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[Andrew425]

So after recently becoming an full fledged adult I got to the thinking of making money through the stock market and other passive type incomes and I had a few questions.

I currently own Rich Dad Poor Dad by Robert Kiyosaki, and "A beginners guide to Day Trading online" by Toni Turner. Are those authors credible?

What are some good books that you can recommend?

I've been checking out investopedia and so far my imaginary investments have been doing okay. Do you guys think that the market is too volatile to attempt to enter it right now?

Are there other markets you can recommend, along with a book or credible source?


So I have a plan to make some money on the stock market and I was wondering what you thought of it.

Find lots of big established companies that produce a decent profit every year that also pay dividends. Start tracking their 2-5 year cycles and then try to buy when the price is low, wait until it goes back up then sell it. If I accidentally buy a stock that is at a high point then just hang onto until the next cycle collecting the dividends. Big companies would be ones like P&G, Railway and large farming companies.

I hope using this plan to make above inflation on my money. Is this possible?

Thanks!

[LordBucket]

I hope using this plan to make above inflation on my money. Is this possible?

It is possible. However, I would advise anyone considering it to do exactly what you've said you're doing: do paper trades for a few weeks before you invest any real money into it. Track your stocks, pretend you're buying and selling, and see if you make any pretend money before you see if you can make real money.

Once you transition to real money, understand that it will not be precisely like the paper trading. With real money you can place buy and sell orders for any amount you want, then walk away. They might or might not be filled, but that's difficult to simulate on paper. So paper is a useful exercise, but understand that it will be different when you're using real money.

Also, one quick, important thing about paper trading: you say you're making money in your imaginary trade...ok, great. But are you using bid/offer prices, or are you using one rate for both exchanges? Using real money if you buy a stock at market price then immediately sell it at market price, you will lose money because buy and sell prices are different. This is an easy thing to miss when doing paper trades.

Day Trading online

making money through the stock market and other passive type incomes

I was wondering what you thought of it.

...ok, I haven't actually daytraded since the 90s, so my information may be a bit out of date. However,  few thoughts in general:

 * A LOT of trading is automated now. You're not trading against real live human beings all the time, you're trading against computer scripts. Be aware of this.
 * Go in with as much money as you can. Yes, it's possible to play the market with only a few thousand dollars, but the trading fees will cut into your profit margin. Yes, sure...maybe you have a flat rate $10/trade. But if you're daytrading, you might be making a dozen or more trades per day. If you're only working with $2000, you're more likely to feel the couple hundred dollars you're paying for transactions.
 * Markets react very strongly to emotionally charged events and news. It is possible to play off this. For example, shuttle launch? Probe landing on Mars? There may tend to be a lot of optimistic buying going on. President gives a speech? Pessimistic selling. This doesn't necessarily even need to be related to the topic of the event. Don't feel the need to buy aerospace just because it's a space or technology related event. If you want to, sure, go ahead. But even unrelated stocks may tend to be affected. Key words here: emotionally charged events. If you know something big is going to happen...state of the union speech, for example...if you don't have a good feel for how people will react, you might want to sit that day out.
 * Related: remember you don't have to trade every day. If you're not feeling it, don't push yourself. Being in a bad mood can have a big effect on your decision making.
 * Standard advice: avoid margin trading until you're comfortable. Don't feel bad if you still avoid it even after you're comfortable. Yes, it can help you win big. It's a useful tool. But it can help you lose big too. Be aware of the risks. The same can be said of short selling. Great tool when used well. Great way to shoot yourself in the foot if wielded poorly.

Big companies

This is an opinion. Not everyone will agree with it. Do with it as you will:

If you're daytrading, you don't want big companies. You want little tiny, volatile penny stocks that you can buy in large quantities and sell when they fluctuate a tiny bit. If you spend $1000 to buy 10 shares of XXX @ $100 each, and they go up one cent, congratulations the net value of your stock is now $1000 and ten cents. If you spend $1000 to buy 10,000 shares of YYY @ ten cents each, and they go up by one cent, the net value of your stock is $1100.

Do ten trades like that in a day and you made good money. That's kind of the whole point of "day" trading.

If you don't specifically want to daytrade, and you're content to have a dayjob and make money over time through casual investments...that's a different beast. I would offer the casual recommendation that you look at some historical composite index charts before you decide whether to get involved in that, but there are probably others here on bay12 who could give you more useful advice there. Some years (some decades, even) you can buy into any composite and come out ahead. Other years (and decades) you would lose big-time over those years. A daytrader can make money in both bear and bull markets. If a stock is rising, buy long. If it's declining, sell short. You have both options at your disposal. Long term stock market investors I think generally only do well in bull markets. But, again...there are probably others here more well informed on that kind of investing.

wait until it goes back up then sell it.

