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How to begin investing?

  1. Apr 7, 2012 #1
    I have no experience investing in stocks or otherwise. I'm 17 and it seems a good way to help control money and have something to look forward to later in life.
    Where to begin though?
     
  2. jcsd
  3. Apr 7, 2012 #2

    jtbell

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    Staff: Mentor

    Give it to me and I'll invest it for you for an annual fee of 2% of the balance, plus $15 for every buy/sell transaction I make. :wink:

    Seriously, a lot depends on the time frame in which you think you're going to need the money. If it's relatively short, e.g. saving for a car or a house, I'd put it in a broad-based bond mutual fund; if it's longer, e.g. for retirement, I'd put it in an index-based stock fund. Pick one of the major mutual-fund houses (Vanguard, Fidelity, T. Rowe Price, etc.). I use Price myself, mainly because my father used them for many years, but Vanguard and Fidelity are bigger.

    This is if you have a relatively small amount of money to invest (a few $1000). If you have a lot (a few $100,000) then you probably need better advice than you can get on Physics Forums.

    I would not recommend trading individual stocks unless you're sure you don't really need the money for a while. Even professional mutual-fund managers find it hard to beat the performance of the overall stock market (as represented by say, the S&P 500 index), over long periods.
     
    Last edited: Apr 7, 2012
  4. Apr 7, 2012 #3
    Yes, just start off with a mutual index fund. You likely don't have enough money for any personal stock broker to even care about. Also, if you don't have a lot to invest, the fees and transaction costs will eat up a lot of your money every time you want to buy and sell stock. Just go with Vanguard (which is owned by customers so they have your interests in mind first).
     
  5. Apr 7, 2012 #4

    turbo

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    Gold Member

    Do you have a parent that is currently investing? If so, they may have access to a financial adviser that could assess your risk-tolerance and long-term goals, and give you some guidance. I have a money-market account, IRA (rolled over from several 401Ks), and other accounts in an investment bank. As I set up those accounts, I got access to an adviser. I have his phone extension, and when I call, he always gets back to me within 30 minutes or less.

    If a parent has such access to a financial adviser, and (s)he knows you intend to stay in for the long haul and make regular contributions to your account, you may get the benefit of some decent guidance.

    BTW, you have gotten some good advice so far. I just wanted to add the caveat that you might be able to leverage a parent's investment accounts and get some professional advice. The "investment counselors" in this area are generally unreliable, and want to sell you investment vehicles that supply the best sales commissions to themselves. Paying them for "advice" is a waste of money, IMO.
     
  6. Apr 7, 2012 #5
    Hi, you should look into stocks, commodities and forex. The returns are much bigger than any other thing, but unlike any other thing, you'll have to learn for yourself how to trade, and it requires some work. Don't trust any broker to trade for you, the great majority of them are ignorant about how to trade properly, and are losers in the long term (if the majority of them were good, how could the markets be profitable?). I also found that most people who trade, not just brokers, don't have a clue on what they're doing. They rely on news, TV "expert analysts", unreliable and inadequate mathematical indicators, they don't backtest their method of trading...

    If you don't have much money to invest (<$1000), trading forex (which includes gold and silver, since they're currencies) on the daily/weekly timeframe may be the best for you, because the commissions are in %, not in fixed $'s like stocks and futures. Go to babypips.com, learn, and then you have to backtest the method of trading you develop for yourself, to see if you can be profitable.
     
    Last edited: Apr 7, 2012
  7. Apr 8, 2012 #6

    Thank you very much i got the links to the websites that you all recommended and it looks very promising. Also yes I have a grandparent active in the investment realm, i'm going to talk to him, i was just interested to see what i could lear on my own.
     
  8. Apr 8, 2012 #7

    chiro

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    Science Advisor

    If you are going to invest, my own opinion (I can't give investment advice legally so here is my disclaimer) would be to actually understand what you are investing in.

    This might seem like a stupid answer, but the fact is many people invest in stuff they do not really understand and subequently lose money.

    If you are investing in stocks and don't understand in the simplest terms how a business makes money at the very minimum, my opinion is to not invest. Very simple: it doesn't matter about anything else: if you don't understand how a business makes money then learn that first.

    In fact if you don't understand any investment scheme in the most basic language, don't invest.

