Investing Newbie

Pac-Man said: "Hey guys. I'm a 16 year old kid that would like to start investing in the stock market and making some money. I was thinking of investing in some mutual funds to start out with like T. Rowe Price Bluechip or Emerging Markets or something. Is this a good idea? Can you guys give me some advice or point me in the right direction? Thanks.:biggrin5: Oh and I have a small question. When companies take over other companies (like microsoft is trying to do with yahoo) do both stocks benefit? Is there a trend with that? Thanks."

hasse_john@yahoo.com said: "I see a real downdraft with the sub-prime mess unraveling, pulling down home values, and stock prices. I would not want to be on the positive side of the market for the next little bit. There will no doubt be stocks that rise, but in a mutual fund, you are more or less playing the averages. On takeovers, there is no uniformity. Usually 'the street' is positive, but not necessarily. Pretty uniformly the company being taken over increases in value, but whether the combined company is worth more is anyone's guess. (sometimes the market reacts positively to divestiture, which is the opposite of a 'takeover')"

Pac-Man said: "Ok thanks. Are you suggesting I don't buy mutual funds? I read an article on the motley fool and the guy said the best funds to buy are index funds. The markets are pretty down right now but I saw all of them had a little bit of an upswing yesterday. I also think the oil bubble is going to burst soon. Would it be bad to buy a little of an index fund that represents the Dow or the S&P?"

cwms said: "FIrst of all, my suggestion for investing newbies is to stick to quality, 4-5 star mutual funds and/or index funds. That's a good way to get your feet wet without too much downside risk. Regarding oil, I agree there is a speculative bubble, not sure how much or when it will hopefully pop, but we can't disregard tensions in the middle east that may keep that bubble from breaking."

Mr. Gekko said: "Mutual Funds are how I got my feet wet in the markets and I think it's a great way to start off. You can track your fund just like a stock and that will give you a sense of how the markets work. You can also plug your fund symbol in Yahoo! Finance and view the major holdings that are in the fund. From that, you'll also be able to see how different market conditions effect different sectors. My advice is "go for it!" You're young and the markets are sold off. This is a great time to get in because there is more upside than down side in the long run. Before jumping into any old fund, I would do some homework. Look at some funds that are highly rated by Morningstar. I would also suggest that you try to get into a "no load" mutual fund. That way, you won't have to pay any management fees."

SKriLLa. said: "Answer to question #2 The company that gets bought out usually gets bought at a premium, higher than the current value of the stock. So if Microsoft were to buy yahoo for $31 a share, the stock holders of yahoo would make money. As for the company who does the buying, it usually takes time to understand whether their purchase is going to make or lose them money. Buying a company purely as a takeover prospect isnt a good idea, even though some people will disagree. Its better to look for a good company that is additionally a takeover target."

Pac-Man said: "Thanks for all of the advice guys! You have all been really helpful. I've been reading Money Magazine and they seem to have a lot to say about mutual funds. I guess I'm off to morning star to look at some, and I'll run my picks by you guys once I have some. I've also been learning a lot from investopedia. I won't have a whole lot to invest, maybe about $1,000, but I guess buying mutual funds will help with diversification? Thanks again guys. :biggrin:"

Mr. Gekko said: "[QUOTE=Pac-Man;71244]Thanks for all of the advice guys! You have all been really helpful. I've been reading Money Magazine and they seem to have a lot to say about mutual funds. I guess I'm off to morning star to look at some, and I'll run my picks by you guys once I have some. I've also been learning a lot from investopedia. I won't have a whole lot to invest, maybe about $1,000, but I guess buying mutual funds will help with diversification? Thanks again guys. :biggrin:[/QUOTE] A mutual fund will most likely help you be diversified. You also might want to check and see if there's a minimum investment required. $1,000 may not be enough for some funds."

Pac-Man said: "Yeah I was hunting around and most of the mutual funds I saw had min. investments of like $2,500. Ill keep looking though. What does it mean when it says them min. investment is "closed?""

cwms said: "When you see "Closed", it means the fund is closed to new investors, meaning you can't buy unless you already own shares in the fund. Keep looking, there are funds with $500 or $1000 minimum and some with higher minimums will let you invest less if you commit to adding, say $100 every month."