how do i invest?

OGIONIK - My first suggestion is that if you cannot answer the questions that you posed, stay the hell away from the stock market!

Stocks are shares in a company. Their value used to be related with how well the company was doing. The price of stocks would rise and fall according to many factors, including news of the company, ratings by financial gurus, etc.

Over these last few years, I have observed a tremendous change in the way that stocks behave. A lot of it has to do with people buying on the internet, and the emergence of many day traders. In many ways, the stock market is as much a gamble as any Las Vegas casino.

I remember when I first became involved in the market. I had very conservative stocks, and the changes in price from one day to another were very small. Now the market is like a roller coaster.

If a market "crashes", it means that overall, the prices of many stocks have fallen sharply.

I'll be back later but my first suggestion is something fairly easy and somewhat safe, which won't give you a long-term commitment. One suggestion is a Certificate of Deposit, or CD. You can get them for fairly short-term investments, something like 5 years. There is a penalty for early withdrawal so don't put in more than you can afford to have socked away for a while. Ask your bank; they sell 'em.

Another idea is a mutual fund (another thing you can get through a bank or your employer's retirement plan, if there is one). Mutual funds are a collection of a bunch of funds, depending on your tolerance for risk. Since you're very young (as I recall), your tolerance for risk can be higher. Again, don't toss in a lot of money right now because you're just feeling things out. Not that I don't think saving and investing are important -- I think they're crucial -- but you need to get some educating first. If you go with a mutual fund, again, see if you can do something shorter term. And ask whoever you buy the fund from what the ticker symbols (that's the term) are for the mix of funds in the overall mutual fund. E. g. AIG is American International Group, etc. And Google those symbols and also see about going to www.fool.com and following them there.

That's the Motley Fool, by the way; they have very good information.

Also -- whatever you invest in -- read about it. A lot. Know what you're buying and what is happening with the company. What if the company is being bought? Or the CEO is stepping down? Or the company is filing for bankruptcy? Or something crucial didn't come through (e. g. for McDonald's it's probably a big problem if the potato harvest is bad because of all the french fries they sell)? Or they turn out something that's a best seller (that's what happened with Pfizer when they got permission to sell Viagra)? Or the company lands some big contract?

You don't need to know every single company out there, just a few that you have your money in or think you want to put your money in. My husband and I follow about 30 or so stocks, funds and companies. We don't really go nuts looking for news about them; usually we look about once a week and do a more thorough check about once a month or quarter. Plus if any sort of big news story comes down the pike, we check it out. I am more into it than he is but he will tear out articles about some of our bigger holdings and earmark them for me to read.

PS Stock market crashes are rare these days (at least in the US), mainly because the market now has a lot more safeguards than it did in 1929. It's not impossible but it would have to be something truly dire, probably coupled with some sort of major drought, crop failure or weather event. While the market was down after JFK was assassinated, after Pearl Harbor and after 9/11, it didn't crash any of those times. Hurricane Katrina didn't cause a crash, either.

PPS There's also more than one market. There's the NY Stock Exchange, NASDAQ, the Chicago Board of Trade and others. When most people say the stock market, they mean the NYSE but it's not the only game in town.

Ask questions, I'll try to answer them. I'm in the industry but only on the IT end of things, but there are people I can ask so long as it doesn't get too specific, e. g. no one is going to advise on your specific needs as that could jeopardize their trading licenses. But general questions are fine.

OG...you've alluded in other threads that you are 15...seriously, is that your age?

I ask because any teen who is earning income can open a Roth IRA.

More on that in a moment.

You can buy individual stocks, but that is quite risky. There are however, accounts called "Index Funds". That is where a set amount of money is taken out of your checking account each month by an investment firm, and they purchase with your money a wide array of stocks (actually small percentages of numbers of shares, which accumulate) The goal of an Index Fund is to at least match the average of what the rest of the market is doing.

Generally, this is a safer way to invest, as even though some stocks will decrease, others will increase.

People get really jazzed up about wanting to beat the market. If over the course of your working years you do as well as the average of the stock market, you will be doing very well indeed.

IRA stands for "Individual Retirement Account"

A "Traditional IRA" is one where you invest a set amount of money each month, like in an Index Fund above. The money you put in it each year is not taxable, so you pay a little less in taxes each year.

A really better alternative for someone young who is commited to setting aside money each month is a "Roth IRA" In a Roth IRA, the money you put aside each month is taxed, BUT, and this is a big BUT, ALL money your savings earned over the years is completely tax free!!

