Question: How to invest in Stocks for beginners?
What exactly IS investing in Stock? How do you go about investing in stock? What's the best stock to invest in? I'm completely clueless, so the more details and information, the better. Thanks!
Answer:
Check out, Investing for Dummies, by Eric Tyson. Don't let the title scare you off, it's really a great book for beginning investors. Will help you avoid many of the crooks and thieves out to take your dough.
Buying stock is like buying little slices of a company and sharing in their profits. If the company does well then more people will want it and then the price will go up per share - so when you sell it you can make a profit. It differs from buying bonds where you are lending your money to a government or to a company for interest. As you'd figure, bonds are safer but if the company does better in growth or profits you won't benefit more by just holding bonds.
Before investing you must think of what you are investing for exactly, plus for how long and how much risk you want to take. More risk means more rewards, but more chance of loss. If you are investing for the long term though (many years or decades) then you can take on more risk if you like the volatility.
You might consider a mutual fund or index fund for broad exposure and diversification at a very low cost. If you are thinking of retirement then a Roth IRA may be suitable for tax free growth.
You need to pick a good broker or investment company. For funds avoid the banks and expensive places - try Vanguard, Fidelity, or T. Rowe Price. The former has the lowest costs for you.
Try reading Investing For Dummies, and Mutual Funds for Dummies for a good basic investment education.
Owning stock is owning a (usually very small) part of that company. You buy stock through a broker - you pay a fee when you buy and when you sell. There's no "best stock" to invest in.
A good way to start is by putting money into a mutual fund. That pools money from many people to buy a group of Stocks. Each fund has a professional manager who chooses the stocks the fund will invest it, and each fund has a particular goal - some are higher risk (and have higher chance of gain, but also of loss) than others, some are in particular industries.
There are 2 ways to get involved with stocks.
First is investing in stocks. Second is trading stocks.
Both of them have different perspectives when it comes to stocks.
Investors invest in a stock because they believe the company's stock price is going to rise. They make a profit by investing in the right stock. For more info:
http://beginnersinvest.about.com/
Traders trade a stock to make a profit, and they usually are not that interested in the company that much. For more info:
http://tradytube.com/trading-guide/
Start with a book like _Idiot's Guide to Stock Market Investing_ to get a basic sense. Beware--educational services and published newsletters, etc., are likely to scam you. If you can find one person to mentor you for free or low cost then that could be a great way to go.