Advice needed from experienced investors and traders

[Jordan]

Hello, I am 20 years old and want to get involved with the stock market.
Here is my scenario:


20 years old
I know the basics of the market
Can't start until the summer
Can only start with $500-700
I want to eventually earn a small monthly income and also have something for when I retire

I know I can open an account at Scottrade with minimum $500

I need advice and answers frot he following questions

Is $500-700 too small to start with?

With that little amount, should I invest into something secure and long term(mutual fund), or should I trade and try to multiply on that amount?

What are some good online sources and books for beginners?

Should I purchase a subscription to the Street's under $10 stocks or would it be pointless with the little capital I have?

Please advise me with your honest opinions. Feel free to PM or email me.

Thanks
Jordan

[InvestingMoron]

Pay the rent. That's what I would do.

[moneyman]

$500-$700 is not too little to start with. Most people start saving (403 b's) with $25 or $50 a pay check. With that money I would buy one position that pays a dividend. I am invested in a small bank called Rome Savings Bank (ROME) that is $11.80 a share and pays a 2.55% dividend. That is a relatively safe company. Being as young as you are you could look at something riskier like Sirius (SIRI) or JDSU. Whatever you do don't trade with your rent or grocery money. All the research that you could need to do can be done on line. I wouldn't pay $10 extra in your situation.
Good Luck

Chris

[Jordan]

Thanks for your reply.

I am saying that small amount because the rest I have will pay my bills and utilities. I just want to start young.
If I do start with $500, I plan to put in another $500 every 4-6 months.

Please, keep the advice coming

[Jordan]

$500-$700 is not too little to start with. Most people start saving (403 b's) with $25 or $50 a pay check.

Chris

Question, what are 403 b's?

[bobwatford123]

In my opinion, and I think Cramer agrees take some chances. Go with risky (but well researched by you) low price stocks. As for mutual funds totally forget it. As for dividends.....3% on $500 is $15 a year so don't waste your time (also considering the dividend paying stocks are stable price wise and likely won't appreciate enough to make much money).
You won't be earning a monthly income investing $500-700 but you may make a decent profit at the end of the year if you get involved with the right turnaround company.

[Luc1Grunt]

Take "your" %10 first and put it in something solid. Pay yourself first.....as stable savings grow, increase the risk. Also, see the 200 other threads on this topic for starters. Good luck and good investing!! :D

[the_menace]

I would just pretty much invest my time and money first on books if I were you. The bookstore used to be my hang out for the whole weekends dedicated to reading about stocks, etc. At your age, you're very much capable in taking huge risks, and that $700 can be invested in any stable company that you wish. I'm a risk-taker, so I love being involved in small cap stocks with of course good fundamentals so that's just me. If you're planning to do this at least on a pre full-time basis, you can start looking at on how to read the market including technical analysis. Start small and learn from mistakes (everyone makes them).

[madcowdisease]

With $500 I think you'd get eaten up by commissions. Scottrade or not you better hope for good gains or the commish will kill you. Remember $7 a trade equates to $14 total. $7 to buy, $7 to sell. So you had better hit the jackout if you plan on making anything worth while.

I stared out small, with less than 4K. That allowed me to take 1000 dollar positions in a few stocks so it doesn't have to move 5% just to pay the commissions.

But hey, if you have a small-cap in mind that you are sure will go up, go for it. I'd advise you to look at BMD or something along those lines before the summer driving season.

G'luck

[Jordan]

Thanks for all of the help, keep it coming :D

[optimus25]

Practice your investing strategy using sites like www.clearstation.com

Buy some investing books. I know that chartguru and the other traders here have recommendations on technical trading.

I like "The Intelligent Investor" for fundamental trading. The book will help you understand the market and how to find good quality companies etc.

[optimus25]

$500 is too small to start with. I started w/ $1000 7 years ago and in hindsight, that amount was too small.

I would invest in learning first. Save up that money in an account like ING Savings. When it gets sizable, around $2000 then you should start thinking about trading in stocks.

