Advice for a new investor?

Darth_Trader said: "Greetings, I'm new to the forums, and I'd just like to say hello to everyone. I'm 21 years old, and I've been thinking about investing my money in stocks for about a year now, but I haven't gotten around to it. I just graduated with my associates, and now that school is out for a while, I thought it would be the perfect time to get started, since I'll have more free time until school starts up again. I've read a few books, "The Wealthy Barber" and "Yes, You Can Time the Stock Market" (by Ben Stein), but other than that I'm pretty green when it comes to the stock market. After reading Ben Stein's book, my plan is pretty simple; invest money into the S&P when it is down. However, one thing his book fails to mention is how to go about actually investing your money. Do I HAVE to go through a broker, or can I some how invest my money on my own? If not, which brokerage firm would you recommend? Also, I'd love to hear about any books you'd recommend. I'd like to learn as much as I can. I figure if I start now, I can retire before I'm too old to enjoy my money. So please, if any of you have any advice for a young "nooby" investor, I'd love to hear it. Thanks again, Darth_Trader"

drdan said: "First things first - definitely learn and practice by paper trading prior to using any of your own money. We have a game going on right now on Investopedia. Don't have the link here check the thread titled "just a thought" Second, yes you always have to go through a broker. The broker you are looking for is a discount or online broker so you can manage your own money. A full service broker will have a financial advisor on staff and will be happy to manage your money for you for a fee, but even then they usually have to run things by you first. Welcome to the forum and read read read"

drdan said: "Sorry forgot to give you broker choices - you have Etrade Scotttrade TD Ameritrade and several others I have no real recommendations on any of them as I am an options trader and use different brokers than these, but I am sure the stock traders here will give you some choices and reasons why their broker is the best."

BenHouston said: "Read some beginner articles at investopedia.com; also the wealthy barber is a great book."

LongArm said: "Hi DT, If you're going to invest in the S&P 500, that could mean either an index fund or an ETF. You can purchase an index fund from a broker OR directly from the fund family itself. An ETF must be purchased from a broker, as it trades on the exchanges like a stock does. If you go the index fund route, you could go with something like VFINX, which is Vanguard's S&P 500 fund. You can buy this from a broker like Scottrade (which is a good, cheap broker) or you can buy it directly from Vanguard. Index funds have minimum inital purchase requirements, often around $2,000-$3,000 (VFINX is $3,000), although subsequent purchases are usually much less. With an ETF, on the other hand, you don't have to worry about minimums--you can buy as few shares as you want. SPY is the most popular S&P 500 ETF. If you purchase shares of an ETF through a broker, you'll pay a commission for each buy and sell (Scottrade, for example, charges $7 per trade). If you plan on buying shares frequently, however, the commissions will really add up. In that case, you should go with an index fund instead and find one that's on the broker's No Transaction Fee list, or buy it directly from the fund family. You're off to a good start by reading Ben Stein's book. That guy's one sharp cookie. There is a ton of good educational investing material on the internet. Morningstar.com has a good free "classroom" where you can take lessons and earn points as you advance: [url]http://www.morningstar.com/Cover/Classroom.html[/url] Yahoo Finance also has educational material, Investopedia is great, etc., just off the top of my head. If you have more questions, post 'em. :)"

cwms said: "I would suggest opening a retirement account, either an IRA or preferably a ROTH IRA. With a retirement account, you won't be paying taxes on dividends, capital gains, etc. each year. You will only have to pay taxes when you start withdrawing your funds at retirement age. As mentioned above, I would pick a couple good mutual funds to get started with before going the individual stock route."

LongArm said: "[QUOTE=cwms]I would suggest opening a retirement account, either an IRA or preferably a ROTH IRA. With a retirement account, you won't be paying taxes on dividends, capital gains, etc. each year. You will only have to pay taxes when you start withdrawing your funds at retirement age. [/QUOTE] Actually, with the Roth, you [I]won't[/I] have to pay taxes when you withdraw at retirement age, as gains aren't taxed in a Roth. :th_dblthumb2:"

Mr. Gekko said: "Welcome to the forum and congrats on the great decision to make your money work for you. I haven't read either of those books but, they’ve obviously influenced you to do a great thing for yourself. Two books I'd recommend would be "Real Money: Sane Investing in an Insane World" by: James J. Cramer and "All About Dividend Investing" by: Don Schreiber, Jr. & Gary E. Stroik (remember, dividends = free money!). As for a broker, I use Scottrade. I have no complaints about them. They have $7 trades and a physical office near my house (and probably near yours). I've heard good things about E*trade as well. Best-o-luck to ya'! :wave:"

Darth_Trader said: "Thanks, everyone, for the great advice. I'll be sure to ask questions when I need help with something, which I'm sure I will! Darth_Trader"

AlfredSokol said: "Welcome aboard and good luck. :wave:"

Harry said: "Advice to new invstor... * Buy low, sell high...avoid all the pitfalls and mis-information that corrupts the process."