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[3man75]

So i want to start investing but i don't know HOW to start exactly. One banker told me about sharebuilder.com {{https://www.sharebuilder.com/sharebuilder/default.aspx}} an i was wondering what advice i could get from the individuals here about investing. I'm looking to have good money being made so i can retire nicely.

I'm 19 and very young i know but i really want to dip my toes into this.

[martinuzz]

http://en.wikipedia.org/wiki/High-frequency_trading   <<<<< should be illegal, but isn't


Just so you know, stock trading is one big farce. Stock prices can be influenced by some geeks repeatedly trading on insignificantly small margins, with expensive computers.

That being said, the best things to invest in IMO, would be weapons, clean drinking water, and coffins / body bags.

I'm looking to have good money being made so i can retire nicely.

Do you think it is ethical, to get rich while sitting on your butt?

[ChairmanPoo]

Spoiler: How to Invest (click to show/hide)

[David Holmes]

That comic is actually a fairly accurate representation of how laymen approach the stock market.

Buy an S&P 500 index fund or total stock market index fund.  Keep it for the very long term.  That's pretty much the only good way for ordinary people to invest in the stock market without having some expert knowledge in a particular industry.  Stock prices are dominated by institutional investors and analysts who know a million times more than you do about any particular stock and ordinary people beating the market by buying individual stocks is almost always the result of pure chance.

Be aware that markets fluctuate wildly in the short term but tend to go up reliably in the very long term (with some exceptions).  That means in the short term, things will happen like losing a third of your money in just a week will happen.  If you don't have the stomach to handle that without tilting, or if you think you might need any of the money you're investing within five years, then don't buy stocks.

Don't by managed (non-index) mutual funds or pay any money to any sort of stock advisor.  Their results once fees are considered are consistently worse than the stock market as a whole.

[Jimmy]

First, define why you want to invest in the stock market.

"Get Rich Quick" isn't an option. Unless you have some insider trading information that will most likely see you going to prison, you're not going to make large amounts of money using the stock market. What you can get is a slightly higher return on average compared to bank interest, with some nice tax deductibles as well.

Second, understand that investing involves risk.

Buying shares essentially means you're investing into a business. To use a completely inaccurate but useful illustration, assume you're buying stocks in an underwear company. You're giving this company your money so they can pay their bills, buy their raw materials, hire staff and make their product to sell. Assuming their product sells well, part of their profits belong to you, since you own a 'share' of it. On the other hand, people might suddenly decide wearing underwear is unfashionable, meaning their product doesn't sell and you have no profits to share in. It's the risk you take.

Third, diversify your portfolio.

Investment risk is reduced by buying small amounts of various things, from different types of businesses to foreign currency exchange rates to real estate and so forth. This also reduces your chances of striking it rich by putting all your eggs in one basket, but it's the safest way you're going to get a return on your investment if one of your investments turns up a dud. With a decent spread you can safely allow the money you've invested to grow itself into bigger numbers. Compounding your returns works just like compound interest on a credit card, but in reverse. Investing your profits back into other fields will result in successively larger returns.

Fourth, research the advantages to having stocks.

Depending on your local tax laws, investment in the stock market can have additional benefits for the purpose of tax you pay to the government, as I mentioned earlier. Do your own research to find out what is best for you to claim. But remember it also makes filling in your tax return a lot more complicated each year, and you want to do it right or you're going to have a lot of pain later when the government catches you.

A few final thoughts to consider.

Don't trust anyone that tells you you're going to get rich quick or make lots of money. Scammers prey on people's Hollywood perception of the stock market, when really it's a slightly better return than bank interest for moderately more work.

Unless you are already a millionaire, you won't be quitting your day job. Returns from the stock market don't work like that. Assume you'll get somewhere between 2% to 6% return p.a. with a heavily diversified portfolio after accounting for inflation. Growth of up to 10% isn't impossible but don't expect much higher.

Remember that ultimately you're investing into a business and getting a small amount of the profits in return. If you really want to make money, you'd work towards getting the skills and finances to start your own business instead. That's where the real money will come in, when you're using your own time, skills and energy to turn a profit for yourself, not just skimming off other people's work.

[3man75]

First, define why you want to invest in the stock market.

"Get Rich Quick" isn't an option. Unless you have some insider trading information that will most likely see you going to prison, you're not going to make large amounts of money using the stock market. What you can get is a slightly higher return on average compared to bank interest, with some nice tax deductibles as well.

Second, understand that investing involves risk.

Buying shares essentially means you're investing into a business. To use a completely inaccurate but useful illustration, assume you're buying stocks in an underwear company. You're giving this company your money so they can pay their bills, buy their raw materials, hire staff and make their product to sell. Assuming their product sells well, part of their profits belong to you, since you own a 'share' of it. On the other hand, people might suddenly decide wearing underwear is unfashionable, meaning their product doesn't sell and you have no profits to share in. It's the risk you take.

Third, diversify your portfolio.