This is a simple strategy that is sometimes difficult to actually follow. Yes, if you buy something and it immediately drops a few points, you can always hold onto it until it goes back up. But what if you decide to wait and it goes down a few more points? So you keep waiting and it goes down a few more? On paper, over time, from my experience, if you can actually bring yourself to wait...yes, generlly things will go back up. Almost always. But money has a time value. While you're waiting, that money is tied up in a stock that isn't performing for you. So, is it better to wait...days? Weeks? Months? To turn a profit on that purchase? Or is it better to sell it for a loss and use that money to make money on something else? There's not an easy answer to that...but the question does sometimes need to be asked.

collecting the dividends

At that point you're not really daytrading anymore. You're a long term investor. Also, dividends are usually so small that it's not worth persuing them. I assume you're going into this without much more than 5-10 thousand dollars. Sure, maybe if you hold onto something for a few months you can collect $20. Again, this depends on what you're buying. If you're daytrading, don't expect payout rates on the things you're probably buying to matter much. In fact, odds are good that a lot of the companies you're buying into probably won't be paying dividends at all.

Finally, remember that at its heart the market is basically one big game of last man out loses. The primary moving force in stock markets is the action itself of buying and selling. If you put money into the market, you're increasing the value of something. If you pull money out, you're decreasing the value of something. There are millions of people doing this. And, the money everyone's investing is only actually usable after they've pulled it out. There's a very basic, fundamental concept here that really needs to be understood. The stock market is not a magic money-making genie. It's a form of gambling based on perceived value. If you buy  stock and it goes up, very frequently that change doesn't reflect any change in actual value of the stock. It simply means that more people want to buy it. Yes, sure...if a company performs well it's possible they might pay out greater dividends. But the value change in the stock is not really a reflection of that. More likely, people see that the company is performing well and therefore perceive it as being more valuable...leading them to buy its stock which creates a relative scarcity between buyers and sellers. More people want to buy it, fewer people want to sell it, so the price goes up. This is the primary force at work here. Perception. So long as you understand that, and you're willing to take the risks that come with playing what's basically a game...then sure, go for it. If you buy into the market, somebody is guaranteed to make money as a result. Just make sure it's you.

[Levi]

Daytrading always seems to much like gambling to me.   

But I guess if you want to get rich quick(or poor quick) then its probably the best option.  I like longer term investments, but I'm in my thirties and still no where near retirement so I guess its not working out great for me. 

[LordBucket]

All stock market trading is gambling. Playing for a long time doesn't make it not gambling.

[Chaosgabe]

I'd like to ask you some questions, LordBucket. As they are pretty much on topic i hope Andrew doesnt mind.
Did you earn your living daytrading or was it to make some cash on the side?
With regatds to the first question, how much time did you invest? You do recommend the "papertrading" for daytrading too, not just for general investments on the stock market? Are the 10-15k you mentioned a reasonable amount to start with?
(Sorry for any spelling errors i missed, typing on a phone with autocorrect working against you iin another language is unpleasant)

[LordBucket]

I'd like to ask you some questions

Think I'm going to generally avoid answering personal questions. I've already had enough of being accused of eating babies and things lately in a different thread.

You do recommend the "papertrading" for daytrading too, not just for general investments on the stock market?

I was specifically recommending it as preparation for daytrading, but it would probably be useful for both.

Are the 10-15k you mentioned a reasonable amount to start with?

Let me give you two answers:

First answer Try it on paper and find out. That's what papertrading is for. To see what works, what doesn't, and allow you to make mistakes without costing you money. Google provides free real time stock data. Plot out trades for a couple weeks, and recompute for however much fantasy money you want to play with. Just do the math and you should be able to figure out how much you need to make it viable.

Second answer Yes, 10k is probably enough. I mentioned it in the other post because below a certain threshold trading fees become an issue. $10 trades sounds cheap, but remember you need to both buy and sell. If you're averaging 5 buy/sell pairs a day, that's $100 you'd need to be making every day just to break even after brokerage fees.

Let's work with an example. Imagine you start with $1000 and your broker charges $10/trade regardless of volume.

