Beginner

 Book:Wall Street Journal: Guide to Understanding Money and Investing
Click to buy		  This handy fact-filled book initiates you into the mysteries of the financial pages -- buying stocks, bonds, mutual funds, futures and options, spotting trends and evaluating companies. For those who are curious but intimidated by everyday financial jargon, this guide offers a literate, forthright and lively alternative. Recommended.

If you are a beginning investor (it's OK, you can admit it), you've come to the right place. Remember that every market expert was once a beginner. We will walk you through the maze of the investment world.  Learning about any subject isn't easy, and the stock market is a very large subject.  If your goal is to be an expert, then be prepared to spend lots of time playing the market, trading, reading and surfing the web.  You can progress to what ever level you want.   You must learn the rules, strategies and risks.  The stock market is exciting when it's up and depressing when it's down, though you can make money even when the market goes down. It is very easy to lose money, a lot of it, and very quickly.  Some people, reach financial independence by playing the market. We actually know a few.  Our goal isn't to teach you everything about the market. It's to teach you how to learn as much as you'd like.  There's an old saying,  give a man a fish and he has a fish for a day.  Teach a man to fish and he has fish for his life. 

Lets Go Fishing

  1. Get yourself a small pad and a good pencil or a small portable tape recorder.  From today on, you should write down or record any words that you hear relating to the stock market which you don't understand.  Each day log onto the internet and try to figure out what the term means. Go to our glossary page to look up the terms that you don't understand. You can also purchase an investment dictionary so you don't have to logon every time you don't know a word.  You can also try a search engine like AskJeeves , Google, Metacrawler and ask it a question that you need the answer to.  Now you may still not understand what the term means but don't give up. This is quite common.  It takes time, repetition and determination.  If you spend a little time each day understanding the market, you will eventually learn this stuff.
  2. Purchase a good book for beginners and read it.  See our book list here.  
  3. If you don't understand, something don't give up.  Determination is the key to learning.  There are many subjects in the market that we first didn't understand, but through asking questions, researching we've learned much about the market.
  4. Don't try to learn too quickly. Go slowly. Revisit topics you still don't understand.  It takes time to learn the language and the rules. Be patient. If you stick with it, focus your efforts, you will learn this stuff.
  5. Learn beginner topics first and then procedure to more difficult topics.
  6. Use the AllExperts.com service to get answers to questions you may have or email us.  
  7. The best advice to be given to a beginner is to put as much money as you can into an IRA or a 401K and do it as soon as you can. Check out the difference it makes here. If you were to start with $5,000 at age 25, invest 2,000 every year and get a 12% return, you'd about $2 Million by the age of 65. Not too shabby.
  8. Doing, making mistakes and teaching others is the best way to learn about something.

Lets meet the players.

  1. First there is you the investor also known as the retail investor
  2. Then you need a Broker to make your trade
  3. Your broker can sell your stock for you to a Market Maker
  4. Your trade can also be executed on an ECN
  5. Then there is the Institutional investor consisting of Mutual Funds, Plan Sponsors
  6. We now have a new category called Day traders or Active Traders
  7. There's your good friend Uncle Sam, the tax man who rewards you for holding stocks for a year by charging you less in taxes.
  8. CNBC, a cable station, owned by GE, has become the main place to watch the action.  
  9. The Newspapers that cover the action are The Wall Street Journal, Investor Business Daily
  10. Mutual Funds will invest your money for you. The theory is they have these advanced degrees from fancy universities. But it turns out that 80% of them don't do better than the S&P500
  11. The SEC, Security and Exchange Commission are the rule makers and they catch and throw into jail the rule breakers
  12. The NYSE, New York Stock Exchange is where certain shares are traded, called listed stocks.
  13. There are the Pundits, whose words can turn the market around in a flash.
  14. There is the Fed and it's chairman, Alan Greenspan.
  15. The Underwriters
  16. The other investors
  17. The Hedge funds.  
  18. Investment Clubs
  19. Stock brokers

Lets Learn about some places these people hang out at

  1. The Stock Exchanges, Nasdaq
  2. The message boards
  3. CNBC

Lets learn the rules.

  1. Don't use money you can't afford to lose.
  2. Day trading is gambling.  The majority of day traders lose money.
  3. If you want to gamble go to the casino
  4. Do your due diligence (DD) before buying a stock. This means to find out as much as you can about the stock and not just rely on the word of others, including this web site.
  5. Don't buy on a tip.
  6. Don't buy penny stocks, they are cheap for a reason.
  7. You can't time the market. (It's pretty difficult)
  8. Put as much money as you can in your IRA or 401K
  9. Have a diversified portfolio to reduce your risk Don't put all your eggs in one basket. Remember Enron.
  10. It costs money to trade, this is called commissions and it varies by broker. There is also a hidden cost of the spread and for thinly traded stocks Market Impact.
  11. Don't buy stocks on margin. If there are margin calls then you can lose a lot of money.
  12. If something sounds to good to be true it usually is.  We know you've heard this before, but it's very true.
  13. If you think you found an investment idea that know else knows about, think again, it's very unlikely you have, but likely you've made a mistake.

Lets get started

The best way to really learn something is to do it.  To truly learn about the stock market, you will have to at some point plunge in a trade with real cash.  Although to start, we would recommend a technique called "paper trading."  Paper trading is making trades on paper. There is no money at risk.  

  1. Purchase a good beginners book to help you understand the stock market
  2. Paper trade
  3. Find some money you can afford to lose
  4. Open up an account with a broker
  5. Pick a stock to purchase
  6. Buy the stock and welcome to the world of investing

Links

Books