Breaking Into Stocks

[gemini0610]

I am finally starting to take the stock and retirement thing serious. For a beginner, what is the best and expensive way to start buying stocks? I don't have a LOT of money, but would like to start somewhere.

 

[Brandon]

By not a lot of money, what do you really mean? 500? 1000? 5000?

If you are going to start trading, I wouldn't step foot into a brokers office without reading a couple of good books (trading is harder than you think) and not starting with less than $5000.

Don't even look at putting stocks on margin and always use stops.

 

[LyricB]

Maybe you should consider looking into mutual funds instead of buying individual stock if your money is tight and you don't have a lot of knowledge to begin with.

 

[gemini0610]

Hmm. Mutual Funds. I may look into that. I'm surprised that it would take about $5,000 to start investing in stocks. A co-worker of mine used to trade stocks on some online program every day, every few hours at work. He was actually pretty good at it and saw a decent profit daily. Not sure what website it was, but he told me he started with like $300 and built it up from there. Oh Well....Maybe I should just think about trying something else.

 

[LyricB]

Gemini, I know there are indeed ways to get started with lower amounts of money, but I think it depends on the time you have to dedicate to it and your savvy as to if you'll turn a profit.

 

[Brandon]

Think of trading as a business. You do not want to start undercapitalized! Use mutual funds until you break the 5-10K mark, then start trading in small amounts. You have to learn the market and how to trade. So the object for the first year or two is to lose as little money as possible.

 

[LyricB]

That's a good way fo looking at it, Brandon. The first year or so is a success if you don't lose money.

 

[Plumley]

I am finally starting to take the stock and retirement thing serious. For a beginner, what is the best and expensive way to start buying stocks? I don't have a LOT of money, but would like to start somewhere.

If you're employed full time, first see what your employer has to offer. There may be a program with automatic deductions for investment, a deferred compensation plan or to buy bonds. If you can set things up to have money taken from your paycheck before you even see it you have a relatively painless way of building resources.

You can buy stocks with a minimum investment at the Share Builder website. Read about it before making your decision, of course. Do a lot of reading about stocks, too, so you can make an informed decision.

It sounds like your friend may have been doing day trading. That's something for the skilled, knowledgeable, and fearless. I'd stay away from it if I couldn't afford to lose money.

 

[Soultrader]

Day trading requires at least 1-3 years of experience, pain, losing couple stakes, and frustration until you can start trading profitably. Trust me, I know. Ive been there.

If you are looking for someone to manage your money, make sure you do your research regarding mutual funds. If the professionals can only match the S&P 500, there is no point dumping your money in them. Take into account inflation also. No point risking money in stocks if your return is 3%. If you are really considering making money in the stock market, start with studying fundamentals.

Choose a timeframe between long and short. Day trading is for junkies like myself. Perhaps you ought to give swing trading a try?

 

[Brandon]

I personally think the longer the time frame the better off new traders are. I think swing trading is still a little bit to fast for trading newcomers. I would suggest that new traders start with position trading. I would also try and trade less volitile stocks until you get the hang of it. The more volitile the stock, the closer you have to watch it.

As always, use stop loss orders for all positions to cut your losses short.

 

[LyricB]

That's a really good idea to look into what an employer has to offer, just make sure not to put all your eggs into one basket like those unfortunate folks at Enron did.