Step 1:
At 10am you see XYZ available at market for $1.00 buy, $.98 sell. Based on your previous research, advice from others traders in IRC, intuition, whatever...you anticipate that XYZ is going to make an upwards move over the next hour. So you buy 990 shares @ $1. You pay your broker $10, you pay $990 for the 990 shares, and you now have $0 in your account and 990 shares of XYZ. Those 990 shares that you paid $990 for have a sell price of $.98 each, so if you were cash out now, 990 shares @ $.98 would give you $970.20, minus the $10 broker fee, leaving you with $960.20 total. Obviously you don't sell, but it's important to see this in action to understand how market friction works. Don't think that "buying $1000 worth of stock" means that you now "own $1000 worth of stock." That's not quite how it works.

Step 2:
At 10:07am XYZ moves to $1.02 buy, $1.00 sell. If you sell now, you'll cash out for $990, pay your broker $10, leaving you with $980. So you wait.

Step 3:
40 minutes go by with no activity, until at 10:47am XYZ finally moves to $1.03 buy, $1.01 sell. It's now selling for more than you bought it for, but if you cash out you'd be selling your 990 shares @ $1.01, leaving you with $999.90, after which you pay your broker $10 and you end up with $989.90. So you wait.

Step 4:
Another hour goes by, over which XYZ drops slighty and then goes back to where it was at step 3. You decide that this obviously was not the great mover you were hoping for and you're ready to just cash out and move onto something else. As you sit at the screen watching the seconds go by you see an uptick. It's now $1.04 buy $1.02 sell, and you cash out immediately, selling 990 XYZ @ $1.02, leaving you with $1009.80. You then pay the broker fee and end with $999.80. You spent nearly two hours and lost twenty cents. You call it a learning experience and move on.


So, there's a hypothetical daytrading scenario. But let's make a few observations:

First: The stress and drama you endured was unnecessary because you could simply have placed a sell order at 10:01am for 990 XYZ @ $1.02, then walked away and it would have been filled when a buyer showed up. However, you probably wouldn't, because you'd have done all the math in advance and you'd know that selling at $1.02 would result in a net loss for you. Please read that again. In this example, buying @ $1.00 and selling @ $1.02 resulted in a net loss. So, you'd either have placed the sell order for more, or you'd have watched and babysat it so you'd be able to watch the movements to know either when to cash out for a profit, or when to cash out to minimize losses. You don't want to place a sell order expecting to make a profit...walk away, then come back to an unfilled order and a bunch of shares selling for half what you paid for them.

Second: In this example, starting with $1000, you lost money. If you'd done the same thing with $10,000, buying 9,990 shares @ $1.00 and selling those 9,990 shares @ $1.02, after broker fees you'd have made $179.80.

That's the goal. Same exact stock, same exact strategy, same exact buy and sell prices and times...the guy with $1000 lost $0.20 and the guy with $10,000 made $179.80. It took you two hours, so do 3 trades like that over 6 hours of market uptime, and you walk away with $540 for the day. Congratulations. You're now making 6 figures working 20-30 hours a week. With 10k, even if you'd cashed out at step 3 you'd still have made $80 in 47 minutes rather than losing $11.10. This is why there's a minimum practical amount of money to start with, and I'm sure it's more than whatever the minimum to open a brokerage account is these days. What is a costly and harrowing "learning experience" with $1000 can be a good and profitable pair of trades with 10k.

[silverskull39]

This is relevant to my interests. ptw.

[Twiggie]

This is relevant to my interests. ptw.

also ptw

[mainiac]

Do not think that you can win money on the stock market through active trading.  They know the system better then you, you are fresh meat.  Furthermore active trading will in and of itself cut into your capital.  The average active trader underperforms the market by a lot.

Instead put all of your money into a market index fund.  They minimize your risk and have a history of outperforming managed funds.  Even if the market takes a downturn your market index fund will recover pretty soon.  2007 was a once in a century downturn but the market index funds are back to their 2007 peak this month.  Market index funds are also typically set up to work with 401k's which is the best place to keep your stocks if you are American. 

Look for a fund like this, which is similar to the fund my retirement is in: https://personal.vanguard.com/us/FundsSnapshot?FundId=0085&FundIntExt=INT
Some key benefits:
-Management fees are very, very small compared to a managed portfolio.  Your money stays your money.
-Money invested before the 2007 crash is currently recovered if you rembered the golden rule "hold and wait".
-A good rate of return (8.34% avg since 1993)

Putting your money into an actively managed fund would be a mistake.  Trying to trade youself is a gamble where the house has an edge.  The fiscally responsible choice is a market index fund.

