The Motley Fool Investment Guide for Teens

[cdxx]

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I'm 19 and want to start investing. I have about $2000...not much, but it's all I have.

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read MF's page on Roth IRA. then re-read it. don't fool yourself that from day one you'll be able to beat a good index. everybody makes mistakes at first, everyone loses a lot more than $2000 by making them. put your first $2k into a good fund.

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I don't think putting it in an index fund and getting 10% return every year is anything great because $200/year isn't really what I'm looking for.

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umm... you may think 10%/yr isn't great, but this stuff compounds fast (you'll see it when you graduate college). stock portfolio returns are the highest EV of any investment vehicle, the only question is how much risk you can take. i am not much older than you (25) and most of what i invest goes into small/mid-cap growth funds. higher risk, but also higher returns.

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I Read "Fooled by Randomness" and half of "The intelligent investor" (it was mostly way over my head). I'm also going to read some of the morningstar.com and investopedia tutorials. Do you think this book is worth it?

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i think first book should be something like "Money for Life" that teaches you why and how to save. the second book should be something like "investing for dummies". after that i read everything i could find by peter lynch.

[SteveKeys]

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I read investing for dummies last yr and I am up 1000% this yr.

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Go on...

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I read investing for dummies last yr and I am up 1000% this yr.

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What size account?

i started it with 15 cents

[Sniper]

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i started it with 15 cents

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.15 -> $15 ... not bad, but you probably could have done that easier at the .001/.002 jokers wild tables [img]/images/graemlins/wink.gif[/img]

[LaramieJC]

Open a Roth IRA if you are earning money from employment each year. Put your money in SPY and don't touch it. I started investing in 2000 when I was 18 and decided that I didn't want to settle for "average 10% returns" so I invested in my brokers recs - LU, GLW, NOK...I lost 6K or about 60% of my portfolio. That's a tough pill to swallow but it was a good lesson learned. Take the 10% reinvest it, make your yearly contributions, and be happy. Don't try to outperform the market if you don't have the time or knowledge to do so [img]/images/graemlins/wink.gif[/img]

JC

brokers make you broker

I think that you are ignoring the major question that you should be asking yourself: "Why am i investing this money?". The answer may seem obvious to you--to earn a return on what I've already made. This is true in the broadest sense but you need to decide what your investment time horizon is. Do you plan on starting a retirement account (IRA/ROTH IRA) or are you saving to pay education/housing/car expenses. In short, the longer your investment horizon the more aggressive and risky your investments can be because with more risk you get a higher return IN THE LONG RUN. Long-run investing is usually considered a 20 year plus time horizon. If this is in fact your case, you are starting an IRA that is going to sit for 40 years before you touch your money then I would reccomend an index fund that tracks small-cap stocks such as a Russel 1000-based fund. Historical average return for this class of stocks is around 28%--IN THE LONG RUN--, not bad at all. This is assuming reinvestment of dividends and compounding of capital gains etc. If however, your timetable for investing is less--say 5-10 years, I feel that SPY would not be a bad way to go. If you will need the money before this governemnt or municipal bonds may be the way to go for you. As far as trying to pick individual stocks my advice is don't do it until you have absorbed an abundance of information as to what you are looking for in a stock (what the numbers mean largely) and more importantly, enough money to diversify your portfolio sufficiently to protect yourself from a stock going sour. I would say the threshold for this is about enough to invest in 20 stocks-but don't over-diversify, risk can only be reduced so much and by the time you have about 20 stocks, properly diversified, that's about it. But this is getting ahead of your question. My recomendation, in short, is this:

1)determine nature of your investment strategy (retirement, home purchase, emergency fund etc.)

2)find a good investment vehicle that fits your time frame

3)don't touch your money if you can help it--esp. if you are considering reallocating into individual stocks

Also remember that the worst thing you can do right now is NOTHING. You are young and have a long time to compound your returns--use this to your advantage. It is the single greatest tool an invester can have. Don't try to 'beat the market'; it can't be done by the average invester (I'm going to get flak from that statement if anyone reads this). Invest in something with the most volitility that you can handle GIVEN YOUR INVESTMENT HORIZON, this will give you the highest returns on average. Remember to diversify--SPY is not as diverse as you think-neither are all index funds, but it is a good place to start and THE yardstick by which investments are compared.

Just remember--do something with your money, you worked hard for it, now make it work hard for you.

[RunDownHouse]

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Don't try to 'beat the market'; it can't be done by the average invester (I'm going to get flak from that statement if anyone reads this).

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It can't be done by the majority of those in the industry.

There really needs to be a sticky at the top of this forum:
Q: I have $XXXX but know nothing about investing. What should I do?
A: Put it in the lowest cost S&P 500 fund you can find.

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Quote:
Don't try to 'beat the market'; it can't be done by the average invester (I'm going to get flak from that statement if anyone reads this).


It can't be done by the majority of those in the industry.

There really needs to be a sticky at the top of this forum:
Q: I have $XXXX but know nothing about investing. What should I do?
A: Put it in the lowest cost S&P 500 fund you can find.


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True--hardly anyone can 'beat the market' not just the average invester.

However, uniformly adminsitered advice to simply invest in the S&P 500 index is probably not your best option but it is better than doing nothing at all unless you know you will need the money in short order.