Thread: Start Investing Now!

ohoh...if this is for real i'm totally into it. i have nothing to do with my money except buy breast implants and i was thinking about investing. hurray.

I can't wait until I hear your thoughts on this matter, Digity. I too have invested some of my money into new businesses, stock market, real estate etc. And I'm only 19! I have found that it was more worth while to invest than it was to spend. Also CD's and such that recieve interest is also a good way to gain extra money on the side.

I can't do much now because I'm going to college, but what I have saved so far, I am using it to go to college on, as well as buying some land for a nice sized graveyard.

Anywayz, I'm sure you all are bored to death now.

Wow, what a coincidence you post this, Digity. I was just talking to my dad the other day about businesses. Many of my friends' families own small businesses and my dad's wanted to too. I've BEEN telling him how much I wanted to invest money since I was a kid, and now he said I can. Digity, my old man's giving me a thousand bucks to put into stocks, etc. I want to learn about it before I put the money all into one thing. I don't spend money on other things like you, too. Just stuff here and there, but mainly my check go to my car insurance, etc. Haha and I AM a 16 and work part time. You sure know your audience. :P Help me out, Dig. Man, your article has good timing with my life. Haha

Part II - That four letter word...DEBT

The first step is to build a healthy relationship with money. Money should not be a problem in your life and if you take care of your finances it won’t be. The worst thing you could do is get into debt! Being in debt is the opposite of investing. Even so, people continue to use their credit cards and not pay it off before having to pay interest. The annual interest rate on my credit card is 18%!!! Credit card companies don’t need to be in the stock market they’re getting an 18% return on their money and it’s much safer! Think about that for a moment! They’re getting a better return off use than the stock market average! The only time being in debt is really acceptable is when you’re buying a home and paying for university or college. However, in my four years at university I only took out one loan for less than $2,000 and paid it back before I had to pay interest. I was saving up for school from the time I was fifteen and I was able to pay for it all on my own…even books. Most people I knew graduated with a debt to deal with. They had to work a whole year, full time, before they got to my position, being debt free. Meanwhile, all the money I was making I was pocketing. Even people who were making more money than me were in a worse position than I was, because I wasn’t in debt and able to invest the money I had. I don’t mean to boast about myself, but I’m just trying to illustrate how bad being in debt can be.

Guess what? I use my credit card all the time! At least I try to. As soon as I was old enough to get one I did. You should too. I make sure I pay it off in less than twenty days. I never pay interest. I use my credit card even though I could pay for what I’m getting in cash. The reason I’m using my credit card and paying it back right away is because I’m trying to build up my credit history. When you look to get a loan for a house people will look at your credit history and based on that they’ll give you a loan or not. If it looks like you never pay back the money you owe you’ll have a tough time getting a loan and you’ll be stuck having to get it off someone else who’ll charge you a very high interest rate, because you can’t be trusted to pay it back! They’ll look at mine and see that I paid back every penny I owed and I did it before paying interest. They’ll see me as reliable and give me the loan for the house at a much more reasonable interest rate. As soon as you get the chance to get a credit card, do so, use it and pay it back right away. Never pay the interest. Build up that credit history as soon as possible.

Making tons of money won’t necessarily make you rich. It’s how you use that money that matters. Think about it, Mike Tyson filed for bankruptcy and he made millions! Don’t do debt! If you can’t afford it, don’t buy it. I know people in my life who own things they can’t afford. It’s the losers way, don’t do it! I could go on and on about how bad being in debt is. I could go through the figures of paying 18% interest and only paying the minimum monthly fees and you’d see that you end up paying a heck lot more for your original purpose. But, I’m going to leave it at that. Don’t do debt!

OK, I'm not in debt and I don't have a credit card, but I'll make sure to build up my history once I do. What next?

Part III - Introduction to Stocks

A lot of people make the mistake of being overly eager to start investing without learning the fundamentals about business and understanding what makes a good company tick. My first time investing money, I knew nothing about it and I ended up losing it. Luckily, it wasn't a huge amount of money...funny enough, it was about $1000. I invested it in the small company I was working at...bought the stocks, but the company will most likely go belly up at this point and I can kiss my money goodbye. Now that I've educated myself about the stock market and how businesses should be run I realize now that I should have never invested in that company. It was poorly run and I learned my lesson, but I was blindsided by greed at the time and had my head fixed on how much I'd get in return if the company was successful. The moral of the story is that your stock portfolio needs to mostly consist of solid companies. About 10% could be more risky, but the vast majority of your money should be invested in solid companies that have a good record of return. Usually, the companies 5 year record is a good initial indication of whether you should invest in it or not. If it's 5 year record is very volatile you probably don't want to put your money there, unless you want to take a big risk. On the other hand, if the stock has consistently being going up then you might have found a stock worth further investigation.