Let me repeat myself DO NOT TRY TO BE SMART, BUY A MARKET INDEX AND HOLD.

You wouldn't play poker for keeps against a professional poker player because you read some book.  Don't think you can play the stock markets for keeps and win.

Market index fund

[Bouchart]

Two books I recommend are "Common Sense on Mutual Funds" and "A Random Walk Down Wall Street".  Indexing works a lot of the time.

Another investment strategy is the dividend growth strategy, buying stocks of large, blue-chip type companies such as KO, MCD, WMT, and the like and reinvesting the dividends.  Here's a good author to start with that: http://seekingalpha.com/author/david-fish/articles

[LordBucket]

2007 was a once in a century downturn

That's just not correct, and the 2007 crash wasn't even the worst. Let's use NASDAQ as an example. Here's a historical chart:

Even if the market takes a downturn your market index fund will recover pretty soon.

Really? Look at the chart. If you bought in the 2006 to 2007 range, you didn't break even until around 2010. If you bought in the 1999 to 2000 range, you still haven't recovered your money ten years later. How is this "soon?"

the golden rule "hold and wait".

You're advocating long term holds...so, let's say you bought in 98. By 1999-2000, you'd have doubled your money. But you're "long term holding" so you don't sell. Market crashes, and by 2001 you're back to where you started. 2002-2003 comes along and you've lost money. But...you're still "long term holding" and sure enough, by 2004 you've caught back up to where you started with your original investment six years ago. Feeling confidant...you keep "long term holding" and sure enough, from 2005-2007 you've made money again. And then the 2007 crash comes long, and you've lost money again, and it's not until 2009-2010 until you break even again. And...sure enough...since you're "long term holding" you keep waiting, and by 2011-2012 you're ahead of your initial investment again.

How do you look at this and conclude that long term holding is the best strategy? Wouldn't it make more sense to sell when you're ahead?

the market index funds are back to their 2007 peak this month.

Meaning...if we use your example instead of mine...if you invested $10,000 in 2007, this month...today, finally after five years...you now have $10,000.

Forgive me if that doesn't excite me.

-A good rate of return (8.34% avg since 1993)

Yes. If you happened to invest in 1993. What if you happened to invest in, say...1999? Or 2000? Go ahead and recompute your rate of return starting from those years and let us know what it is. I'll give you a hint: it's a negative number. And without actually doing the math, just from casually glancing at the chart I would guess that if you bought any time from 1997 to 2000, or 2006 to 2008...your return on investment today would probably also be less than 8.34% annually.

All stock market trades are gambling. Daytrading is gambling. Managed funds are gambling. Composites are gambling. Mutual funds are gambling. Choose your vehicle, call it what you will and whether it's you or someone else managing it, or a market-wide index with no human input...it's all gambling. It's just a matter of choosing risk vs reward, and deciding whether you want to have a personal hand in the results. You say you wouldn't play poker with a professional poker player...and I understand that completely. But the fact that you acknowledge that there are professional poker players tells me that you believe it's possible to play and win. If you don't want to play, if you're unwilling to accept the risks, if you're unwilling to take the time to learn to be a professional poker player yourself...that's fine. Don't play.  I'm not advocating that everyone should go rushing out and start daytrading. Andrew425 asked about it, and it happens to be something I've done, so I shared information on the topic. Like I pointed out a couple posts ago...I myself don't do it anymore. So please don't misunderstand and think I'm saying that it's some kind of magic money-making genie. You're correct when you say most people "underperform the market." I'll even be more blunt and say that most lose money. And if you press ctrl-f and do a search for  the text "lose" you'll see that I've pointed out several times that you can lose money doing it.

But what's the alternative you're offering?

Let's take your own numbers and see what they do for us:

A good rate of return (8.34% avg since 1993)

Ok. Let's pretend that crashes don't happen and you're guaranteed your 8.34% in a world of absolute perfect safety. Here's a compound interest calculator:

http://www.thecalculatorsite.com/finance/calculators/compoundinterestcalculator.php#.UF0K5Y1lTQs

Let's say you invest $100/month, every month, for ten years at 8.34%. Plug in the numbers, and this is what you get:



$19000 after ten years by investing $100/month. So...is that good? Well, I guess it's not bad. But if you invested $100/month for ten years...that's $12,000 you invested. Your total profit is $7000 over ten years.

That's not very exciting.

But...maybe that's not fair. We said you'd need about $10,000 to daytrade. So let's start investing your way with $10,000. And your 8.34% figure is based on a starting point in 1993. That was 19 years ago. So, let's say you invested $10,000 in 1993, and let's double our monthly investment, so we're putting in $200 every month...for 19 years.

