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First Time Investing
AJAlkaline40
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So, I'm a young guy, 18 years old, graduating and starting college this year, and I have a very tiny bit of extra money saved up from working at a grocery store this year. I'm really interested in buying some stocks, but I have a few questions. First off, how much money should you start off with if you want to set up an investment account? I've been looking into starting up a Scott Trade account, and their minimum is $500, which is pretty much exactly what I have to blow. Is it smart to start trading with this little money? Should I wait to accumulate a lot more before beginning? It honestly wouldn't be too disastrous for me if I lost a good portion of it, but would it be smarter to just put it in a C.D. or something for now?
Also, I've been looking into buying stocks primarily from companies in the video game market, like Activision-Blizzard, EA, etc. The advantage I see in this is that I know this industry much better than any other, and I know when big-ticket products are going to be released (like SCII and Spore) so I could better predict this market. Is the video game market a good thing to trade in? Would it be better for me to pull from a lot of other industries, even if I don't know them as well? Or would it be better for me to just invest in very low-risk stocks right off the bat?
Any input would be extremely appreciated.
Also, I've been looking into buying stocks primarily from companies in the video game market, like Activision-Blizzard, EA, etc. The advantage I see in this is that I know this industry much better than any other, and I know when big-ticket products are going to be released (like SCII and Spore) so I could better predict this market. Is the video game market a good thing to trade in? Would it be better for me to pull from a lot of other industries, even if I don't know them as well? Or would it be better for me to just invest in very low-risk stocks right off the bat?
Any input would be extremely appreciated.
AJAlkaline40 on
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I don't think it's normally recommended to try and make money off of buying and selling individual stocks yourself. The people who succeed at that have a huge amount of capital to sink into it. I think I recall reading that you can, in fact, pick stocks at random and do only slightly worse than an experienced educated trader.
I distribute my contributions to my 401k basically following fidelity's example for "pretty sorta high risk" distributing, which works well over long periods of time(good bye money until 69.5 years old
No, you shouldn't buy individual stocks. You won't beat the market, and you certainly won't predict the market. The basic rule is that if you're asking for advice on what individual stocks to buy, you shouldn't buy individual stocks. It's like that poker rule- if you look around the table wondering who the sucker is, then you're the sucker.
Your knowledge of the video game industry is, quite honestly, completely and totally worthless when it comes to buying stocks. The information on game releases and whatever is known to everybody, and it's built into the stock price. Unless you spend hours going over financial statements and earnings reports, which I'm guessing you don't, you shouldn't buy individual stocks. And even then, you aren't likely to beat a portfolio of random stocks, like BlochWave pointed out. Just a fact of stocks.
My 2 cents? Put your $500 in a CD or savings account like ING or WaMu online until you save more, then buy a mutual fund. Once you do, come back and we'll be glad to help. Kudos on taking some efforts to be financially responsible; you're leagues ahead of most 18 year olds.
While $500 is too little to invest in most mutual funds, it's enough to invest in an Exchange Traded Fund.
Most people who make money through stocks do it with long term investments rather than by trading a lot, which sounds like you want to do with video game stocks.
I'm not saying it's impossible... but I got hit pretty hard when I jumped in after watching stocks for years and thinking I had figured it out.
Also, it helps to realize that stocks in general aren't really going to be a good short-term thing. I buy what I can and ride it out, selling what I need to when I need it. It doesn't do you any good to play at day-trading, and that will usually end up getting you broker than hell, plus who wants to pay those 'service' fees for tiny transactions (and yes, sorry, but 500$ is small potatoes in the stock world).
So, my successes has come through three steps.
1)Buy on Bad news (Reasonable things though, not "Hey we're going bankrupt!")
2)Buy stocks that pay dividends!
3)Stick with it for the long haul!
I don't disagree, but I'm curious. You're basically only saying "buy large market cap stocks, particularly so-called blue chips" since those are stocks that are both always around and pay regular dividends, as you require. GE or IBM for example. But that's not really diversified; there are lots of medium/small cap stocks and large cap stocks in other sectors that you aren't buying.
I'm sure your method works fine, it just seems a little conservative. It's kind of like why people don't buy the S&P500 index as much anymore but rather but a total stock market index fund. Compare VTSMX and VFINX in google finance or something. They're similar, but the total stock market outperforms by a small amount. I'm no financial expert or anything, though, I just have read a few books, so I certainly could be missing something big here.
Where does one find this sort of thing?
Many mutual fund companies have mutual funds that are geared for retirement in a certain number of years. You're not going to find a fund that averages a 20% return every year for 40 years. Mad Hatter's math or expectations of performance are way off.
Probably not.
And you should purchase companies you think will provide decent returns after ten years. If you invest, do it for the long run. Dropping into google to make a quick buck is about the dumbest thing you can do, but people do it.
I just did a financial valuation on wrigley and hot damn is that thing overvalued right now...people who had the stock before the mars buyout must be happy as shit.
Nope. You'll spend it all on trading fees. I believe several thousand is the minimum for play money that has any chance of not being whittled down to nothing by fees.
If you really want to buy a few stocks and see what happens, go for it. $500 isn't very much to invest in stocks and trading fees are going to take their toll, but if you're willing to accept this go ahead and buy a few stocks.
The odds of making money really depend on what stocks you're investing in. If you're investing in IPOs or penny stocks you're a lot more likely to lose money than if you invest in large and consistently profitable companies.
If it is money you've set aside and can afford to completely lose, then go ahead. In that sense it's not much different than a casino; don't bet what you can't spare. For $500, though, transaction fees will destroy your gains. If you only buy a single company, at $7 to buy and $7 to sell at Scottrade, you'd need a 2.8% gain just to break even. There are also the companies Zecco and Sogoinvest, but I never buy individual stocks so I have no idea about those places. Both are very new, but I think they're cheaper. Zecco might even be free, if I remember correctly, but that might be if you have $1000 in your account or something.
If you are looking for a long term investment (for retirement etc.), once you have a couple thousand I would most certainly put it into a mutual fund or an IRA.
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