Investment risk is reduced by buying small amounts of various things, from different types of businesses to foreign currency exchange rates to real estate and so forth. This also reduces your chances of striking it rich by putting all your eggs in one basket, but it's the safest way you're going to get a return on your investment if one of your investments turns up a dud. With a decent spread you can safely allow the money you've invested to grow itself into bigger numbers. Compounding your returns works just like compound interest on a credit card, but in reverse. Investing your profits back into other fields will result in successively larger returns.

Fourth, research the advantages to having stocks.

Depending on your local tax laws, investment in the stock market can have additional benefits for the purpose of tax you pay to the government, as I mentioned earlier. Do your own research to find out what is best for you to claim. But remember it also makes filling in your tax return a lot more complicated each year, and you want to do it right or you're going to have a lot of pain later when the government catches you.

A few final thoughts to consider.

Don't trust anyone that tells you you're going to get rich quick or make lots of money. Scammers prey on people's Hollywood perception of the stock market, when really it's a slightly better return than bank interest for moderately more work.

Unless you are already a millionaire, you won't be quitting your day job. Returns from the stock market don't work like that. Assume you'll get somewhere between 2% to 6% return p.a. with a heavily diversified portfolio.

Remember that ultimately you're investing into a business and getting a small amount of the profits in return. If you really want to make money, you'd work towards getting the skills and finances to start your own business instead. That's where the real money will come in, when you're using your own time, skills and energy to turn a profit for yourself, not just skimming off other people's work.

That comic is actually a fairly accurate representation of how laymen approach the stock market.

Buy an S&P 500 index fund or total stock market index fund.  Keep it for the very long term.  That's pretty much the only good way for ordinary people to invest in the stock market without having some expert knowledge in a particular industry.  Stock prices are dominated by institutional investors and analysts who know a million times more than you do about any particular stock and ordinary people beating the market by buying individual stocks is almost always the result of pure chance.

Be aware that markets fluctuate wildly in the short term but tend to go up reliably in the very long term (with some exceptions).  That means in the short term, things will happen like losing a third of your money in just a week will happen.  If you don't have the stomach to handle that without tilting, or if you think you might need any of the money you're investing within five years, then don't buy stocks.

Don't by managed (non-index) mutual funds or pay any money to any sort of stock advisor.  Their results once fees are considered are consistently worse than the stock market as a whole.

Thanks for the advice one last thing: What's your opinion on dividends? I understand it's when the company pays you for having stock in their company. Thoughts?

[Jimmy]

Dividends are nice but they're not going to pay your bills. Probably not even going to give you a tank of gas each month. Essentially the company is giving shareholders the profits from that year based on how much share they have in the company. Some argue this means the business isn't reinvesting into growth, but usually a dividend paying company isn't hurting for profits.

Again, if you have a diversified portfolio, any dividends you get will be small in size and should be recycled immediately into other investments. They're not income, they're interest that should be compounded back into your portfolio to equal bigger returns years from now. Also remember that a lot of countries tax dividends, so you're losing part of the return to the government.

If you want to live an easy life, reduce your expenses to bare minimum, save and invest as much as possible, use your skills and savings to create your own wealth in the form of a business of your own, then sell that business when you can have two or three million in savings after it's sold. With a flat 4% interest on that sort of nest-egg, you can retire on $80K to $120K per year pre-tax, though you'll want to ensure you're recycling enough interest to beat inflation.

[BigD145]

You'll see a reliable uptick of money by just putting x dollars in a local credit union every paycheck. Most will have some minimum dollar amount before paying dividends or interest. Stocks are just gambling if you're not on the floor at a stock market or sitting on the board of directors at a company. Paying a middle man cuts into any profit you might see. Being that middleman is a hefty paycheck. You just have to like fleecing people.

[acetech09]

Spoiler: Tl;Dr Using $400 in birthday gifts and savings from six years ago, I've made about $15k with four share actions. Know the industry & make long term investments.
(click to show/hide)

The only monetary/stock investments I have made are finding promising startups, and investing in them when shares are cheap.

About six years ago I requested everyone in my family help me acquire as many shares of Apple stock as possible, when they were $80 a pop. I really just liked the idea of having shares, I didn't really know what I was doing. I sold them about a year ago for $600 ea.

I then turned that money around and (silly me) invested solely in TSLA. Bought shares at $29, just sold for $200. Thank god that worked out.

Not sure where I'm going to go next. This is basically my retirement savings fund. Once I hit $100k I'l likely drop half of it into inflation-proof assets, because that shit's coming fast.

[mainiac]

You picked a stock and got lucky.  That doesn't mean picking stocks is a good plan, this is just selection bias in action.

Also, for the love of god, don't put your retirement assets into inflation indexed securities, the people saying we are about to have runaway inflation are the same ones who predicted it would arrive years ago.  While they've been making this prediction, inflation has been at a 40 year low.  Do like David Holmes said and put your long term investment money into a broad stock index and forget about it.  I use Vanguard myself.  If you feel daring you can try real estate indexes.  If you are going to retire in the next 10 years shift some of your money into bonds but only what you need short term.