This is what you get:



After 19 years you've roughly quadrupled your money. $160,000 minus your total investment of $45,000 means that after twenty years you've made $115,000 profit.

...is that...exciting? Because I'm not really feeling it. 115k over 20 years just doesn't seem very good to me. And, look at the chart at the top of this post and think about the fact that if instead of buying in in 1993 you'd bought in during 1999 or 2000, you would have not made that 8.34%, you've would have lost about a third of your money.. 2 years out of 19...and since we don't have the benefit of being able to magically know which years to buy in and which years to avoid...anyone over the past 19 years hearing the advice of buying into an index fund and "holding for the long term" would have about a 10% chance to have bought during those bad years, and would therefore have lost money today following your strategy.

10% to lose money over the long term. 90% for 8.34% profit.

I simplify. If you'd started during some of those 17 other years you'd have made more money, and some others you'd have made less. Either way...do you see how it's still gambling?

All stock trading is gambling. Indexes and mutual funds might be "more" safe. But they are not "safe." Like I said previously, the stock market is a game of last man out loses. No money is created. The source of rising stock values is the fact of people putting more money in. "Put your money in and keep it there" only works if other people also put their money in and keep it there. Maybe they will. But I have to question whether anyone who advocates this strategy really understands what the stock market is.

remember that at its heart the market is basically one big game of last man out loses. The primary moving force in stock markets is the action itself of buying and selling. If you put money into the market, you're increasing the value of something. If you pull money out, you're decreasing the value of something. There are millions of people doing this. And, the money everyone's investing is only actually usable after they've pulled it out. There's a very basic, fundamental concept here that really needs to be understood. The stock market is not a magic money-making genie. It's a form of gambling based on perceived value. If you buy  stock and it goes up, very frequently that change doesn't reflect any change in actual value of the stock. It simply means that more people want to buy it. Yes, sure...if a company performs well it's possible they might pay out greater dividends. But the value change in the stock is not really a reflection of that. More likely, people see that the company is performing well and therefore perceive it as being more valuable...leading them to buy its stock which creates a relative scarcity between buyers and sellers. More people want to buy it, fewer people want to sell it, so the price goes up. This is the primary force at work here. Perception. So long as you understand that, and you're willing to take the risks that come with playing what's basically a game...then sure, go for it. If you buy into the market, somebody is guaranteed to make money as a result. Just make sure it's you.

Understand the risks, and make informed choices.

[LordBucket]

Rich Dad Poor Dad by Robert Kiyosaki

Finally got around to torrenting and reading this. I liked it. Could have been about 40 pages shorter, but a lot of good perspective is offered.

For those who won't read it, let me share the following two thought experiments with you:


Let's say that I offered you a deal: You give me $2400, and I give you $100/month for the rest of your life.

Is that a good deal?

It's an investment that takes you two years to break even on, after which you make $100/month. If you think it's a good deal...if it's a deal that you'd actually want to do, and if I were to right now make you that offer...

Would you be able to hand me $2400?

Think about that. Windows of opportunity come, are open for a time, then close. Are you ready for them? If a good deal presented itself right now...would you be able to accept it?


Next thought experiment. Imagine that I were to offer you the three following deals:

1) You give me $1000 and then I give you $100 every month for 30 years.
2) You give me $1000 and I give you a pretty blue button you can wear on your shirt that says "I paid $1000!"
3) You give me $1000 and I give you a pretty blue button. You then give me another $100 every month. You can stop giving me the $100 any time you want, but as soon as you do you have to give the button back.

Two questions:
 * Which deal do you want?
 * If there are three different people who each regularly and habitually take deals 1, 2 and 3 whenever they have $1000 available...who among them will be rich? Who will have a lot of buttons but no money? And who will be poor?

I'll assume that most of you don't want deals #2 or #3. Ok. So then why are you making those deals in your real life all the time?

Think about it. Look around you. Look at your $1500 widescreen TV. Look at your $2000 gaming computer. Look at your fancy car. These are buttons. They might be pretty and maybe you enjoy them, but they don't produce for you. Now think about the first thought experiment: if you spend all your money on buttons, how will you ever be able to take opportunities when they're presented?

Now let's look at deal #3. I'm sure none of you thought that was a good deal. You give me $1000, and then you keep giving me an extra $100 every month. Why would you do that?

