Your Questions About How To Invest In Stocks

Steven asks…

About stocks investing?

Is there a difference between buying and investing stocks?

John answers:

To invest in corporate stocks you must buy them in some way.
—– —– —–
I have my own distinction: If you buy stock hoping that you can sell it for a quick profit because of the daily (or monthly) swings in price, then you are not investing. I call that gambling and on a large scale.

If you allow the company to earn money over time, that is investing.
There are two ways to work the stock market; make money slowly or lose money quickly.
The quick way is gambling, the slow way is investing.

Charles asks…

How do I invest in stocks?

I’m 14 and I know this sounds ridiculous but I want to invest in stocks. Where do I start? What should I invest in? I only have about $150. Your opinions woul be VERY helpful. Please help!!

John answers:

You invest in stocks by opening an account at a broker. For many brokers, you need a minimum of $50 to open an account (some need more). Once you have your account, you then place an order through the broker to buy and/or sell stock. The broker will take a commission each time you make a trade – online brokers usually charge between $5 and $10 a trade.

Two things you should know – first, at 14 you cannot legally sign a contract, so you cannot open a brokerage account by yourself – you will need an adult to act as your legal representative. Second, you need to educate yourself on how the market works and how to pick.analyze stocks. The public library usually has a row of books on these topics…I highly suggest that you pick up a few and read them before investing – not knowing how to pick stocks and how the market works is a sure way to lose your money (and yes, you can lose everything if you pick wrong).

John asks…

how to invest in stocks?

ive been thinkin about entering the world of stocks but im not sure how to go about it. Ive checked some websites that say stocks isnt the best thing to invest in nowadays is this true? any advice i would much appreciate it thanks.

John answers:

Anyone who ever tells you that there is a bad time to invest in the market doesn’t know what they are doing or doesn’t have the right amount of capital to make money when the market isn’t firing on all cylinders.

It doesn’t matter if the market is going down up or sideways you can make money in any environment if you know what you are doing. It’s not easy and it may take you years to learn what you need to know to make money consistently but the first step is to just start.

I started 12 years ago and I’m still learning. In my first few years I did nothing but lose money. I got lucky a couple of times but I lost 95% of the time. The thing is I didn’t care because it was what I expected. The reason was because I knew absolutely nothing about the market and in those days the online brokerage firms didn’t give you access to as many tools as they do today.

I did it the hard way but you don’t have to. There are a lot of sites that will teach you what you need to know. Even the online brokers offer online courses that teach you how to trade using some pretty sophisticated trading tools. Just open an account and learn what you can from your online brokers classes before you trade.

Here are a few tips
Sign up for Margin and Option Trading as soon as you have at least 2000 in your account.

Why? The more restrictions you have on your account the harder it will be for you to make money.

Margin trading eliminates one restriction. It allows you to day trade. Regular “cash” accounts don’t allow this.

What is day trading? Lets say you bought Lehman last year and all of a sudden some news comes out that the company is going to go bankrupt so you sell. Then you see that Apple is coming out with some new product and analysts raise the price target for Apple. With a Margin account you would be allowed to buy Apple as soon as you got out of your Lehman position. If you have a regular “cash” account you would have to wait 3 days to be able to buy another stock since you only held Lehman for 1 day. In the mean time the market could skyrocket and you will just be sitting around missing out on the opportunity. Get a margin account and avoid this because it allows you to day trade.

Options. Options allow you to put up minimal risk for huge potential gains. While some people are out there putting thousands of dollars on a stock for a 10 to 20% gain the options players are putting up significantly less for much better gains. For instance. Recently (in September)GE was trading around 13.00 and change. You could have bought a 14$ call that month for .08 cents at the time. They are sold in contracts of 100 so 1 contract would have cost you 8 dollars. Many people were celebrating when the stock jumped from 13 and change to 17 dollars that month. Thats 30%! Anyone who had 10000 on the stock made 3000.

