Your Questions About Good Money Making Stocks

Sandy asks…

what happens if i open a brokerage account, but Im under age?

I am 20, but my state requires that I be 21 to set up my own account. Are there any legal ramifications if i open an account of my ow, and trade stocks, or even make money from stocks? I know i can open a custodial, but I have one with Schwab already, and I don’t like them that much. I want to open a new one, and i don’t want to make my parents go through all the paperwork again.

John answers:

In the United States, the legal age for opening a brokerage account is 18 years of age, state law CAN NOT over ride fedral law

Mary asks…

How to take money out of the stock market?

I am very new to the stock market, and just beginning to look into it so so If I dont make sense it’s because I have no idea what i’m talking about. Ok so say I open an online stock investing account with $500 and then over time make another $500. So now I have $1000. Is that just money in an account that I can take out whenever? Or do most people just leave it in there for years? Basically how do you get the money if you make it?

John answers:

There is NO money in the stock market, per say. Investors own shares of companies. If you can find someone to purchase your shares, you get paid money in exchange for selling your partial ownership of that company.

Read “Investing for Dummies” to learn more about how the stock market works.

Carol asks…

What is the minimum investment required to build a decent share portfolio?

I received a bonus from work and have £3000 available to invest. Rather than just putting it into a cash ISA I am considering opening an online sharedealing account and investing in shares.

However, even the cheapest online brokers charge a flat fee of around £8-10 per trade.

I don’t mind a moderate degree of risk, but I get the feeling that after trading fees are deducted I will struggle to beat the performance of a tracker fund or even a normal savings account even if I make good stock selections (and this is by no means guaranteed!)

Is there a general rule of thumb for the mimimum amount of money that a private investor should have before they consider investing directly in the stock market? Should I just stick with a cash savings account, or possibly tracker / mutual funds?

John answers:

I’m not sure about this myself so I am playing with msn virtual shares and seeing what happens maybe this will help you if you practised first
http://secure.digitallook.com/cgi-bin/digitalcorporate/msn/login.cgi?

Helen asks…

How can i make money through investment?

I have been trying for months to make money through an eBay business… And it isnt working! I am the cheapest around but because my items are less than a £1 because they are low value items i dont make much profit, and not very often.

I have approx £500 to invest, how can i invest it to make money on a regular basis? Stock market seems risky and bonds are long term, low payout

Thanks.

John answers:

GBP 500 is not enough of a capital sum to invest to give you a regular monthly or annual investment income. You have to save up far more than that.

As to your eBay business, you may investigate to resell somewhat higher priced items and set you gross profit margin at 40% and that may still make you very competitive as against other sellers. Investigate the cheapest shipping method and include that in your price, so you can offer it with “Free Shipping” and that may set you further apart from your competitors.

George asks…

How are stocks beneficial for companies?

Companies distribute dividends, people buy shares and give the companies money and in turn more people invest in the company because many people buy its stock, earning it more money? And when the stocks go up, everyones’ shares go up so that the company has enough to pay higher dividends to its shareholders and still have more leftover than originally?? I probably botched that miserably. How exactly does the process work and how do companies make money with shareholders, stocks, etc?

Thanks

John answers:

There are many people that think as you do, that companies earn money when the price of stock increases or when shares are bought and sold. This is not the case. Normally the ONLY* time that companies make money from the sale of stock is when they first sell shares to the general public in whats known as an Initial Public Offering (IPO). Once the shares are initially sold, they are then bought and sold on a secondary market between different individuals, the company is completely out of it. The rise and fall of the market price of the shares has no effect on a company’s income. As far as dividends go—-If the company makes a profit during the year, they may decide to distribute those profits in the form of dividends to its shareholders.

*Note: Companies at some later point in time may decide to issue more shares of stock after the IPO. But it works the same way. They only receive funds for the sale of stock at that point in time.

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