That's a good question. Why do you do that? That iphone you have? What's the monthly service charge? $50? You paid $200 for the privilege of giving me $50/month. Cable television? $50 for the box and $75/month? You're paying for buttons, but you don't even get to keep the buttons. It's the opposite of an investment. You're paying for the privilege of regularly giving away money. Even look at something larger, like a house. It's common to think of a house as an investment, but the majority of people never own their homes. They make a down payment, then spend the rest of their lives making monthly payments...refinancing and pulling money out every few years so that they constantly remain in debt. Or maybe they want the $1500 widescreen television and they don't have $1500. So they put it on a credit card and make payments. That's turning deal #2 into deal #3. They still have to pay for the button, but they're choosing to also pay a monthly interest fee on top of it. And now apparently according to a quick google search, the average US household has $17,000 in credit card debt and pays a little over $2000/yr in interest on that debt. But I bet they have lot of buttons.

Again, this is the opposite of an investment. It's paying for the privilege of giving away money. If you're always taking up deal #2 and buying buttons, and taking deal #3 and paying for the privilege of giving away your money...all while never taking deal #1, how can you possibly expect to become rich?

The point here is not to suggest that you throw away your cellphone and computer. Maybe it's worthwhile to you to have these things. But look at the abstract concept at work here. You instinctively knew that giving away a small amount of money to receive a larger amount of money over time was a more productive use for money than paying for buttons and paying for the privilege of paying more. And yet, look at your own personal spending habits. Which types of deals are you actually making in your day to day life? Maybe you want the car. Maybe you want the computer. Maybe you want satellite tv and unlimited text messaging.

But if you spend all your money on deals #2 and #3, and never have any money left for when a window of opportunity for deal #1 comes along, what will be the result?

[mainiac]

Well gee Lord Bucket, that there sure is a reason not to invest in a portfolio that's entirely tech stocks.  Funnily enough that matches my advice to diversify to the maximum possible extent to a t.  Putting all your money into a NASDAQ stock index is a horrible idea.  I didn't say to do it.  I said to put it into as broad an index as possible.  The fund I offered as an example is up 400% since before the stock market crash in 2001 you consider a bigger deal then the 2007 crash.  I also must make a confession.  I wrote that it average 8.3% since 1993 when I actually meant to write since 1997, i.e. right before the crash.  If the index had been incorporated earlier then the average would be higher naturally.

Sneer all you like at idea of taking five years to recover from a once in a century crises.  The average managed fund still has not recovered to 2007 levels.  The average daily trader is even further behind the game.  I'm not promising miracles, I'm just promising that the method that is efficient at providing the return on investment that one could reasonably expect.

I'm actually in a much better position then break even too.  I didn't invest all of my money in one lump sum in 2007.  I invested it as it came in both before 2007 and after 2007, more after then before.  So I've actually done pretty well for myself because I've reaped the upside as well as the downside.

I'm not promising a get rich quick scheme.  I'm promising a sensible investment.  You say not exciting.  Well I don't want excitement with my portfolio, I want a good investment.

And no the stock market is not a zero-sum game.  Stocks aren't just abstract bets, they are pieces of ownership in companies that have real products and services, real capital investments and other assets and derive value from those.  I am not saying that markets are perfectly efficient or even reasonably efficient here.  However it is incorrect to think that stocks are akin to a ponzi scheme where the last one out is a sucker.

[Skyrunner]

LB, do calm down. :/

My thoughts, mostly derived from a Business Intro course with a good teacher:

* Day trading—Don't, unless you have lots of experience. 
* Dividends—Good in theory, but not worth it.
* Stocks—Long term, tend to rise.

Investments are not actual gambling. There are people behind the numbers that do things. It's also why stock markets aren't zero-sum games. The sum keeps increasing, and companies do stuff that may increase or decrease their stock price.

Anyways, investment at heart is making money inaccessible for a chance at increasing it. Higher risk equals higher return on all investments. For bonds, another pair of factors are the maturation date of the bond and how much money is committed. 

Some investments in order of low to high risk:

Federal bonds, bank accounts, CDs
Municipal bonds
Corporate bonds (AAA~B)
Money market funds, mutual funds
Stocks (blue-chip)
Stocks (penny), junk bonds
Hedge funds, options

Hit-or-miss: Real estate

Also, don't invest in an actively managed fund. They take more money in exchange for attempting to "beat the market".

Another thing—diversify. Mix up safe investments, bonds, blue chip stocks, penny stocks, and maybe even a touch of currecy hedge.

[Skyrunner]

Double post.