However, anyone who had 1000 on the $14 calls made over 30,000. That is the benefit of options you risk 1000 for a profit of over 30000 versus a person who is risking 10 times more for 10 times less the profit. Options aren’t easy though. You have to be able to predict where a stock is going to be at a specific date. Most people can’t do this but there are other options strategies that are easy to use that will make you more money than a stock trader.

Just remember never stop learning and start with your online brokers classes. Good Luck.

Laura asks…

I need help on investing stocks ^^;?

I have interest on investing stocks…^^
not a tons of money to put in but just a little bit to get an idea of how the “investing stock” works…
so heres my questions
1. in which way I can buy and sell stocks? (by credit card? banking account?)
2. where can I buy and sell stocks? (internet? how?)
3. If you have one, can you please recommand me a good book to get an idea of investing?
Thank you so much!!!

John answers:

I see you are interested in investing in the stock markets. Start trading stocks is as simple as opening a trading account and then picking a stock and then buy. However, that simplicity is truly the wolf beneath the sheep’s skin. Doing so is an expressway to losing a lot of money.

There are quite a number of things you need to learn before you can even start thinking of the stock markets …

1. You need to understand how the stock market works and what it is exactly about.

2. You need to know what are the different styles of trading in stocks and shares.

3. You need to read about why so many people lose their shirts in the stock markets so that you can avoid their mistakes and also decide if this is a risk you want to take.

For all these issues and more, you can read about them from some of the articles that I wrote at http://www.mastersoequity.com/articles.htm

After you are adequately armed with the basic concepts and ideas, you need to know how to find profitable stocks to trade or invest in. You can do that the easy way by subscribing to stock pick services (example http://www.stockpickmaster.com ) or you can learn to use charting tools and softwares to find stocks with parameters that you can pre-define. (example http://worden.mastersoequity.com/)…

Remember, the slogan “Just Do It”, Just won’t do for the stock markets. If profiting in the stock markets is as simple as buying a single stock , then why are so many people still poor?

After you have all the above mentioned knowledge, you need to ask the following golden questions before you can decide whether a stock is worth buying or not :

1. Why are you of the opinion that this stock will rise?

2. Is your opinion valid in the first place?

3. When are you expecting it to rise? Can you hold on for that period of time or longer?

4. What is your expected entry price? After what price would your expected profit margin be too thin to enter upon?

5. Where is your expected stop loss point? What is your stop loss point based on? Where will you tell yourself that it is time to take a loss and get out?

6. Where is your expected profit taking point? What is your profit taking point based on?

7. Does the way you are buying the stock allow you to hold on until your expected profit taking point?

8. How much of your money should you dedicate to this one trade?

9. What is the level of primary, secondary and idiosyncratic risk you are undertaking when deciding how much of your fund to use?

10. What is your cashflow need? Does your cashflow needs allow you to hold the full lifetime of the stock?

After you are able to answer all these questions confidently, THEN you are ready to… PAPER TRADE your stock strategy. Yes, even at this point, you are NOT READY to trade for real. You should trade on PAPER for at least 6 months and become consistently successful BEFORE you take your stock strategy into real life.

Then.. You are ready to start… But there is still no guarantee of success as paper trading is very different from real trading. You will need another maybe 1 year or 2 trading very little money and be consistently successful BEFORE you are ready to increase your stakes.

So, as you can see, success in the stock markets is not easy at all the the less knowledge you have, the more risk you undertake. I lost hundreds of thousands in the stock markets before I become successful.

Take heed and good luck.

All in all, investment and trading is a lifelong education and non stop learning. No one is ever done learning and catching up with changes in the markets.

If you care to read about how I went from completely broke to retired millionaire trading stocks and options by 28 years old, you can go to http://www.mastersoequity.com/

In conclusion, what I am saying here is that trading stocks and investing for profit is a professional game that takes years and a lot of money to learn, so it is not something that someone in need of college fees should do … Now…. But you should certainly start to learn about it right now.

Hope these information helps.

