How do I start getting into stocks and financial stuff?
I′m Zuing It asked:
I think stocks look very interesting and I want to begin investing. Where do i start?
I think stocks look very interesting and I want to begin investing. Where do i start?
The best way to start is to begin reading about stocks. Books like “Intelligent Investor” by Benjamin Graham, “Stocks for the Long Run” by Jeremy Siegel, “One Up on Wall Street” by Peter Lynch, and maybe something on the Warren Buffett style would be a good start. Or visit websites like Smart Money or Motley Fool.
When you’re ready to get your feet wet, you need to decide HOW to invest. Basically, there are three good options. You can invest through mutual funds that focus on stocks (the best method for really small investors), you can hire a professional money manager or investment advisor (ideal if you don’t want to spend all your time researching), or you can go it alone, and manage your own portfolio. Regardless of which method you choose, I recommend keeping abreast of some of what is going on in the investing world.
Let me know if there’s anything else I can do to help get you started. Good luck to you.
You can start for as little as $100 a month at most firms, investing systematically, month after month, which is the smartest way to do it by the way, whether you have $100 or $100,000. Actually, I know at Edward Jones you can start with mutual funds for as little as $25 a month.
What to invest in? I’d suggest buying a diversified series of mutual funds. Make sure you hit all the asset classes, like Large cap stocks, small/mid cap stocks, international stocks, emerging markets stocks, government debt, corporate debt, hi-yield debt, foreign debt, emerging markets debt, real estate, commodities, and precious metals. That’s 12 categories right there, so if you’re starting off with $1000, you’re talking about $83 each. Or why not spring for an extra 200 bucks, and start each off with $100 even?
Then sit back and rebalance each year, back to your original percentages. This is called asset allocation. The thinking being, what’s BEEN hot is more than likely not going to STAY hot.
This sort of portfolio should average 8-12% per year, so just split the difference and say 10%. Will it do 10% EVERY year? Of course not. I’d be surprised if it ever did EXACTLY 10%. That’s an annual average. With that average, your money should double roughly every 7 years.
So, if you start with that $1000 and never add to it ever again, in 7 years you should have about $2,000
in 14 years you should have about $4,000
in 21 years you should have about $8,000
in 28 years you should have about $16,000
in 35 years you should have about $32,000
in 42 years you should have about $64,000
in 49 years you should have about $128,000
in 56 years you should have about $256,000
in 63 years you should have about $512,000
in 70 years you should have about $1,024,000!
A long time to wait to become a millionaire, impressive as that compounding is!
Of course, if you keep adding money in systematically like I suggested earlier, say $100 a month, you’ll become a millionaire MUCH sooner. The key is discipline, and sticking in when markets are up OR down. Don’t try to time the market–you’ll NEVER get it right.
Here’s a handy formula:
$100/month x 12% return x 20 years = $100,000.
So if you want $500,000 20 years from now, just save $500 every month, and go with that diversifed portfolio. If you only average 10%, you’ll only end up with $450,000, not bad either way!
Oh, and if you qualify, and do this all in a Roth IRA? Then every penny will be 100% TAX-FREE. That’s a deal that’s too good to pass up. That’s why I tell all my under-30 clients–if you make under $90,000, and therefore qualify to do a Roth, you’d be a fool not to. Just having the power of youth (and therefore time) on your side is such an advantage, to squander it would be such a waste!
Hope this helps!
–J.