1. Your Questions About How To Invest In The Stock Market
With No Money
Linda asks…
How does the stock market work, and what should I invest in?
I'll be honest, the whole stock market thing is completely over my head and more complicated
than just about anything I've tried to figure out, it may as well be in a foreign language because
I don't get it. For instance, where is the sense in taking risk with your money when you can
invest in a stock like Google or Apple that you know is thriving, how can you lose money with
that?
My company by default goes through Fidelity and we I'm in one of the lowest risk stocks by
default that they chose for me, called FID Freedom 2050. I have no idea how it works or what
have you, all I know is it very seldom loses money, but does not gain very much either.
I have a personal savings account that I will keep putting money into--I realize the low interest
rate won't net me a whole lot in the end, but when it comes down to it that is all my money that
no one can touch and I feel good about that, but I wish I could figure out how the stock market
worked better, since it seems like a good way to earn a lot of money.
Steve Winston answers:
Well, if you want a basic description of how the stock market functions, start with reading
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2. http://en.wikipedia.org/wiki/Stock_Market
But really your question is how to be a good investor, and for that you should start with some
basic books to teach you the fundamentals. Two excellent reads are The Complete Idiot's Guide
to Investing and Investing for Dummies. Before doing anything, make sure you have enough in
savings in case things go south for at least 6 months.
You need to learn also some important concepts in investing, such as dollar-cost averaging and
compound interest - two of your best friends to make money for the future.
You are not clear about your company - are they contributing money into a 401k for you? Your
fund (FFFHX) can easily be looked up on various sites like http://finance.yahoo.com and it is a
Target Retirement type fund which is one of the easiest and hassle-free investments. It's
essentially an auto-pilot type investment that will gradually change to a more conservative mix
as you get older to lock in your stock gains. You don't need to take any action over it. Also vitally
important is who is running it and how much they charge - and Fidelity is one of the better ones,
who don't charge sales commission on the front end or rip-off 12b-1 fees which basically skim
off money for themselves big time before it starts working for you. The expense ratio they
charge is about 0.84% (it's their profit off of what the market makes for you) which is much
better than others like the big banks, but still much higher than some others like Vanguard's
0.19%. If you want to compare how over time you are robbed of tens or even hundreds of
thousands of dollars, try looking at
https://personal.vanguard.com/us/insights/investingtruths/investing-truth-about-cost
and compare.
The question you need to answer is WHY you are investing. Different people have different
goals. Is it for more income? For retirement? For someone's education? Plus how old are you
and how long do you want to invest? How much risk are you willing to assume? The more time
you have, the more risk you can take on, since you have more time to recover if the market
falls.
These are all very critical questions and they will determine what kind of investments are right
for you. Don't believe anyone who has a "one size fits all" kind of investment. For stocks
typically you are talking about at least a 5 year investment period. If less, consider getting into
bonds or a bond fund instead. Many people choose an appropriate mix of the two.
If you want to get into the market but don't know what stock to pick, consider an index fund.
Instead of throwing all your eggs into one basket (one company), index funds can invest you in
dozens, hundreds, or thousands of companies all at once and so there is less risk. This protects
you if any one company or industry runs into trouble. For bonds, the returns are less, but more
solid. There are more conservative as well as more aggressive funds, so pick some that suit
you.
If you are thinking of retirement, consider a Roth IRA. Your money grows tax free, and when
you retire you can withdraw it tax free as well.
For more information, try looking at
https://personal.vanguard.com/us/funds/vanguard/all?sort=name&sortorder=asc
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3. and play with it, comparing funds with more or less risk.
Do some reading online such as
http://www.vanguard.com/us/insights for some important investing truths.
Only you can choose what is right for you, following your desires, goals, and risk tolerance.
But some basic generic advice is:
Have a goal - know what you are investing for, and choose the right investment to achieve it.
Choose the right amount of risk - neither too cautious nor too reckless.
Do your research - choose what's right for you - not someone else, especially a sales rep.
Be diversified and allocate your investments properly.
Think long term and avoid the Big Money Fast hype.
Don't invest according to emotion - especially fear/panic.
Don't just look at the investment - consider fees/taxes/commissions around it.
Best of luck!
Nancy asks…
Investing Question w/ Stock Market?
