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investing money, making money, stockmarket etc.

Discussion in 'The Lounge' started by 84gmcjimmy, Dec 27, 2005.

  1. 84gmcjimmy

    84gmcjimmy 1 ton status

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    Can someone school me on making money, other than working. Things like investing money for a certain locked period, to take advantage of all the interest over the certain amount of years. Or investing in stocks or shares of an organization or company.

    I know I am limited by my age. But what are my options later on down the road for investing money, for example, when I get married and have kids, it would be nice to have a relief account or whatever so I could take time off and care for the kids, while they are young. Or the same thing if someone in my family was ill and I needed to take time off for work. Same thing would be nice to invest money sooner than later, so in say, 10 years once I am settled and have been working for a while, I could take the money out of an account and use it as a down payment for a house. You guys know what I am saying?

    Also, with the stock market...I realize its a win or lose sort of situation. From what I understand you buy stocks or shares in to certain companies. Then once they hit a certain spot they gain more money, then you get money back. But at the same time if they lose money, then you lose all the money you invested into it, right?

    I know you guys could tell me it in a nutshell, investing money and all. But is there a book, or website that can explain all this to me, and the ins and outs of each thing?

    I'm not trying to be/get rich by any means. But my family has lived in debt for a while, and I don't want to "grow up" to be like that. I don't want to have to use large loans just to get by or whatever. I just want to have a bit of safety, and if I decide on becoming an engineer, from what a member was telling me, you don't get paid over time. So I can't make extra money from what I understand.

    Thanks, hope I made sense?
     
  2. 4by4bygod

    4by4bygod 1/2 ton status

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    Steve.. don't be afraid of / apologize for wanting to make money. I've had money, and not had it.. it's better to have it, especially when others rely on you.

    having money doesn't automatically make someone a d**k, just like being blue collar doesn't mean one is "low class".

    a good way to begin is buy a couple of bank CD's.. they grow slow, but you'll get used to the idea of leaving the money alone, which is the key to success, regardless of the investment.

    You can invest in mutual funds ( a collection of different company stocks) on your own, or you can hook up with a financial planner.

    look up some "investing basics" on the web, to learn more.

    About the best thing I can tell you is to always live beneath your means, so you'll always have some money TO invest. start young, keep doing it. live long and prosper.

    Tom





     
  3. cbbr

    cbbr 1 ton status GMOTM Winner

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    Being young is an advantage. Compounding interest means that a little invested now will pay off big latter. Look at a few sites like Charles Schawb for a primer. http://www.schwab.com/
     
  4. justinf

    justinf 1/2 ton status

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    This can be true, but also not. For instance, right now I can get overtime pay, but once I get my professional engineering license, I will become salaried, and can only get overtime if the budget for the project I am working on can afford it. However there are other perks as well. We get profit sharing every year, plus if I am the project manager on a project, and it makes money, I get a cut of the profits for that project so at least in my company, I have some means of making additional money, but it usually only comes at the end of the year, not throughout the year.

    My advice is like what has already been said, live below your means and invest what you can. Take advantage of 401k plans at your future job, especially if there is a company match. And start saving what you can. Personally I like to keep a certain amount in savings/checking accounts that are easily accessible in case of emergency, then I have other accounts like CD's, mutual funds, stocks, etc. that I put money into that I don't plan to use except for college money for kids, retirement, or some kind of extreme situation.

    I also advise you to allow yourself money for hobbies like wheeling or other stuff you enjoy. Life is no good if you don't allow yourself to do the things you enjoy along the way. (boy that sounds cheesy.:D )
     
  5. 84gmcjimmy

    84gmcjimmy 1 ton status

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    Thanks for the help guys.

    I won't beable to set aside any money for a while, I still owe my mom money on the truck. But I definitly won't kill myself trying to save the money. I will just be a cautious buyer.

    I think I once saw one of those "__________________ for dummies" books I may look into.

    Thanks
     
  6. newyorkin

    newyorkin 1 ton status

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    Steve, it's excellent that you're thinking of this now! Way too many young people wait until they have a midlife crisis or need a large lump that they don't have to realize they should have been saving all along...like me...

    Live below your means is certainly some of the best advice to use, but to expand that, also use the difference of your living expenses to your means to increase your means, which is basically what it seems you want to do...