The stock market is like a casino in the sense that you can win but the odds are clearly against you.  In a casino you just need to look around and see the giant building and realize that building is paid for by people like you losing money.  In a stock market you just need to look around and see all the rich schmucks in Wall street who got rich fleecing people who thought they knew stocks.  It's no more impossible to get lucky with stocks then it is to get lucky and beat the world's best poker player with a bunch of lucky hands.  But the odds are against you and the most active amateur traders end up losing money on average even in a rising market.

[acetech09]

You picked a stock and got lucky.  That doesn't mean picking stocks is a good plan, this is just selection bias in action.

Aye. Although it's quite unreasonable to presume that stock success is random, my point wasn't trying to claim this is a good method of investing. Quite the contrary. I'm doing it 'wrong'* yet still making money from it. There are a bajillion ways of investing and storing money. Any method can be effective, so if you're going to do it, put it wherever you're most comfortable and accessible, not where you hear somebody will say you have the best return.

* I doubt many investors visited Tesla's production facility in Livermore to determine sustainability before buying shares. I'm not investing in the 'stock market', per se, I'm investing in the success of that particular promising business.

[Levi]

Index funds are probably the easiest and most reliable.

Everybody has an opinion on how to invest in stocks, so here is my amateur style.   

I like to buy things that have a higher value per share(essentially, the value of everything the company owns/owes divided by the number of shares on the market) than the actual stock price.  The theory being that the stock price is undervalued and will eventually correct.  I also like to make sure its EPS (earnings per share) is positive so that I know that the value will keep going up(hopefully), and it doesn't have too high of a debt load(which bit my ass on one of my choices). 

[CaptainMcClellan]

I don't actually invest and my method is probably really bloody stupid, but I'd like to invest in stocks that are dropping but inside a decently relevant industry and wait for them to rebound. This is the single riskiest strategy I can think of, so don't do it unless you have money to throw away.

[Comrade P.]

So, was it just me who read the title and thought about Irish Republican Army (IRA) and investing in terrorism?

[weenog]

You need to educate yourself. Stock picking is not the gamble people make it out to be.  Stock picking isn't rocket science either; the people who profit from your ignorance just prefer that you think it is.

Check out Investing for Beginners and The Motley Fool.  They're good places to start your education, but bad places to stop.  However, you'll find things through them that you want to investigate on your own, and wind up self-educating.

I think it's important to make a distinction between traders and investors.  Traders want to buy cheap and sell expensive, flipping stocks left and right for a quick profit.  Investors buy stocks and hold them for the long term, they want to own companies and reap the benefits.  I prefer to behave as an investor rather than a trader, and so far it's worked for me.

To invest for the long term, look for solid companies in promising fields, ones you expect to be around for a good long while yet, and that you'd like to own a piece of.  Check out their data sheets and find out about their expenses, their income, payouts to shareholders, really get to know how profitable and sustainable they are.  Ask yourself where this company is likely to be in ten, twenty, thirty or more years, and do your homework to justify the answers, don't just go with your gut.  If you still like what you see, enough to commit to it, pick up some of the stock and hang onto it.  To paraphrase Warren Buffett, one of the greatest investors of all time, buy stock like you expect the market to close right afterward, and stay closed for five years.  It has happened before.

Dividends aren't everything, but I do love dividends.  That's not some intangible thing like stock price going up today (but maybe down before you get around to selling it), it's real money in your pocket, money that you can do something with, not just numbers on paper.  When you're looking at the numbers for a company you're researching, investigate how much of their money they're paying out to shareholders in dividends.  You don't want an extremely high payout, because that drains the company coffers and is unsustainable.  A dividend payout ratio that looks like it could last for decades and even has room to grow, without bankrupting the company, is preferable.

I always reinvest my dividends into more shares, (ShareBuilder will do it for me automatically), so that even when I can't afford to put money from my job into stocks, I'm always growing my portfolio, slowly but surely.  It also takes the guesswork out of timing the stock market, by ignoring timing completely.  If the stock price is up when I get my quarterly payout, I buy a little; if the price is down when I get my payout, I buy more... whatever the payout can afford at the time.  See here for a simple explanation of DRiP investing.

Note that diversification isn't just buying different things, it's buying different kinds of things, in different sectors, so that an unforeseen disaster that takes out one or a few isn't likely to hit all of them.  Having shares in Target, Walmart, Costco, and Kmart isn't diversification, they're all retail stores and anything that hits the retail sector is going to hit all of them.  Having shares in Walmart and Amgen would ironically be more diverse despite only being half as many companies, as one is retail and one is biotechnology, and an event that hurts one isn't likely to have much impact on the other.  To get really diverse you should also look into bonds, income generating real estate and other sources.

Good for you thinking about this early.  Time is a huge factor in growing your wealth with compounding returns.  Good luck to you.