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4. I am in high school and I currently have saved ~ 7000 dollars. For years, I have had CD
accounts with APYs around 4%. I learned in my personal finance class that returns/year in the
stock market over the past 70-some years have average 10%/year, which is much better than
CDs, especially once I have to renew mine later this year with CD rates in my area below 3%. I
was looking at maybe investing some of my money into the stock market, but I am unsure
how much I should invest; 5%, 10%, 20%, 50%, etc, I have no idea how much I should aim to
invest given the economy's present state. In addition, I don't have a clue which stocks to
invest in. What stocks do you predict will have good returns that are better than my CD rate of
4%...and what stocks do you think have a good chance of doing well in the long run, like from
now to 2020 or 2030?
Steve Winston answers:
You started very young and that is good. You learned about the fixed income of CD and their
reliability. However you are correct about the LONG term- these fixed incomes will not hold up
to inflation as rates go as low as 1% and sometimes higher than 5% but on the average about
3+ %.
So as you have suggested you need to get into the stock market and even into the bond
market.
Since you have no idea where to start I would advice you start with MUTUAL FUNDS. These
funds contain hundreds of stocks or bonds in each fund so you don't have to worry about 1 or
more individual stocks going south since you have hundreds in these funds. PLUS one or more
professionals manage the funds for you. There are fees but make sure you only buy NO LOAD
MUTUAL FUNDS (that means to load fees for sales people)
Get some of these funds labeled as INDEX funds.
I would go to VANGUARD Funds since they have some of the lowest costs in the industry.
Since you are so young going with a high percent of Stock Mutual Funds would be smart.
Somepeople would suggest even up to 80% stocks but personally I would cut that back a bit
especially since you have only used CD's and a bad market could make you jumpy.
Keep some of those CD's, get mostly Stock Mutual Funds, and get 10% bond Mutual Funds.
Since the market is very variable at this time it will be hard for you to get started high in stocks
but by 2020 you will be glad you did because those poor producing stocks today will inflate
significantly by then.
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5. Helen asks…
Investing? How to play the stock market?
I am receiving about $2,000 from my taxes this year and rather than blowing the money, I'd like
to know what options I have in terms of investing the money and perhaps turning it into a
bigger lump of cash. Are stocks the way to go? I'm 25 years old and I've never delt with any
kind of stock before and I have no clue how it all works. All I know is that if I invest right, I have
the potential of turning this $2,000 into something big. Any help?
What is wasteful about getting a large refund??
Steve Winston answers:
Buy low and then sell high. That is the key.
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6. Steven asks…
In the latter part of 1929, what did stock market investors do when
they sensed danger in the market?
1.In the latter part of 1929, what did stock market investors do when they sensed danger in
the market?
A.Bought more stock to help stabilize the market
B.Convinced their clients to purchase more stock
C.Began to sell off their holdings
D.Decided to do nothing and watch the market for a few more days
2.One of the factors in the crash of the stock market was the number of people who bought
stocks using what method?
A.Based on past performance of the company to predict the future outcomes
B.Buying stocks using their entire personal savings accounts
C.Word of mouth from other investors
D.Buying stocks on margin with borrowed money
3.How did the Federal Reserve Board’s decision to keep interest rates low help fuel the
Depression?
A.Because of low interest rates, the government had to raise personal income tax.
B.It allowed individuals and businesses access to money to invest that they could not pay
back after the stock market crash.
C.The banks were not making enough profit on the low interest rates so the banks stopped
loaning money to businesses.
D.People lost faith in the government’s ability to control banking and refused to buy
American-made products.
4.How did low interest rates from the Federal Reserve Board affect U.S. businesses?
A.U.S. businesses borrowed money to produce more products than there was a demand for,
resulting in unsold goods and layoffs.
B.Private entrepreneurs were able to start businesses and flooded the market with cheap
goods.
C.It had no effect on business in general, which stagnated the economy.
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7. D.Business executives pocketed the excess funds instead of paying back business loans to the
banks.
5.All of the following were long-range causes of the Depression except:
A.Uneven distribution of wealth
B.Farms were not able to produce enough food for everyone
C.Low interest rates by the Federal Reserve Board
D.Overproduction of goods by U.S. businesses
6.Why did the stock market’s crash weaken the banks?