    I just started getting into this stuff in the last few months, so I like yapping about it and may have a thing or two wrong, but you'll probably find better info on the web. I actually got a bunch of info from another member here, too. I'll post up some bookmarks later if I fire up my laptop.
    One thing to keep in mind, though, is that there are a LOT of different opinions on how to manage money in stocks, savings, mutual funds, etc. Collect as much info as you can, don't build your conceots on just one guy that talks smooth or seems really genuine or whatever. Gather as much info as possible!

    Compounding interest is a powerful force... Essentially how it works is this (extremely simplified):

    1. You put $100 in an interest bearing account, at a rate of 50%, compounded monthly (meaning the interest is calculated and added to your account balance at the end of every monthly/30 day cycle).
    2. After one 30 day cycle, your account has your original $100, and $50 interest has been added (50% of the $100), so your balance is now $150.
    3. After another 30 day cycle, your account has the previous months $150, and now $75 interest has been added (50% of the $150), so your balance is now $225.
    4. After another 30 day cycle, your account has the previous months $225, and $112.50 has been added (50% of $225), to make your total balance $337.50.

    So with compounding, you begin to make money/interest on the interest. After enough time, it's not unrealistic to have more interest than principle (the initial amount you deposited).
    In the modern U.S., you'd be hard pressed finding a better return than 5% (compounded annually, paid monthly), but with enough time, and recurring savings deposits by you, this can really add up. But, it works both ways, this is also how credit card companies can financially rape people, and how you can end up paying double or more on a mortgage by the time it's paid off... I recently wrote a script to calculate compound interest on certain accounts to figure out the best ways to save for retirement and the kids, and I love it. I run numbers through it just for fun sometimes...


    With the stock market, you're investing in a piece of a company. Companies often need to raise money for startup, projects, etc. Instead of taking out loan after loan and accumulating huge debt, they "sell" portions of the company in the form of "shares". Ownership of the company becomes contingent on ownership of the shares, which is why companies that aren't struggling or completely for sale will almost never sell more than 49% of their shares to the public; that would open control of the company to whoever has the most shares.
    As a shareholder/owner, you have a stake in the company. When they're successful, many will often pay shareholders what's known as a dividend, which depends on the companies profits. If you own 1000 shares of IBM, and they pay out a 20¢ dividend quarterly, they'll send you a check for $200. Most people will usually choose to reinvest the dividends, though, which means you buy more shares of the company (or a different company, depending on your brokerage). This is basically like interest.

    Where people lose money in stocks is by the rise and fall of the share price, which is affected by many different things, and thier buying/selling timing.
    Take a company like Home Depot; after Katrina, Home Depot will probably make a lot of money on the rebuilding efforts in the affected areas. This means they'll have higher profit, which means their stock dividend may be higher, which means more people will want shares, which means current sellers of shares can ask more for them, which means the price has been driven up.
    Or, say a company like Delphi files for bankruptcy. The stock price will usually tank because the future of the company appears very bleak, dividends are extremely unlikely or small, and they could go out of business. This means anyone holding shares is holding a worthless piece of paper, stock in a no longer existing company, and the cash they bought the stock with is permanently gone.
    A lot of money is also made buying and selling stock, too. Buy low, wait while it grows, then sell high. A loose rule of thumb is to not hold a particular stock more than 5 years, or it will bite you. Something like Walmart or Microsoft would have been great to buy and sit on for 20 years, but you've got to be reallllllly lucky or good to find them and hold them that long successfully. Even today I wouldn't buy those and hold them more than a few years.
    Generally, success in the stock market is through a degree of work, it's not a no-effort ride. You have to research companies thoroughly, get to know their balance sheets (income/debts/etc), get to know thier management, know what's good and what's bad, and buy if all that looks good to you. There's still a degree of "luck", things like Katrina that made Home Depot and AIG shareholders ears perk up, or things like 9/11 that tanked most of the market and put a lot of companies out of business. But generally, the more you put into research and the better a company looks, the better you'll do. Don't expect to just stick a wad of cash in the market and the stock you own will naturally grow, that's leaving a LOT to the wind, and when you need the cash you may find your stock has just sunk to less than you paid and you would have done better in an ING account (lemme know if you want one, I get a commission if you use a referral from me :wink1: :wink1: :rotfl: ). Also, even if you put say $100 in the market for x years, and when you're ready to take it out, it's still just worth $100, you may have lost money because of inflation.