Below is a link to a calculator where you can put in your age, amounts you're planning on saving, and for how long and at what rate.

Roth IRA Calculator

You'll see that it really adds up.

Some investment firms will start an account for you with just a few hundred dollars, and with putting in as little as $50 a month. Of course, as your salary increases, you'll want to put in more and more until you meet the maximum.


When you become employed, hopefully the company you work for will have a Matching 401K

A 401K is an investment account your employee handles. You can sign up and have them take a percentage of your pay automatically and put it in this account...it can be as little as 1%, upper limits will depend on the company. 401K's are not included in your taxable income.
When a company "matches" it's 401K, that means free money for you.

Let's say the company says they will give you a 50% match up to 4% of your investment.

That means that if you invest up to 4%, they will add in 50% of that amount for you.....anything you contribute over 4% won't be matched, but it's still the best way for most working people to prepare for their retirement. You should always contribute enough to your 401K to at least get their match

Example, let's say you make $400 a week and put 4% in the 401K....each week you contribute $16, they contribute $8, a total of $24 a week.

These are all VERY basic investing ideas, but it's best to get the basics down.

You're not a retard....you're asking a very important question.

I guess I scared OGIONIK off.

Well, the whole prospect can be scary -- you start to contemplate the future and getting older.

In the last few days, the markets, all over the world, have been in the crapper. That is because of the sub-prime mortgage market. Mortgages had been given to less than credit worthy folks, and now there is an influx of foreclosures. In addition, since the real estate market has cooled, some people are now in a position where their mortgages are higher than their homes are worth.

I have been hearing rumblings, that Countrywide, the largest mortgage lender in the US, may be approaching bankruptcy, because of the way that the mortgage market is behaving:

http://www.theage.com.au/news/business/meltdown-extends-nationwide-to-countrywide/2007/08/16/1186857681988.html

IMO, for the present, if you are a newbie investor, this is not a good time to go into the stock market. Stick with safe stuff, like CDs.

au contraire, I do believe this is an excellent time to get into the market. I would, however, do careful research on where I put my money. For the past 4 days I have been doing nothing but buying.

If you don't know what you're doing then buy:

CDs
US bonds
Invest in a money market account
Fixed rate annuities
Savings Account
Bond index funds

Yeah dys, there are a lot of bargains to be had.......................if you know what you are doing. I get the distinct impression that OGIONIK is a babe in the woods when it comes to the stock market. He could make a bundle, and also lose his shirt.

The problem is that no one really knows what is going to happen. I am listening to all the financial gurus. Apparently this is a minor panic going on in the stock market because of the sub-prime mortgage lenders. The panic has little to do with the qualities of the companies involved. It is predominantly a psychological reaction to the uncertainty in the market. It could cause a general recession, or then again it could blow over. Nobody really knows yet. So I plan just to sit tight right now.

Sit tight.

Yes I Phoenix I do hear what you are saying however if I might add a comment; many major investors are ineed coming up short because of the sub-prime mess, then need to sell to cover their losses and what they sell (because they can) are there value holdings which, in turn devalue those same value holdings making them an excellent opportunity for buyers.
hope I'm making sense here.

dys- You may just have done the right thing:


http://www.breitbart.com/article.php?id=2007-08-17_D8R2PP9O0&show_article=1&cat=breaking

Get ready for a fast and furious ride today!

Those, who're buying today are doing so with the anticipation that shares of the stock purchased will increase in value with time.

I doubt that in the near future, the prices will increase in time. I suspect that we won't see major increases in stock prices before 1/1/08.

While the big money managers should buy now, the small investors should just sit tight and wait.

Its my guess that ogoink doesnt have a shirt to lose.

Bumpy ride down here too, but speed bumps only.

Buy Aussie mining stocks.

Right dadpad....that's why I was trying to keep it really basic for him.

Some of this other stuff will do nothing but intimadate him and keep him thinking he's retarded, when he's not.

He may not even have enough money to open a CD right now.

OGIONIK, come back!!!

In the first 2-3 min of trading today, you could easily see the day traders at work. Up $3, down $2.50, up $2...etc.

I've had savings accounts for my kids since birth and plan on holding that money until they are 18. This is mostly gift money. Once their balances reached an amount that I could purchase a CD I did so. This being because CD's earn a higher interest rate than a savings account. And why not since the money is just sitting there.
This may or may not be an option for you too. Some institutions, such as a credit union, offer $500.00 CD's in as little as 3 month deposits. I chose 5 year CD's based on their ages and when the money will be available to them.