The important thing is earnings, if a company isn't earning money its stock will fall. Look at Krispy Kreme Donuts...

http://chart.finance.yahoo.com/c/5y/k/kkd

Good thing I didn't put money in there. That's the scary part about investing in stocks...you never know what could happen. Atkins came along and wiped out a number of businesses like pasta and bakery factories...but now people aren't so mad at carbs and we're seeing Atkins losing popularity. All along the stocks for these various companies are being affected and how in the world would any of you foreseen the whole Atkins craze!? Some people try and chase the up and down curves of stocks, but this is very difficult and most aren't that successful at it. You're much better putting your money into solid companies and leaving it there. A stock like KKD or even a lot of tech companies are risky, because things are changing so rapidly that anything could happen to the stock. Although, you'll most likely get the highest return on these riskier stocks. Again, you need to balance between risk and stability. I currently have money invested in Bank of Nova Scotia.

http://chart.finance.yahoo.com/c/5y/b/bns.to

Look at the 5 year return. Much more secure, but I'm not going to quadruple my money while it's parked there, but I'm also less likely to lose it all. Honestly, I'm just looking for a 10-15% annual return on my money. If you can achieve that then you're doing good! You're beating inflation, which can eat into your investments. Also, I'm planning to leave my money invested there for at least 5 years...the longer, the better. 30 years would be great, but that's not always practical. In some cases you might need the money soon, if so, you probably shouldn't have it in the stock market. These are long term investments!

The interest rate on your savings or chequing account is much too low. My personal strategy is to park most of my money in solid companies and to DIVERSIFY. That means, don't put all your eggs in one basket. Don't invest all your money in just one area, because if that area tanks you're in trouble. By diversifying you spread the risk. So, I have one bank I'm invested in...next I'll look at an insurance company to invest in, then an oil company and then probably a tech company and so on. Spread it out.

Start reading up on investing! This is merely a primer to get you to started. I don't have any magic formulas here...just the basics you need to know to get started, but investing should be a life long thing and something you're continuely educating yourself on. In the next section we'll look at some stocks and go through what each of the figures mean. We'll also look at some other options, besides stocks, and see the pros and cons of each.

Thanks Digity. What do you think about CD's? To be on the safe side, etc.

Yeah, seconded. I have a CD, and since I lack a job it'd be a good idea for me to be making money somehow. Even though college is literally around a corner, would it be a good idea for me to put some money in the market when my CD matures, or to put it into another CD? (I know you already answered this, but I'm not sure if it's a good idea to be focused on my money in the market while having to focus on school and perhaps a job at the same time)

(sorry for the late reply )

Part III - Where to Invest

There's a lot of different investment options out there and you're bound to wonder where you should put your money. I'd love to give you one straightforward answer, but the real answer is that it depends on your situation. However, S-B is made up of young people and therefore, I'll focus my discussion on what's best if you're young and want to invest. The younger a person is the more risky they can be. If you're 65 and ready to retire...it wouldn't be very wise to put all your money in some super risky company and end up losing it all! When you're young you can be more risky and I was. I invested in a small company and it didn't work out...not a big deal. I have plenty of time to save up for retirement and my other major expenses. That doesn't mean you should go and throw all your money into something really risky. You still need to spread out your money. The golden rule of investing is DIVERSIFY! Even when it comes to risk. As you get older you have more responsibilities. You purchase a home, a new car and plenty of other stuff. So, you need a more stable portfolio, because you can't risk losing all your money. Otherwise, you'll be in a great deal of financial trouble when you retire. As a rule of thumb %10 of your money can be in risky investments. You can probably bump that up to %15 if you're young. Although, even a young person should have a stable basis for a portfolio.

Okay, so you're young and willing to invest. Now, where do you put it. My personal answer is "stocks". Stocks should make up the majority of your investment, unless you're totally unwilling to follow the companies you're investing in. In that case, you might be better off giving your money to a broker and having them invest it. For people that don't want to follow their stocks picking a mutual fund might be best. I personally own both. My primary focus is owning stocks in companies, because that's where you get your greatest returns, but I still feel that a solid mutual fund is a good investment. The thing is, we're aiming for a 10-15% return on our money. You can't get that leaving your money in a savings account or CDs, etc, etc. These are just short term and they're fine if you just need to park your moeny somewhere, because you'll need it soon. Otherwise, you should be in the stock market if you're in it for the long term! Stocks have been the highest performing of all investment options. Also, if you're about to retire it'd make sense to put your money in these safe, but low return investments. However, now you're young and can leave your money in the stock market for a long time...you need to put it where you'll be getting the greatest returns. Again, if you're not up to educating yourself even more on the stock market and following them then it might be best to give your money to a professional to invest. But don't be fooled into thinking that you can't invest your money just as wisely as an investment broker. If you educate yourself you can! There's no existing proof that stock brokers outperform regular joes in the market, but if you no nothing about the stock market and aren't willing to learn it's best to hand your money over to them to invest.

Here's a link that explains all the different pieces of information you see when viewing a stock: http://www.teenanalyst.com/askus/stockquotes.html
(Note, I haven't look at all the articles on that site, but it looks like a great start for a young investor).

So yes, the bottom line is stocks. I don't invest in anything that won't give me back the returns I'm looking for. Those low risk investments may not even be able to keep up with inflation! They have their time and place, but now is not the time. However, if you're saving up for univesty and heading off in a year you should have your money tied up in risky stocks...in such a case, it might be best to park your money in one of these low risk investments, since you'll need the money in a short while, but if you can leave the money for 5+ years (preferably 30 years) then put it in the stock market.

Quick question Dig what the fuck do you need all that money for if you dont spend it.

Digity, this is great! Why don't you make another section on retirement funds?? The coolest thing about retirements funds is that if you start one when you are young, it can be worth even a hundred thousand more than if you start 10 years later (even if you are only putting in a couple grand a year).

My boyfriend made me a Roth IRA for surprise present recently. It may not seem that romantic, but it was really a sweet thing to do. I actually got choked up when I saw the papers because it's probably one of the nicest things anyone has ever done for me.

this is great advice, i've always wondered how the investing concept works.
I'll start today! or maybe next week..