    IRA's and mutual funds are generally very good and safe, and at your age, I'd choose more aggressive funds. Aggressive funds are more volatile (fluctuating in value), but that's ok as your younger because you can leave the money in them longer to recover from dips. Mutual funds are managed by an individual who takes a pool of several individual's money and invests it in various companies. You generally choose the mutual fund you like, put your cash in it, and leave it there for a while, much lower maintenance than actual stock trading.
    IRA's are retirement accounts that have a lot of rules about circumstances to withdrawing cash. But they're generally maintenance free, you put the money in and forget about it until you're ready to retire (maybe check on them annually).

    The stock market is a lot of fun, though. When I got into it, I set limits, deadlines, and rules on myself; then I got carried away with good initial results and started "day trading", which doesn't leave a lot of time for research, and by the time I reached my re-evaluation deadline, I had lost some cash, which really sucks but has skin-thickening value...
    So for now as I recover and discipline myself a little better, I'm "Paper-trading"; I use an excel spreadsheet and have several stocks I watch and "own", a fake "account" with x dollars, and I do simulated trades, to see how well my research and techniques are... I actually wrote another script that reads my spreadsheet, goes out on the web and checks the share price for each of my "holdings", then displays how much I made or lost on each one, my breakeven price, and how much my holdings are worth overall... I still have to work in trade commissions (the amount you pay your broker for each trade you make), but I have to find a new broker first, I didn't like my last one, thinking about Scottrade now...


    Wow...So maybe tomorrow when you finish reading this post I'll send you those links... :doah: :doah:
     
  7. CustomChevy

    CustomChevy 1/2 ton status

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    ratch just taught me everything they tried to teach me in grade 10 economics, and it only took me 15 mins to read.


    WHERE WERE YOU 10 YEARS AGO! :doah:
     
  8. newyorkin

    newyorkin 1 ton status

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    :rotfl: :rotfl: Drinkin beer and wasting my money... :doah:


    Here's some great educational info on Mutual Funds:
    http://www.mfea.com/GettingStarted/default.asp

    Lots of Stock Market info:
    http://www.investopedia.com/university/buildingblocks.asp
    (Actually, a link I didn't know I had but will be re-studying now :wink1: )

    Another investment vehicle I forgot to mention was bonds (read this instead of me sloppily explaining in another essay-post):
    https://us.etrade.com/e/t/kc/KnowSeries?topicId=13200&groupId=9187

    There's also real estate investing (landlording, trading), which I think is one of the most stable retirement investments in existence. I don't think now is a good time to tie up money in it, though. I don't have any decent links on how to get into that, though...
     
  9. jekbrown

    jekbrown I am CK5 Premium Member GMOTM Winner Author

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    If you're new to the investing game, I highly recommend that you just do some research on mutual funds and by a diverse group of them (ie some large caps, mid caps, small caps... cover some different sectors etc). Everyone these days wants to invest in individual stocks and think they will make mad money. They may get that lucky... but there are people who have done decades or research and do this professionally and have still lost their ass. If you have any kind of job or kids or anything, you prolly don't have the time to dedicate to that kind of endeavor. I'd just read mutual fund reviews or "top fund" articles in the mags (Smart Money, Money etc) and online and go from there.

    Right now my Roth IRA is:

    60% Vanguard Health Care Fund... which has done very well for me and pays good dividens.

    40% REIT Index. It has also done really well, and is required by law to pay dividens. Always a good thing.

    My 401K:

    70% Dodge and Cox. This fund is closed to new investors now, but I can get in via my 401k. Awesome fund. Super-well managed and it has delivered a good rate of return for over 30 years.

    20% S&P 500 Index. Index funds are good because they tend to have super low fees. You hear people say "this fund beat the S&P 500 over the last 5 years" all the time... which means that the S&P, especially over the long term, yields a very good return. Very VERY few funds beat the S&P 500 if you are in a 20+ year timeframe.

