5 Thoughts on How do you invest in the stock market?
  1. Reply
    Jennifer Bell
    January 11, 2013 at 7:10 am

    I invest in stockings, thigh highs and pantyhose. Husband loves it when I wear them.

  2. Reply
    January 11, 2013 at 7:41 am

    It’s hard to give you specific advice without knowing more about you. To best advise you, I would need to know how much you are investing, how long you are investing for, what you eventually expect to do with the money, what your “risk tolerance” is, and how old you are. Therefore I can only give you general advice.

    Newbies tend to think that the best way to play the stock market is to buy stocks then sell them a day or few months later, then repeat the process. This method of investing usually loses money. The people who buy and hold for long periods are the people who make the most money.

    Standard investment advice is that you should invest in a diversified mix of stocks, bonds, and money market funds. If you are like most people you will invest part of your money aggressively in stocks, and part conservatively in money market funds and bond funds. However, some young people will go all stocks, and some very conservative people will go all money markets. The links below have on-line questionnaires which will give you an idea of how to do “Asset Allocation,” determining how much to put in each type of investment.

    You want to buy a diversified portfolio of stocks as individual stocks are too risky. Highly knowledgeable people can buy a properly balanced portfolio, but most folks have a difficult time balancing things on their own. They will misbalance their portfolio by buying all small stocks or all growth stocks, or some other misbalanced assortment of stocks. Back in 2000, Some people bought all Internet stocks; they got burnt when they all crashed together. You have to diversify across industries. Unless you know what you are doing, it is best to buy mutual funds that will diversify for you. Buy no-load, low cost funds. Mutual funds should have expense ratios of less than 0.4%.

    I like index funds. Because of their broad diversification, you are less likely to have a dramatic drop in value. They also have the lowest management fees. For stock funds, I like putting ~70% of one’s money in the Vanguard Total Stock Market Index Fund. and ~30% in the Vanguard Total International Stock Index Fund. The Vanguard Total Bond Market Index Fund is good for a bond fund. The Vanguard Target Retirement funds can be a good all-in-one stock and bond funds for an IRA. (If you have less than 3,000 dollars, you’ll have to use the Target Retirement Funds) There are many different opinions out there on what the best mutual funds are. Read the links below and form your own opinion.

    Once you have stared investing, you need to keep adding money on a regular basis. Many funds allow you to set up automatic investment programs that take a set amount of money out of your bank account each month.

    If your company offers a 401K plan at work, try to invest the most you can. The money grows tax free, and some companies will match your contribution. Investing in a mutual fund IRA is also a good idea. If you have children, you may want to consider a 529 plan or other college savings plan that grows tax free.

    If you have high-interest debt, like credit cards, it is best to pay this off first before trying most of the investment ideas above. You should also have 3-6 months of salary saved up as an emergency fund in a bank or money market fund before trying more risky investments.

    I will warn you that there is a tremendous amount of stock investing books and websites that teach stock investing strategies that don’t work. Particularly bad are people that teach “technical analysis” systems that sound impressive, but don’t work.

    Believing advice you get on Yahoo answers can be risky, so read these websites for further information. If you find it too confusing, contact a professional financial advisor. They will charge you significant commissions, however. I prefer to avoid them.

  3. Reply
    Jo W
    January 11, 2013 at 8:06 am

    Buy shares!

  4. Reply
    January 11, 2013 at 8:06 am

    Buying and selling stock may appear complicated at first, but it is, in fact, quite simple. It is like a game. It has its own rules, its own set of characters, and its own language code.

  5. Reply
    January 11, 2013 at 8:09 am

    Well, at the base of it you just need money and a stock broker.

    But you’re also going to want tools to do research on what you’re putting your money into so you can do everything in your power to not make poor investments. There are a lot of great services out there, free and paid alike. Some of my favorites include Google Finance, Chaikin Power Tools, and StockBlogs.com.

    Start with those, maybe check out a free stock market simulator for a bit, and see how you do!

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