Investing in the stock market

[hasselfree]

I am wanting to invest in the stock market and need a little advice. I would like to know how do I buy and sell stocks on my own? Do I have to go through a company? If so, do you know any that has low fees? Any help would would appriciated.

[maat55]

I think you should read a few books on investing before you just jump into the market. It's one thing to invest in mutual funds and totally another to invest in single stocks.

I jumped into the comodities market much the same way and lost 2700.00 very quickly. Hold your money and learn first.

[disneysteve]

I have an account with ScotTrade (scottrade.com). They charge $7 per trade when done online. I've had no problems with them so far. They also have a referral program and if you refer a new customer, each of you gets 3 free trades I think.

[Broken Arrow]

Are you specifically interested in individual stocks?

You can easily get into the stock market through stock mutual funds. Plenty of good choices out there.

[amarowsky]

I believe if you have the capital and the knowledge, right now is a great time to get into the market I believe. Hop up to the library and get some books and ask around. Monitor the market, watch the business channel, and research possible companies you are thinking of investing in.

Also consider the season of the year and the economic demands that follow the current time. Brainstorm what kind of markets will be selling a lot of product/services considering the time. Then look up stocks of such companies and research them via their websites, other's reviews of the companies, competitors of that company/industry, and research the stocks value over the past few years and how it correlates to what time of year.

Right now for example is a good time to hop into the tech stocks, if you don't feel that you are ready to be purchasing individual stocks, try a more broad view as suggested above, possible a mutual fund or an ETF.

But as recommended above, definately read books so you can understand what a basic stock report gives you information about. As far as p/e ratio, volume, market cap, eps, dividends offered and more. All of this information is available in a range of many books. After you understand what all of those terms mean, then you should start researching stocks that seem appealing to you.

[Car Insurance Guy]

Whether today's the right time to jump in or next year, nobody will know for sure until then. One thing's for sure, it's better today than it was last November. We'll see what happens.

Successfully trading stocks is difficult. It's part of what I do at the day job. Consider this. You're hoping to beat the smartest minds on Wall Street if you want to trade stocks and beat the averages. These traders graduated from the best B-schools in the country and worked in the most established banks in Lower Manhattan. Not saying you can't beat them, but they're good. Don't expect to outperform the indexes right away - at least not consistently.

After watching, trading, and writing about this stuff for a decade, I'm coming to see the wisdom of index funds (baskets of stocks that track an index e.g. S&P 500). Not saying you can't overcome the averages, but there's all sorts of hidden fees along the way - like Maat's $2700

At the least, learn before you try to earn.

[KGeary]

I am wanting to invest in the stock market and need a little advice. I would like to know how do I buy and sell stocks on my own? Do I have to go through a company? If so, do you know any that has low fees? Any help would would appriciated.

You don't want to buy single stocks. Go research index funds.

[MaxPowers]

Would it be wise to recommend ETFs to someone who is new?

[Broken Arrow]

Would it be wise to recommend ETFs to someone who is new?

It depends on your overall investing or trading strategy.

The main purpose of ETFs is to give investors the ability to trade mutual funds like a stock. And obviously, trading is not something that is recommended to someone new.

What is much more important is knowing how to achieve proper asset allocation and diversification, and learning the importance of passive investing (regardless of market conditions).

That said, some may still recommend ETFs in some circumstances in order to keep the costs low. And for people who may buy lump-sum for only once a year, that might not be a bad idea. Of course, those who dollar-cost-average are much better off with traditional mutual funds.

Personally, I would not bring up ETFs to someone new. Basically, it's just more stuff they don't really need that will cause even more confusion. And that initial confusion is one of the big obstacles to investing for newbies. Most can still do just as well without ever using or even knowing about ETFs.

[disneysteve]

It depends on your overall investing or trading strategy.

The main purpose of ETFs is to give investors the ability to trade mutual funds like a stock. And obviously, trading is not something that is recommended to someone new.

Actually, I don't think trading is something that is recommended for anyone.

The ability to trade ETFs is one factor. I think the instant diversification with even a small initial investment is a big factor, too, especially for someone just starting out. Many mutual funds have substantial minimum investments, like $3,000 at Vanguard. Someone just starting out may not have that kind of money to invest, but they could start small with just a few shares of an ETF and get the same diversification of the mutual fund.

