What Is The Best Way To Start Investing In Stocks Without Thousands To Invest?
November 4, 2009 by admin
Filed under Ikofx | Forex Stories
Should I make use of a attorney or try to do it on my own? Any info would be helpful.
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To give you specific advice on what to invest in based upon the 2 sentences that you provided would be irresponsible so I will speak in general. First of all, if you have any high interest unsecured debt like credit cards I would recommend paying that off. That can save you 15 - 20% there in interest. (A penny saved is a penny earned). If your unsecured debt is taken care of my next recommendation would be to create an emergency fund equal to 4 months of your fixed expenses. (mortgage, rent, car payment, food expense, etc) This emergency fund should be put in something that has no risk to it such as a savings account, money market account or extremely short term CD’s. Check http://www.bankrate.com for the best available rates. If you have access to a credit union you may find good rates there as well. If debt and your emergency fund are taken care of I would then recommend that you are maxing out your company retirement plan if that is available to you. If that is not an option, a Roth Ira would be a great option as well. I would recommend index mutual funds as the investment within the Roth IRA. If you have accomplished all the things that I’ve outlined and you still have money left, I would recommend splitting up the funds in a well diversified portfolio of mutual funds with index funds as the base of the portfolio.
I realize my recommendations are not as sexy as opening an internet business or investing in gold but they are based on my 15 years experience as a financial advisor. Good luck to you. I hope this was helpful.
I would suggest starting with a mutual fund, which doesn’t require tons of money. Most are somewhere between $500 and $1500.
Since mutual funds invest in a variety of stocks, you’ll have the benefit of buying into a basket of stocks managed by a professional portfolio manager.
The hardest part will be picking a fund. You can check out Morningstar Reports, which rates the various funds out there. It’s available online or at your local library.
It describes the fund’s purpose, gives performance history, and rates it so you have an idea if they like the fund or not. Some funds invest in US stocks, others foreign, some in small companies, others large, so you’ve got a wide selection from which to choose.
Do it on your own.
Some companies let you buy as little as 1 share with no commission.
I’d recommend Sharebuilder - there’s no minimum investment. If you get a company with DRIP (direct reinvestment plans) you can reinvest through the company without going through a broker again, saving a lot on fees. If you’re not experienced, I’d go with larger, stable companies at first. Use the DRIP account and invest a fixed amount regularly. Also, reinvest your dividends…you’ll build wealth slowly but surely.
Have a look through the articles & How-to guides here:http://www.fool.com/investing.htm
Among the things it will tell you are:
- “Tending to your finances isn’t as mysterious and complex as you’ve been led to believe. The professional Wise men on Wall Street, however, would like you to keep thinking it’s too difficult for you to do yourself. That way you’ll entrust your hard-earned dollars to them, so that they can generate fat commissions for themselves.
Sure, there are some good brokers out there worth the money they charge. But know that most financial advisors aren’t paid by how well they manage your investments, but by how often they get you to trade in and out of stocks. Their main job isn’t money management. It’s sales. And what do you get in return? Sub-par performance and lower returns.”http://www.fool.com/school/13steps/13ste…
- Conventional wisdom #3: Trust the Wall Street brokerage firms. They’re here to help you navigate the labyrinthine world of investing.
Foolish response: Well, they spend hundreds of millions a year on TV commercials insisting that they can help us, but… ummm… don’t count on it. First off, it’s not in Wall Street’s best interests to teach you. As long as you’re in the dark about investing, you’ll have to give your money over to Wall Street to manage it for you. That way, Wall Street professionals can charge you (often via hidden fees) to manage your money. The entire industry is built on your not figuring out how to manage your money. And, happily, that’s exactly what your fellow Fools are here to help you do.http://www.fool.com/school/13steps/13ste…
- Over time, because of their costs, approximately 80% of mutual funds will underperform the stock market’s returns. http://www.fool.com/school/basics/basics…
I’d suggest using http://www.SHAREBUILDER.com and try to do things on your own…… but learn all you can about investing first from Fool.com (which I’ve already shown you) and also from http://www.investopedia.com perhaps also find a Fantasy StockMarket game to practise with first before using your own, real money.
A few tips:
Invest in “penny stocks”, stocks that trade at less than $3, rather than the more pricey stocks, at least at the beginning of your trading career.
Do a search for an investment company that will let you have a free practice account so you can try investing without the risk for a while to get the hang of it.
A broker isn’t a bad idea, but avoid those online companies that promise to teach you how to “make thousands or even millions” as a day trader. They are making thousands or even millions by charging people a small fortune for information on how to read charts.
There are many websites that give FREE introductory information on investing. Have a look, but don’t pay to join mailing lists or other membership services–there’s no need to pay for information that is available for free. Start with http://beginnersinvest.about.com/. The multi-part Investing Lessons on that page are very helpful: http://beginnersinvest.about.com/cs/inve… as is the series called Learning to Invest.
Have a look at books on the subject. The “Dummes” series has a couple of good books on investing in stocks. There are also books on investing in penny stocks, online trading, and related topics.
Best wishes!
Go to an adviser. My husband works for a securities company and most investing is so complicated and requires so much time and commitment, its just worth it to contact someone who does it for a living. Good luck.