And remember. As a trader, only invest what you can lose. Period. If you're going long term, you're better off buying mutual funds.

Create a foundation first.

[aiki14]

My 3rd (I think) post and I'm gonna give advice, so take it for what it's worth. I would "invest" in education, all the books are available at the library or a book store you can hang out in. If you have done the research and you can afford the pain if you get hammered, then go for it with your 500. Keeping in mind what others have said about commissions eating into your stake, I would go with one or two positions in small caps where a relatively small dollar change would give you a good percentage and maybe cover your nut and give you a profit.
Good luck

[moneyman]

A 403 B is a tax sheltered annuity that you can invest Pre-tax money into. It does not get taxed until you withdraw it (59 years old). Essentially you are using the gov's money for years to make money. Check with your employer as most companies have plans. As little as $25 a pay check can get you started then icrease it as you get raises.

Chris

[Jordan]

What are some good books to start with? or online sites?

[optimus25]

A 403 B is a tax sheltered annuity that you can invest Pre-tax money into. It does not get taxed until you withdraw it (59 years old). Essentially you are using the gov's money for years to make money. Check with your employer as most companies have plans. As little as $25 a pay check can get you started then icrease it as you get raises.

Chris

A little correction here. 403B's are the public employee's version or a nonprofit company's employee's version of a 401K. Its a salary deferral plan. 401K's, 403B's, & 457's are the name of the tax code and all have similar qualities. The differences are in the type of company that sponsors these plans. TSA's (Tax sheltered annuities) are a whole nother beast.

[NINOHERO]

What are some good books to start with? or online sites?

Buy the successful investor by William J O'neill--$10 bucks. Don't buy any stock that cost less than the book. In the O'Neill book, "Step 2 "a simple 3-1 Profit and Loss %" Read it at least 3 times. Go to the Library and read "Investor's Daily" religously . Don't worry about commissions--They're irelevant now. Don't worry about buying round lots of 100.

Seriously, if you read the book and IBD and keep your discipline, you will be successful. If I only new then what I know now...

[Jordan]

Buy the successful investor by William J O'neill--$10 bucks. Don't buy any stock that cost less than the book. In the O'Neill book, "Step 2 "a simple 3-1 Profit and Loss %" Read it at least 3 times. Go to the Library and read "Investor's Daily" religously . Don't worry about commissions--They're irelevant now. Don't worry about buying round lots of 100.

Seriously, if you read the book and IBD and keep your discipline, you will be successful. If I only new then what I know now...

Just bought the book:D

[optimus25]

Practice your investment strategy.

www.clearstation.com

I subscribe to IBD...just one of many tools. Too many to list on the web.

Readings:

Contrarian Investment Strategies
The Intelligent Investor
Securities Analysis
Reminiscence of a Stock Operator


When you have an investment idea that works, stick to it.

[Jordan]

Thanks for all of the help

[Hafen]

I was your age 44 years ago. I had a similar amount then, I bought 100 sh of a $5 stock, a friend had a similar amount, he bought 15 shares of a $30 stock. Mine choice was a speculation with good reason to buy, my friend was a big name retailer. Fast forward 40+ years, I live in a home worth 4x times my friend's home. I do my own research online, and I trade online at Scottrade, so I need someone, vis-a-vis Cramer to give me stocks on which to focus. And CRAMER IS EXCELLENT FOR THAT. You can't watch and buy, you need to watch, think, then buy, and that technique works quite profitable for me. GOOD LUCK.

[Jordan]

I was your age 44 years ago. I had a similar amount then, I bought 100 sh of a $5 stock, a friend had a similar amount, he bought 15 shares of a $30 stock. Mine choice was a speculation with good reason to buy, my friend was a big name retailer. Fast forward 40+ years, I live in a home worth 4x times my friend's home. I do my own research online, and I trade online at Scottrade, so I need someone, vis-a-vis Cramer to give me stocks on which to focus. And CRAMER IS EXCELLENT FOR THAT. You can't watch and buy, you need to watch, think, then buy, and that technique works quite profitable for me. GOOD LUCK.