    10% Wells Fargo Aggressive Allocation. This is the "risky" part of my 401k... it might go down 20% this year... it might go up 20%. Who knows. All I know is that I'm young enough to tolerate the risk, especially with just 10% of my 401k. ;)

    This is just an example... and I'm not even saying its a good one. Mutual funds are a GREAT option for people who don't have the time to dedicate to the research you will NEED to do if you really want to make $ in the market. Lots of people read Money mag and are on Morningstar.com all the time and they think they are freaking Warren Buffet. You know what people on the street call "retail investors" (people at home, like "Mr. I read Money Mag and Know Everything Now")???? "Dumb Money". I'd much rather pay a small percentage to a true pro who manages a fund. With the right balance of funds you can make a good yield every year... over the long term, you can get rich that way.

    I dunno, what is your age?

    Sounds like you need a money market (basically a bank account that makes a higher percentage) for immediate stuff that might "pop up" like a relative getting sick.... and some good mutual funds to grow money over time so you can turn that money around and buy a house.

    The only time you would lose "all the money" you invested would be if the company goes under. This is certainly a possibility (one of the reasons GM stock is so dirt cheap right now) but with most mid and large cap companies its not much of a concern. This is another reason a mutual fund is good... they are diversified... if one company goes under, it might only be like 0.05% of the funds total holdings... so it doesn't really hurt the fund that much. My Vanguard Health Care funds biggest holding is Pfizer. Anyone who follows the market knows the Pfizer has performed like poop over the last 5 years or so... but my fund is still getting a great return... because while Pfizer isn't doing much, it's only 4% of the funds holdings. Obviously the other 96% are doing ok.

    One should always try to "get rich"... that is what makes out economy go. If everyone in the country just tried to "get by" and was lackadasical (sp?) our economy would be in the toilet.

    If you can pay off the debts before you start investing, do so. Debt hanging over your head sucks... and unless its the Bank of Mom and Dad... someone always wants interest.

    I'm of the opinion that the only loan anyone should ever have is a home loan... and MAYBE a student loan. Otherwise, if you can't afford it, you probably shouldn't be buying it.

    j
     
  10. newyorkin

    newyorkin 1 ton status

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    Hey Steve, I see you're not online, but I'm watching Mad Money with Jim Cramer on CNBC right now. He's doing like a "basics" of investing show. Really good info to pick up...
     
  11. 84gmcjimmy

    84gmcjimmy 1 ton status

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    Hey,
    Thanks Ratch for all the information. I read it a few times I'm just trying to get a worth while reply ready. I'm trying to start as young as I can so I have money when I may not beable to make it.

    I think I missed the show though.

    Thanks
     
  12. tiger9297

    tiger9297 1/2 ton status

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    Read Financial Peace by Dave Ramsey. I read that book about 10 years ago when I was in college. Best book on money I have ever read. He teaches the basics as well as discipline. A MUST read. I have followed his advice fairly closely and have done very well with it. The only debt my wife and I have is our house and we hope to have it paid off ASAP. We pay cash for everything including vehicles. I don't want to sound like I'm "rich" because I'm certainly no Bill Gates. My point is that ANYONE, if they have discipline, can get to a point where they pay cash for everything, and have interest work for you not against you. Most money problems do not come from a lack of money, just mismanagement of money. Congrats on planning and learning early. :bow:
     
  13. 84gmcjimmy

    84gmcjimmy 1 ton status

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    Thanks Tiger, I will check out that book. Sounds like a good one to read if you had success from it.

    Ratch, you mentioned compounded interest accounts. If I put money into it the day I set it up, can I keep putting more money in it? I just can't take it out for the set period of time right? And the benefit is the interest is always calculated on the newest sum. This sounds simple and something I could do.
    I don't really understand the mutual funds and the rest of it. Sounds like a lot of work choosing different things? I just have to chose a company or organization to take my money. Then later I take it out and get more money (depending on the companies success)?
    Never heard of IRA's...maybe they are called something different in Canada. How old would you be to set one of those up? Starting early doesn't hurt I guess.
    I know I'm not going the stockmarket route yet, I would want to research the heck out of it. I don't like that you could easily lose money doing it.

    I think I'm going to wait until I have more than 1,000 dollars so I can get somewhere? What if I move away, do I need to transfer all the stuff, or do I leave it there and get it later??

    I will check out those links Ratch. Thanks

    The only debt I have is the Bank Of Mom. I don't have any way of having debt like a credit card or anything.

    I'm thinking about picking up some books as soon as I pay off my mom (as soon as my stupid parts sell:mad:) Thanks

    Thanks guys
     

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