[Broken Arrow]

Yes, I fully agree, Steve. ETFs can also be bought at much lower minimums. And I too agree that most, including myself, can go on in life without having to trade at all.

Still, that is the main purpose of ETFs: Trading. The rest are practical work-arounds that offer certain advantages.

For cheaper minimums, we all know about T Rowe Price's low requirements, and it's a good company to boot. I think another route to take that hasn't been mentioned yet is to stick your money in an IRA offered by your bank or credit union. Some may have a minimum, but I think most (including mine) don't. Well, $1. Once that money is built up enough, then you can roll it to a company of your choice.

As for trading, well, what can I say? Some of us are still foolish at heart. But I think I've mentioned this in the past that that's why I don't care for ETFs in general. I'm a firm believer that if you must trade, you have to do detailed research, and the bigger the investment, the harder it is to research it. ETFs may seem like a great instrument at first, due to its diversification, but that same diversification is also why research is so difficult. It's hard enough to do a single stock, much less an entire basket of it, or even an entire sector, nevermind the market.

[disneysteve]

For cheaper minimums, we all know about T Rowe Price's low requirements, and it's a good company to boot. I think another route to take that hasn't been mentioned yet is to stick your money in an IRA offered by your bank or credit union. Some may have a minimum, but I think most (including mine) don't. Well, $1. Once that money is built up enough, then you can roll it to a company of your choice.

There are still some mutual fund companies around with low minimums, like T. Rowe, though you do need to do the monthly investment of $50.

As for trading, well, what can I say? Some of us are still foolish at heart.

Oh, I do my occasional trading binges, but I get it out of my system and then won't touch it for a year or two, and I only do it with a small amount of "play" money. It really isn't a significant part of the big picture as far as our portfolio goes.

[scp]

Personally, I would not bring up ETFs to someone new. ETFs.

Hmm, it looks like I might still be missing something between ETFs and index funds. So why would you recommend index funds over ETFs other than having to pay commission for ETFs?

[Broken Arrow]

Hmm, it looks like I might still be missing something between ETFs and index funds. So why would you recommend index funds over ETFs other than having to pay commission for ETFs?

This is just my opinion, but I would not bring up ETFs to someone new over basic mutual funds because ETFs are a cross-breed between a stock and a mutual fund, so a beginner has to have a grasp of both and then understand how ETFs work as a cross-breed.

Which I realize isn't all that difficult, but now, has anyone really gotten that much further ahead using ETFs as opposed to traditional mutual funds? I doubt it unless they are trading and have gotten lucky or good at it.

So, for someone new anyway, it just seems like more information than what they need without a whole lot of gain. And by "new", I'm thinking about people like my mother, not folks here on SavingAdvice. For someone who is not new, let's talk about it!

Now, index funds are another matter. Index funds are just one form of mutual funds, so no additional information is needed to know how to manage those. More importantly, they can be so cheap that it will give even ETFs a run for their money. Most of the time, in fact, it'll beat it. Take VFINX for example. A typical annual contribution of $5k with a typical 0.15% ER is only $7.50. If you qualify for Admiral Share, that cost is down to only $3.50 per year! Contrast that with a typical ETF trade of $15 per buy, assuming that there are no further expenses beyond that. (Sure, those numbers can change if the balance is much bigger, but back in the real world where people still struggle with credit card debts and saving money at all....)

Add it all up, and well, I personally don't see the appeal of ETFs. They're kind of exotic, but ultimately, people can live without it. But that, again, is just my personal opinion.

[disneysteve]

Hmm, it looks like I might still be missing something between ETFs and index funds. So why would you recommend index funds over ETFs other than having to pay commission for ETFs?

Well, I think the commission issue is a major one. I have one mutual fund that I have been dollar cost averaging into since 1992. Every month, I invest money on an automatic basis. That means I've purchased shares nearly 200 separate times. Had I done that with an ETF, I would have paid a ton of money in commissions.

If, on the other hand, I were to have a lump-sum of money that I wanted to invest all at once, an ETF might be a better choice if it had a lower expense ratio than a similar mutual fund.