How do I buy stocks and what is the best way?

Angel: How do I buy stocks and what is the best way?
Hi, im a college student studying business and i became really interested in stocks. Some people live off stocks and I am wondering how i can do that too. How do I buy stocks? I have 10,000 saved up, should i take a risk and invest 2,000 dollars in 5 stocks? Do I have to go to an agency or the new york stock exchange to purchase stocks, or can i do it online?

Answers and Views:

Answer by Mark G
The easiest way is to set up a trading account with a broker like Scottrade or E-Trade.

Transfer your 10K into the account and you can buy and sell stocks for a low fee per trade.

EDIT:

Invest only what you can afford to loose….
Do not invest money you plan on using within the next five years.

Invest in a company you understand….

Diversity is better and is safer than a single stock investment. If that is important to you than consider investing in a mutual fund where your money is pooled and spread across hundreds of stocks.

(Not a recommendation just an example)

Answer by Truth
I hope you have been studying stocks for years because that $ 2000 can go bye bye in a matter of days if you don’t know about things like “sell stop” or invest in the wrong thing.

Stick to really big names .. Apple, Cable, Gold …anything you know about.

Answer by Stock Trading Warrior
That’s a lot of money and you should handle it carefully. I’d really hate to see you “risk” it all in the stock market. However, with a bit of learning, you can be quite successful, but that doesn’t come randomly.

Learning about the stock market takes a bit of time, but it’s well worth it, and books are a great way to start. I recommend Stock Investing for Dummies (no offense). It’s good book for understanding the basics. I would also recommend How to Make Money in Stocks by William J. O’Neil. It’s also a good one because it tells you what kind of fundamentals to look for in a stock, a bit about how to look for patterns in stock charts and how to protect your capital. It’s the first book I read when I started my stock trading and a very good start for stock investing or trading. Any questions about terms or anything go to Investopedia online.

The great thing is that while you’re learning, you can “paper trade” as you begin to learn strategies. That’s basically where you keep a fake portfolio of your trades. This will give you time to really think about how you want to invest/trade stocks, control risk, position sizing, set goals, monitoring your progress, etc.

You can buy stocks through an account with an online brokerage. There are websites that offer comparisons of brokers side-by-side (search for online broker comparison).

I definitely recommend going ahead and opening an investing account to gain access to stock market information, watch lists (fake portfolios) and educational tools that you can use as you begin the stock investing process. You can also familiarize yourself with the broker’s trading platform so when you begin to trade, you’ll have familiarity with how a trade is placed and have access to any resources related to the beginner investor.

That is so great you are interested in investing because when you learn how to invest you do it for yourself, your family and you act as an example to those who know you. Learning how to trade or invest will serve you your whole life!

Answer by Joe
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. Buying 5 stocks is not enough diversification. 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 0.5%.

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.

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 expenses. For stock funds, I would suggest putting ~70-80% of your money in the Vanguard Total Stock Market Index Fund. and ~20-30% in a foreign stock index fund. The Vanguard Total Bond Market Index Fund is good for a bond fund. The Vanguard Target Retirement funds can be good all-in-one stock and bond funds for an IRA. However, there are many different opinions out there on what the best mutual funds are. Read the links below and form your own opinion.

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.