learn how to invest and continue happily doing so. Others learn how to invest in single stocks and learn it is not for them.

Answer 3

1. Start by paying down any high interest debt you may have, like credit cards. Reason being that they ultimately eat into any (positive) returns you may have from investing. Another good reason is to build up some discipline. You will need discipline to be a successful investor.

2. Educate yourself about investing. The Motley Fool is probably still a good place to start. I would also suggest getting into the habit of reading the Wall Street Journal or at the very least the business section of the New York Times. You'll be overwhelmed with the terminology at first, but stick with it. It is certainly worth it, if you want to be an investor. The Investor's Business Daily is another good resource for information, though you will be lost in the deep end of the pool with that publication for sure. (That is not a reason to avoid getting familiar with it. Though at first, it may very well be overkill.)

3. Save some money to open a brokerage account or even an IRA. (You'll learn that there are some restrictions on what you can do in an IRA account. Though they shouldn't necessarily be shunned as a result. Money placed in an IRA is tax deductible, up to certain limits.)

4. ?????

5. Profit!

Note: In case you are not familiar with the joke, steps 4 & 5 are supposed to be humorous. Which provides a good time to bring up another point, if you are not having fun investing, then get out. Put your money in something like an S&P 500 index fund and enjoy your life.

There are a lot more things to say on this subject, though that could take up a book. Come back with more questions as you learn about investing.

Edit:

I forgot to mention DRIPs and Investment Clubs. Both ideas are suggested by The Motley Fool.

Answer 4

In addition to the advice already given (particularly getting rid of high-interest debt), I would add the following:

• Consider waiting until you have at least $1000 to invest before you start. That should be a number where you can at least buy enough shares of something to make worthwhile gains.
• Only invest money you can safely afford to lose. If the amount of money you have in the market would cause you to lose sleep if you lost it all, you've got too much in.
• Only invest money you aren't going to need for at least 5 years. Your time horizon for stock investing.
• Don't use margin accounts or leverage. The most recent crash isn't the first time that the excessive use of leverage nearly took down the world economy. It could do the same to your brokerage account if you aren't careful.

Answer 5

That is a loaded question but I'll give it a shot. First things first you need to determine if you are ready to invest in stocks. If you have a lot of high interest debt you would be much better served paying that off before investing in stocks. Stocks return around 8%-10% in the long run, so you'd be better off paying off any debt you have that is higher than 8%-10%.

Most people get their start investing in stocks through mutual funds in their 401k or a Roth IRA. If you want to invest in individual stocks instead of mutual funds then you will need to do a lot of reading and learning.

You will need a brokerage account or if you have a stock in mind they might have a dividend reinvestment plan (DRIP) that you could invest in directly with the company.

You will have to compare the different brokerage firms to determine which is best for you. Since you seem to be internet savvy, I suggest you use a discount brokerage that let's you buy stocks online with cheaper commissions. A good rule of thumb is to keep commissions below 1% of the amount invested.

Once you have your online brokerage account open with money in there the process of actually buying the stock is fairly straightforward. Just place an order for the amount of shares you want. That order can be a market order which means the purchase will occur at the current market price. Or you can use a limit order where you control at what price your purchase will occur.

There are lots of good books out there for beginners. Personally I learned from the Motley Fool.

And last but not least is to have fun with it. Learn as much as you can and welcome to the club.

Answer 6

Read "The intelligent Investor" book before you do anything. I started when I really didn't understand anything about stocks. I bought an internet stock for $150 per share which sold at 75cents a year later. I sold it for a profit but would've been a disaster.