Buying stocks?

[John Prophet]

A few basic stock questions from a total newbie.

A) pretend Ive never bought stocks before.
B) see A

OK, say a stock is valued at 1 dollar and I buy 500 shares, or $500 worth.....next year this time the stock is valued at $2...basically that means if I sell all my shares I should get $1000 dollars correct?

pretty basic question....I am sure there are things like broker fees etc which I have no clue about.

Whats the easiest way for someone to get started doing a little investing...I dont mean as far as picking stocks, but the actual mechanics of it.

What would it cost me as far as a brokers fee (is that close to a proper term?) to invest in 500 shares at say $1 a share..what are the normal commissions?

Any good sites to get started on?

Thanks, JP

[Redwolf]

For the most part, you're correct. There is brokrage fees and tax, but they are, for the most part, minimal (depends on your broker). Right now is a good time to invest, as we are coming out of a recession. Just remember to keep a very close eye on your stocks.

If you want to gun it on your own, heat to a site like Ameritrade or Datek, which are also great for Daytrading (where a stock is kept for less than 24 hours). It's more risky than a good broker though.

If you want good long term investments, I suggest mutual funds, which are basically pools of stocks you can invest in. If you invest in, say, a Technolgy mutual fund, you may be investing on companies like Intel, Microsoft, and Dell at the same time as companies like Sandisk. It safer, but not as profitable.

A good broker can offer you good advice on what investments are good to make. He may tell you that GE is a good low-risk long-term strock for instance.

Market Indecies help you by giving you a good idea of how the market is doing. The Dow Jones Industrial Average is an indicator involving many major companies, including GM, GE, Microsoft, IBM, HP, Ford, and other large companies of the American stock exchange. If you have blue chip stocks (large company stocks, like IBM or GE), the DJIA is a good Indecie(sp) to watch. Similarly, the Nasdaq is a good indecie(sp) to watch for Technology stocks, since a majority of the stocks on the Nasdaq exchange are technology stocks (like Intel for instance).

[caddmannq]

If you open an on-line account with someone like Ameritrade, you can place buy or sell orders for about $11. This allows the purchase or sale of up to 5000 shares, I believe, of any particular stock. If you sell and make money, you must pay taxes, and if you only hold the stock for a short time, you pay extra taxes (short term capital gains.)

Otherwise, starting an account is easy if you don't want to trade on credit (margin). You just send them a check, or an "e-check", and they start your account. As soon as it's funded, you get an e-mail, and you're ready to trade. At least you're functionally ready.

Places like Ameritrade also have on-line resources where you can track, chart, and research companies selling stock, and news and financial info about them.

If you've never bought stocks before, I'd recommend you go to the library and check out two books:
How to Read the Financial Pages and
How to Buy Stocks.

(I can't recall the authors, but they are well known books.)

Do some research before hand, otherwise it's worse than getting into a poker game where you don't know the rules.

[caddmannq]

PS: Ameritrade and Datek have now merged under the Ameritrade name. Among real daytraders, Ameritrade is not really popular. They consider it strictly for newbies, and not too good at that.

[Emc2]

what about Roth IRA's?

[rebirth]

brokers fees are sometimes a percentage or set amount, go for the set amount.

Originally posted by Emc2
what about Roth IRA's?

Roth IRA's are a tax defferred savings instrument where you conribute your after tax dollars upto a maximum limit and the fund is invested any way you choose-aggressive growth, value, fixed income, balanced- and at retirement when you take distributions, only the growth part is taxed not your yearly contributions because you had already paid taxes on them.

[caddmannq]

'Course you're gambling that taxes & inflation won't go up enough to eat up the profits. But I have an IRA & so does my wife.

The market slump hasn't helped them though....

[Sweet]

I decided to go with schwab investments about 4 years ago. They were solid and a great reputation and real good and easy site. I went to the downtown office with a check and they opened it on the spot. The trades cost more but I intended to keep with them for a long time, no daytrading. If I were to do it over, I think I would use Ameritrade.

buy low, sell high.
peruse financial sites frequently, like smartmoney and fool.com.
keep a close eye on your gains before year end, sometimes selling some shares for a loss can be a tax advantage.
good luck!!! diversify!

And diversify diversify your portfolio into 4 or 5 asset classes.