I want to start using some of my leftover money, but i have no idea how the stock market works other than the basics. My main questions: How exactly do you buy stocks (i know there are brokers but do you just sign up and pay them like 1-10$ for every transaction?) Is it a good short term investment, say like 6 months? Do brokers really F you in Commision? Any other info would be greatly appreciated Background: Been keeping about 10k in a credit association (some kind of savings account) for the last 2 years and they were originally paying out 5.5% but now they are down to 3.5% and i really want to do something else with my money
For a 6 month period, you're better off buying a CD and making at least some guaranteed money. If you're new to the market, mutual funds are a good place to start. Call up Waddel and Reed or other fund managers and get an appointment. You won't make as much, but the risk is much lower, and once you learn more about the market, then you can start playing individual stocks.
Costco has a really nice program. Share builders, you set up how much money you want taken out of your checking account every month and then you pick the stocks you want to buy on their website. I think they charge $4 a month for unlimited buys. Nice easy way to learn. Link http://www.costco.com/Browse/Produc...485&Ns=P_Price|1||P_SignDesc1&lang=en-US&Sp=C
How are you getting a guaranteed 3.5% . . . and if you are looking for a short term 6 month investment, dump it all in there.
An investment certificate at a local credit association, i just thought i could get a higher interest rate somewhere else, but i guess not, unless i dab into the stock market
Well 3.5% isn't going to blow anyone away . . . but at this time it's hard to find a 6 month CD at 3.5%. I say stick with playing with the stock market. Take discretionary income and have some fun. You could lose a major portion . . . but you could also get some great retunrs. If your time frame is 6-12 months, it really is gambling . . . unless you have inside info. I have an account with fidelity. You can go on line and buy individual stocks or mutal funds all at the click of a mouse . . . and a money check to fidelity of course.
If he has some play money, putting 75% into a low-risk/low-yield mutual fund, and then using 25% on a ShareBuilder.com account is a good way to learn the ropes without losing everything by one bad decision.
Not that hard to get. Do you know anyone with a Costco membership? Just go to Costco with them and they can get you signed up. Costco is great.
If you're young, CDs are crap. Stay away from them. If you want my advice (and again assuming you're young), then get out there and take some risks!! All I can say is that investment is typical risk vs. reward. It just depends on if you're willing to potentially lose money in order to potentially see large gains and good rates. Personally I'm still young, and about 20% of my investing money has gone toward my IRA, 40% into a medium-risk mutual fund that pays about 6.5% in dividends, and 40% directly into 7 completely different stocks I've picked out (diversifying is another big key). My worst stock is down about 34% as of today, and my best is up about 206%. All together, my gains/losses average out to about 27% annually since I first started this, and I'm quite pleased with that. My risk tolerance is very high though, so you'll have to decide for yourself how much you're willing to take.
Especially as you don't really know much, you should strongly consider something like a mutual fund. You buy a share of a mutual fund like you a share of stock, but you're buying a collection of stocks that way. You pay a bit more for this, but you spread your risk around. Think, do you want to buy apple or microsoft? One could go up, the other down, and you don't know which to choose. A mutual fund lets you choose a bit of both, with the idea that the gains generally outweigh the losses by a lot, and most people (make that almost all people) can't consistently pick winners, and especially over specific time lines. No. We have no real idea whether particular companies or the market as a whole will be up or down in six months. It's a bit of a gamble. If you need that money again in six months, I think you're a lot better off keeping it safe in a savings account. It's quite possible the stock market falls 10% in six months. So your $10k is suddenly $9k and you're really pissed if you need to take that money out. Of course, if it goes up 10% in six months, you've got $11k. Also, you'll pay higher taxes on investments you turn over in less than a year. If you can sit that money aside for quite a while, it's pretty likely to grow for you. For folks who aren't professional investors, consider it like planting a tree. It's not going to require constant attention, but 5 or 10 years down the road it can pay off really well even if there are short-term losses. You only have the gain or loss when you actually cash out. Depends on who you go to and how you set up your investments. I would check out Vanguard if I were you. If you want to put some money aside for a few years, the easiest and cheapest way is to set up a mutual fund account with them. There are basically no commissions at all. Like I said, you have to consider the time horizon you're looking at with your savings. How old are you? Are you planning to spend the money in the next couple of years (new house, car, etc)? Is it a fallback you might have to tap into if you lose your job? How much of a fallback do you need (should be based on your monthly expenses). Once you answer those questions, you can start figuring out how to allocate the money. As a general rule of thumb * If you don't expect to need the money until retirement, set up a Roth IRA account and then put everything in a stock index fund. That'll give you a good return with little worry, fees or maintenance. * If you expect it's money that you might use at some point a few years down the road for a home down payment, school, a business, go for a regular taxable mutual fund account, and split it between a stock market index fund and a bond market fund. * The general rule of thumb on keeping some money for contingency purposes is 3-6 months worth of your income. EG, if you make $20k/yr, that's $1666/month you make. 3 months worth is $5000. Obviously most folks don't keep that much lying around in their savings account. You can pair it down to what you think you'd need to cover basic expenses, for example. Take that money, however much you decide it needs to be, and put it in a money market or just keep it in a savings account. So, per above, consider your goals. If you need a safety blanket, keep that emergency fund in the savings account. Say for argument's sake it's $2000. You can always withdraw from your investments if you need to as well. Take the other $5000, and put it in index funds. Give a stock market index fund like the Vanguard 500 fund 5 years to work on it, and you've got a few extra thousand dollars. Hopefully.
I'm a big Preservation of Capitol person. Stocks or mutual funds that average a 20% return actually make less than those averaging 10%. It's about risk and how to best manage it. Go with conservative stocks & funds and preserve your money.