    It is good that many businesses out there have very simple business plans and business models and one reason they have this is because they need to make money. If no-one understood the business model they probably wouldn't make money.

    Interest is very easy to understand: you have capital that someone else wants. Usually (but not always because of human behaviour), more risk translates into more interest earned but this is not always the case especially when some idiot fixes interest rates and makes speculators happy. Never the less interest is very easy to understand in terms of how it works at the basic level for a layman. The realities are often very grim (like what is happening now with near 0% rates thanks to the US central bank), but the idea itself is easy to digest.

    Stock's is not so easy. Many things going on here and looking at a brownian motion-like graph with stock data won't tell you everything. Crashes in both the market and in individual stocks will always keep happening because people are greedy in terms of with-holding information, cooking the books and also the fact that all the information that the market would need for instantaneous price discovery is just not there because if it was, then you wouldn't get this panic situations when people find out that Enron just became worthless when in reality it has been worthless for quite a long time. Also the truth is that some big players can execute trades that create huge impacts for price swings and the reflection of this has absolutely nothing to do with the intrinsic value of the company and hence the stock price. There are more but this should give you an idea.

    In my opinion if you give someone your money and let them do what you want with it then you are risking losing the lot if you're not careful. When you're investing my suggestion is to keep it simple and if something looks too good to be true, it probably is. There might be some good opportunities especially if you see an opportunity that is simple to understand but again I would be cautious because people always get screwed over simply because of the fact that people lie for one and that there will always be some kind of conflict of interest.

    If you want to retain your wealth study value and understand how things lose value and retain or increase in value.
     
  9. Apr 10, 2012 #8
    Just jump in...the water is warm, ..shark invested (or infested?), but warm nonetheless. You might lose your shirt in the process, but shirts are overrated, especially when you have a nice highway bridge to protect you from the elements.

    Technology makes it nearly impossible for the average joe to put money in the stock market and make a good buck. Even day traders who sacrifice a lot of time in front of multiple screens and spend lots of financial resources on day trading software can hardly make a buck against these huge institutional firms with their millions of dollars worth of rapid trading programs.

    I think investing in the stock market is only a good idea if you see no other way to put your money to good use.

    Very rare someone strikes it rich. Last time people were getting rich by droves were during the dot com bubble a decade ago.

    The world is truley becoming a place in which there is really no guarenteed short cut to success...unless you get really really lucky on some lottery numbers or some market maker falls asleep at the wheel on the otcbb. (otcbb is the over the counter stock exchange), you'll become familiar with it if you do decide to get into trading stock)...but again thats only if you get really lucky...you have a much better change getting eaten by shark.

    But you are talking about investing. Give it to a reputable brokerage that charges a nice commission and you'll be okay...as long as the economy doesn't collapse again....
     
  10. Apr 11, 2012 #9
    First, get a whole lot of money. Say a couple of million ... minimum. Investing in the various stock etc. markets is gambling (assuming you don't have access to inside info). So, if you can't afford to lose what you're thinking about investing, then you shouldn't invest it in the stock etc. markets. If you can, then have fun investing.
     
    Last edited: Apr 11, 2012
  11. Apr 11, 2012 #10
    P.S.

    An interesting company i'm invested in is Advanced Cell Technology. It's probably a good time to look into it. They are about to reverse split. You probably don't want to invest prior to the reverse split as a decline in price usually follows those types of capital restructurings, but you may want to look into investing right after the split - as there are lots of institutional investors lining up to buy stock in ACT (Advanced Cell Technology). If you recall, ACT is the company behind the cloning of Dolly the Sheep about 15 years ago. A lot of under-the-radar progress has been going on with ACT since then. ACT is still in research and developemental stages, but is getting very close to bringing treatments to the clinic. The sky is the limit with this one - and this is the only company i've come across that I can speak highly of. They are going to be the first official FDA approved company to treat and cure many forms of blindness. They are also going to be the first FDA approved company to be able to create and supply unlimited amounts of blood (effectively rendering blood banks, blood transfusions, and relying on donations obsolete.) The military is very interested in the progress of this technology. There are also other programs that ACT is working on. Just look them up. So if feel like you really want to invest in the stock market, that company would be my only suggestion.

    Good luck.
     
    Last edited: Apr 11, 2012
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