Investing - Where to Begin?

[DeathDonkey]

Hi Everyone,

I think this forum would be a good place for my question, and I apologize in advance if it is too basic, but I really have no idea where to start understanding investing, business, money in general..

I am a 21 year old college student, I will graduate in a year and then intend to go to grad school but I may take a job (engineering), I have no idea. I do know that I have a bit of savings from my summer work that I won't need to live on and it is currently collecting basically nothing sitting in the bank. I'm sure it is a paltry sum to most, but I have about $10k that I could do without.

My question is where do I start in trying to learn about investing this money, or just doing something productive with it. I don't know a financial advisor, a stock broker, a family friend who is good with money, none of that.

If anyone could recommend some books, websites, etc. that would help me understand what options are out there and where I should begin, it would help me immensely. I'm quite intimidated by the amount of knowledge I feel it takes to be a smart investor that I don't know where to start.

Thanks in advance to anyone who can point me in the right direction,
-Chris
(DeathDonkey)

[AdamL]

I recommend Benjamin Graham, Phil Fisher, and Warren Buffet's annual letters to shareholders as a start.

You're going to be hunting for just the right kind of business and then you're going to be buying a company, not a stock. You don't trade, you buy for earnings. The earnings are *yours*. You either get them as a dividend or you own a company that likes to re-invest. Hopefully, whatever they do, they do it for the right reason -- the rate of return is highest either within the company (reinvest) or elsewhere (dividends).

You'll also want to understand a little about tax law and capital gains. Non-dividend stock actually has an advantage because you acrue tax-free.

Finally, learn management. The people who manage the company you own a share in are your employees. You need to know whether they are doing a good job or not, because they make or break the company. Buffet picks his stocks with heavy weighting on management, because by and large they determine where the worth of the organization is going.

Good luck! I'm a 23 year old graduate and I'm still far too broke to start making decisions on these matters.

For someone your age though, the best "investment" may very well be the purchase of a home. Rent hurts a lot, and unless you're really making good money on the difference you pay b/n rent and ownership you lose big renting.

Adam

[BadBoyBenny]

Yo donkey...

This type of question has been posed and answered many times in this forum. You can search for plenty of book lists and the like, but for anyone to give you a good answer, you must give a little more info.

Is this 10 G's something you will want in say 5 years for a house down payment, or something you could really do without until retirement, or until your kids inherit it?

Are you willing to commit time and risk to learning how to pick stocks or are you just trying to beat inflation or a money market yield by getting a piece of the market?

If the answer of the first question ends up being somewhere more than 10-20 years and the second ends up being just trying to get a piece of the market, look into index funds, the lower the expense ration the better. Maybe a little exposure into foreign stock in case something catastrophic happens here at home.

If the answer to the first is that you may need it sooner (< 5 years) then CD's or TBills or Money Markets may be the only option to ensure protection of your hard earned money.

If the answer to the second is yes, then Adam's suggestions are good, maybe others will disagree. Many more books are recommended in past posts (repeating myself).

[digdeep]

Read books on Warren Buffet: Essential Buffett is one that is excellent. Websites that are good are Yahoo Finance for financial data, Motley Fool.com for Investing ideas and commentary, Investopedia.com. for answers to nearly any investing question you might have, and Nasdaq.com, guru analysis, for information on companies and SEC filings. I would not recommend listening to a broker's advice, and I personally would not invest in a mutual fund.

[thesanch]

Hey Chris, I'm sorta in the same boat as you. I've been thinking of putting my money into a year CD. You can check daily interest rates at www.bankrate.com. The reason I'm choosing this over stocks or an IRA is that I would like gain a little money but still be able to get it back when I plan to graduate. Maybe to put a down payment on a house. It will make more money than a regular savings account, and there is no risk of you losing money. It's a good little deal I guess.

-Freddie

[GeorgeF]

1) Go to the best public/university library where you are. Ask a librarian for help. While your researching speculation look for the kind of chicks that are on the asset, not the liability side of the balance sheet. You might also consider reading biographies and any other books that seem interesting

2) Read Buffetts and Mungers stuff at www.berkshirehathaway.com.

3) Consider subscribing to the Wall Street Journal (or reading it for free at the library). The Journal of Commerce might also help you. A good library will also have trade magazines from most every profession.

4) At your age the returns from anything that increases your personal income will be highest. Simplistic analysis: 40 years working x 365 days = 14,600 working days. If you can get a $1/day raise you are in effect getting $14,600. Try turning $1 into $14,600 in the stock market even in 40 years (you would be lucky if you got $256). Dirty secret: investing is for 40+ year old people with money but few ways to increase their incomes.

You need to figure out how to move up the career ladder and get the most income soonest. While you are investigating speculation at the library consider self help / career books. If you get your career and your spouse right real estate and stock portfolios will take care of themselves.

"What color is your parachute" is probably worth reading.

[lu_hawk]

You've gotten some good advice. I would add that it's very important right now not to get the itch to start buying stocks right away. You have lots of time to invest, the stock market is not going anywhere. You aren't going to be a winning poker player that first time you play, the same goes with investing, take the time you need to do the reading and studying before you make the plunge.

I would read Ben Graham's books, also read Buffett's annual letters. Another one that isn't as widely known but that I consider essential reading is 'You Can Be A Stock Market Genius' by Greenblatt. Yeah the title makes it sound like it's worthless but it's really good and the author put up some ridiculous numbers at his hedge fund. Also, I would suggest www.valueinvestorsclub.com as another good resource.