A.The banks depended on stocks for their operating funds.
B.Investors no longer had money to deposit in banks.
C.The banks had invested their deposits in the stock market.
D.Investors could no longer afford to take out loans from the banks.
7.What do most economists agree was a key cause of the Depression?
A.Over consumption
B.Over production
C.Inflation
D.Deflation
8.How did the Hawley-Smoot Tariff affect the economy at the outset of the Depression?
A.It slowed down the Depression because the government loaned the tariff money to the
banks at a lower interest rate to stabilize the banks against the stock market decline.
B.The act convinced Europe to reduce their tariffs to help stimulate overseas trade with U.S.
companies.
C.It had no effect because the tariff was immediately rejected by President Hoover.
D.It raised tariffs on imports to stimulate the U.S. economy; the tariff backfired when foreign
countries raised tariffs on U.S. products.
9.What was President Hoover opposed to that caused him to be slow to respond to the
economic crisis?
A.Deficit spending
B.The government investing in stocks
C.Spending money on all public work projects
D.Giving money to private charities
10.How did Americans escape their worries caused by the Depression?
A.They formed social groups to help cope with their depression.
B.They went to the movies and listened to radio shows.
C.They formed cooperatives to share what food they had with others.
D.The held peace marches to voice their concerns about the economy.
11.In response to industrial leaders closing factories and slashing wages, President Hoover
proposed what program in hopes of reducing unemployment?
A.The Public Works project
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8. B.The Right to Work Act
C.The One Job per Person policy
D.The U.S. Relief Act
12.All of the following were cultural reactions to the Depression except:
A.Movies grew in popularity as an escape from America’s worries.
B.Literature flourished because writers focused on real life struggles.
C.Artists and photographers gained interest because they paid tribute to the suffering.
D.Restaurants flourished because Americans struggled to grow food on their farms.
13.In response to Hoover’s inability to help with the Depression, the American Communist
Party got Americans involved in what activities?
A.A national recall petition to remove President Hoover from office
B.A plan to overthrow the current government
C.Rallies and hunger marches
D.Raising money to bring communists to the U.S. from Europe
14.How did the lack of farm support by President Hoover’s administration affect American
farmers?
A.Farmers refused to sell beef and sent herds of cattle to Washington D.C. to protest the
economy.
B.Many farmers became angry with the government and protested by destroying crops and
dairy products.
C.Farmers protested outside of banks attempting to drive away bank bus
Steve Winston answers:
Sure I'm bored I'll take a stab at your homework for you, I warn you I'm not completely up on my
Great Depression details, but I'll give it a try
1. C
2. D.
3. B.
4. A.
5. Either A or B not sure
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9. 6. C.
7. A.
8. D.
9. A.
10. B or C not sure
11. A.
12. D.
13. C.
14. B.
Joseph asks…
How can I start investing in the stock market at 18?
I am 18 years old, still in high school, and I want to start investing in the stock market. I have
close to $10,000 saved for college. However, I will be keeping most of that in CDs and my
money market savings. I want to start investing not for the money, but for the experience. I
plan to major in either Economics or Finance in college. When I get out of college, having 4
years of experience (no matter the amount) seems like a great investment for me. Even if I start
out with a thousand or two and end up losing 25%, it is better than losing 25% when I am
experimenting with bigger amounts after college.
So where would I go to start this sort of thing. I am thinking about starting at $1000 and possible
going to $2000 depending on how I do. I dont wan't to just throw it in a fund and have other
people manage it for me, I want the experience. I love seeing how companies react to news,
how the stock market reacts to announcements, and most of all I love trying to understand
the changes in prices of stock. Where do I get started? And do I have to have a parent on this
investment account with me?
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10. Steve Winston answers:
Your going to need a broker of some kind who will take your money
and invest it into the stocks that you want to buy shares of. There are
so many ways to invest, so best you read up on the subject of investing.
Mary asks…
How do I get into the stock market?