Http://www.optiontradingpedia.com/

http://www.mastersoequity.com/

.

Donald asks…

Stock Exchange??? How do I invest?

How do I invest in the Stock Exchange?
How much is the minimum investment possible?
Is there an age requirement in investing? Because I’m just 16.
How exactly am I suppose to buy and sell stocks/shares? Who do I approach? How am I suppose to invest?
What should I wear if I’m going to the Stock exchange?
Let’s say I’ve bought and sold shares and I’ve gained money, how exactly am I going to receive the money? Do I need a bank account? Do I get a check or something?

I’m a 16 year old high school student and I’ve got a couple of hundred dollars lying around which I don’t how I’m going to spend, I don’t want to just waste it on stuff I don’t need. Soo, I’m thinking of maybe investing it in the Stock exchange. Am I qualified to do so? With my age, with only a couple of hundred dollars, and without a bank account. If I am, please tell me how.
Keep in mind that I’m a newbie here, so tell me everything that I need to known on how to invest in the Stock Exchange.

John answers:

What you’re looking to do is to invest in stocks that are traded on an Exchange, you’re not going to be an investor in the stock exchange. To invest in a stock exchange, you must be at least 18 years of age, registered with the SEC, purchase an exchange membership (approx $250,000) deposit your investing capital (another $50,000), show proof of insurance, obtain a clearing agreement with another B/D – approx nother $50,000.
Don”t worry what to wear when you go there, – I wore jeans & a tee short bu t I was known by most of the committee. But you’re not ready for all this, just start with opening brokerage account when you’re 18.

In North America you must be 18 to have a brokerage account in your name, but a parent can open custodian account using your social security nimber and when you turn 18 the assets in the account can be moved to an account in your name.

In the meantime, you never to young to start learning about the markets and the various products traded in those markets. Before you spend $0.01 on any investment, you must know what you’re doing, why you’re doing it and how to do it. Before you invest in any security, the first investment you should make is in yourself, and the best investment you can make is by educating yourself.

Begin your education by learning why you should invest and the importance of being able to make your own decisions or how the pro’s make theirs. Start your education by reading “Investing or Dummies” by Eric Tyson.
To continue your education select some of the following
Beating the Street by Peter Lynch
Bulls Make Money, Bears Make Money, Pigs Get Slaughtered, by Gallea
From Riches to Rags, by I.C. Freeley
How to Make Money in Stocks” by William O’Neil
24 Essential Lessons for Investment Success by William O’Neil
The Intelligent Investor, by Benjamin Graham
Common Stocks, Uncommon Profits, by Philip A. Fisher
One Up on Wall Street by Peter Lynch
Stocks for the Long Run, by Jeremy Siegel
Uncover the Secret Hiding Places of Stock Market Profits by Joel Greenblatt.
What Works on Wall Street by James O’Shaunessey
You Can Be a Stock Market Genius by Joel Greenblatt
Your Money and Your Brain by Jason Zweig

Websites that can provide instructions and help with procedures and terminology are Investopedia – http://www.investopedia.com/ http://www.investorshub.com/ and 1 Source for Stocks – http://www.1source4stocks.com/info/stock-analyst-opinion.asp or Smart Money
http://www.smartmoney.com/
Visit some of the more professional websites like Zacks Research – http://www.zacks.com/ Schaeffer’s http://www.schaeffersresearch.com/ Investors Business Daily – http://www.investors.com/default.htm?fromad=1
Some of these web sites will have advertisers who are worth looking into also. And remember, if they offer free information, get it.

And when you think you want to invest/trade, try some paper trading to test your skills without spending you money http://simulatorinvestopedia.com/ http://www.moneyworks4me.com/
and/or http://www.tradingsimulation.com/

You at least have made the right decision to start investing, this is the first big step and it won’t be your last. Keep taking those steps forward and along the way never take the advice from people that are not in the market or try to tell you not to invest.

Good luck on your journey, study hard and you’ll invest well.

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