Thanks, that is very interesting

[redrum]

Trading Direct has no minimum to open an account, and all trades are $9.95, all you have to do is make at least one trade a year.
And don't get too depressed if your stock goes down a little. View your stock like a cash register - sometimes it's got a little less, sometimes a little more - eventually in the perfect world (cramerica) it will have considerably more. 8)

[redrum]

Thanks, that is very interesting

You forgot to mention what a pain in the ass it was to purchase a stock, less even to FIND a good one, without having to pay at least a 10% commission to some broker who would then purchase the stock for you......... :mad:

[nedfromsaltmarsh]

Open an account with Scottrade and then buy 100@SIRI.

[zyzzyva57]

What has eaten into me is learning the lingo, e.g., Scottrade and reading between the lines with Cramer and discovering at Hard Knock U his strengths and weakenesses. He makes it seem ez and he is always right. But, on his Thurs show he talked about one of his big losses early on. The only way to learn is you got to put money on the line. It is amazing how this increases your Learning Moments. Money, like cancer, will do this.

[the_menace]

I like when Cramer said, "your first lost is your best lost". I definitely feel that this is true and it stuck in my mind how valuable this was when I took my first lost. There's going to be times when we feel that we just have to jump in the market just for the sake of it. Try to ask yourself first why you're buying the stock and have enough argument if its truly worth the risk/reward potential, if not its rather best to keep your money in the sidelines during uncertainties. I've learned this the hard way but definitely don't be too conservative to the point where you're scared to take risks even if you've done enough homework. Bottom line...read, read, read.

[David Briggs]

Let me suggest trading CEF, which holds gold and silver bullion. It is NOT a mining stock, has negligible enterprise risk of any kind, and is a low-priced trading proxy for the metals. Buy below $7.50 and sell above $8.00. A very conservative way of gaining experience placing orders and making 15%+ per year.

[MoMoney4Me]

Commissions on the buy and sell side will kill your net return for stocks purchased in a small portfolio and the diversification you would be wise to seek would be severely limited in such an account.
Common wisdom says to avoid stocks unless you have accumalated about 6 months of income into a liquid savings account, paid off any debts you have, etc,,,
But if you're still inclined to accept the risk of being in the market a great way to start small is to dollar cost average through a direct purchase plan or dividend reinvestment plan. You might begin by looking at Computershare.com https://www-us.computershare.com/investor/plans/planslist.asp?stype=all

Another way to start is with Sharebuilder, but not best choice for a trader. Plans like this are best suited for buy and hold over the long haul, and the initial plan fees might look like a value but the costs to sell are usualy quite high too. http://www.sharebuilder.com/sharebuilder/Index.asp

If it was my money I'd try this one first though,,,,
http://qqqdirect.mystockfund.com/
A lower fee alternative to Sharebuilder is MyStockFund.com which works much like ShareBuilder. MyStockFund has a service that allows dollar cost average investors to buy the NASDAQ-100 Index Tracking Stock (NASDAQ: QQQQ) called QQQDirect.
QQQDirect is an affordable online investing service that provides one plan purchase of QQQ per month free of any charge. It is a fractional share, dollar-based service that allows as little as $10.00 per month to be invested with QQQDirect's AutoVest Schedule.
QQQ offers investors ownership in NASDAQ's largest 100 non-financial companies. A single share of QQQ represents 100 of NASDAQ's large-cap growth companies while adding a broad-market index to investment portfolios.
There are no purchase fees or annual fees when you buy QQQQ through MYSTOCK FUND.com so you could dollar cost average into it over a while and only pay a fee of $12.99 when you sell your shares.

You could buy a few shares of a single stock hoping to swing for the fences with a company that doubles or more in the short term, but I'd rather take that $500 to the crap tables hoping for hot dice and have a little fun and a free drink or two in case it went the other way.

Unless you're willing to part with that money pretty quickly, you need to get a bit of diversification by at least getting into an ETF or sector fund IMHO !!