I have no idea how it works, and I want to start investing money and watching grow. Do I find a
company/industry I believe will rise, and just buy a stock, then sell it later when it has earned
money? Is that the basics? Once I find something I want to invest in, how do I start? Im on
Yahoo Finance, and Im looking at starting with a electronic entertainment company called
Konami. (I guess its called KNM on NYSE)
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11. Steve Winston answers:
Invest in stock market is not as easy as 'buy a stock that you believe will rise' and 'just buy a
stock and then sell it when it earn money'. Rather, it is an ongoing process of searching for
good company that is worth investing and buy them at the right price (not necessarily at the
right time).
So, how to know which stock to invest in?
When you should buy them?
And, how you can make money from?
Fundamentally, you can use various key financial ratios to start screening which stock worth
your hard earned money. From there, you can go to the next level by further study how they
perform qualitatively. Look here for more info:
How to Pick A Good Stock
http://www.stock-investment-made-easy.com/good-stock-pick.html
Guide in Analyzing Stock
http://www.stock-investment-made-easy.com/analyzing-company.html
then, you must study how much the stock worth. To do this stock valuation, you have to
calculate intrinsic value. Once you got it, buy the stock when it is at its margin of safety, either it
was discounted than its intrinsic value, or discounted from the past historical prices. Look here
for details:
How to Calculate Intrinsic Value
http://www.stock-investment-made-easy.com/calculate-intrinsic-value.html
How to Determine Margin of Safety
http://www.stock-investment-made-easy.com/margin-of-safety.html
now the last question, how you can make money from it? Look, good company will grow over
time. If you invest for your retirement, you can sell the stock after 20 years with as much as 30%
return per year! Doesn't it sounds good? And besides, you'll be earning dividends year after
year, which will also grow annually!
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12. I hope this able to help you to get started. But if it is not what you are looking for, apology for my
misunderstanding.
Susan asks…
Investing in the stock market?
I am currently 23 and I want to start investing in the stock market so by the time I'm thinking
about investing for my retirement I want to be comfortable and at least familiar with stock
bonds. But where do I start? I have no knowledge of how it works. Or where would I get
information on investing money? Any and all suggestions are appreciated! Thanks!
I am a recent college graduate and planning to attend grad school in two years. I am not
married and do not have any children. I am making decent money and just thought it was a
good idea to think about my future and it seems like investing is a good idea.
Steve Winston answers:
Without knowing more of your personal information, and current financial status and other data
such as risk tolerance, martial status, and demographics it would be very inappropriate for me
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13. or any other responsible person, especially a professional from the investment industry, to
provide specific investment information in this type of media.
At the same time it would not be prudent of you to accept any specific investment advice from
those you personally know nothing about other than a responder here YA.
However, there are websites that serve as tutorials for novice investors as well as information
for the more experienced. Such sites are Smart Money - http://www.smartmoney.com/ Winning
Investing - http://www.winninginvesting.com/
There are other sites that will be of help MSN MONEY
-(http://moneycentral.msn.com/home.asp) and Yahoo Finance (http://finance.yahoo.com/),
Investors Hub (http://www.investors.com/?tn=top), that provide access to various investment
products as well as access to several experienced advisors, all provide a wealth of information
regarding the market and the various products trade in the markets. The research and
commentaries by the various writers provide a wealth of free information that serves all types of
investors whether they are novices, or experienced professionals.
There are many people just like you that are, or were looking to invest and those that did bought
Mutual Funds and/or Exchange Traded Funds (ETFs). One purpose of mutual funds is to help
investors like you, who are either just entering the investment world or who have no investing
experience. Once you feel you at least have an understanding of investments you should look
into ETFs which are similar to mutual funds but are traded on the exchanges.
Mutual Fund companies as well as ETFs have an entire array of products many will fit your
needs. You can go to the MSN.Money website
http://moneycentral.msn.com/home.asp
http://articles.moneycentral.msn.com/Investing/MutualFunds_DC/MutualFunds.aspx
it has an entire section on mutual funds and Exchange Traded Funds. Read about the various
products and in doing so you will be getting investment ideas and at the same time educating
yourself about investing.
You could also contact the funds companies for more information. I have found that Vanguard
(http://www.vanguard.com/) & Fidelity Investments (https://www.fidelity.com/)
can meet your needs for mutual funds. The service and information they provide is all free and
you will find it helpful.
Regardless of what you decide, do not ever let anyone tell you not to invest, especially those
that do not invest themselves.
Good luck on your journey
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Read More… http://buystocksmakemoney.com
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