4 answers
Sanghmitra
Student
Kanpur, Uttar Pradesh, India
1
Question
Asked
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How to start investing in stock market at young age without investing too much money and avoiding losses?
#money #sharemarket #teenagers
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4 answers
Maeve Cannon
CareerVillage.org TeamPartnerships Manager
47
Answers
Ridgewood, New Jersey
Updated
Maeve’s Answer, CareerVillage.org Team
Hi Sanghmitra,
I am by no means a stock market expert, but one way I have gotten to invest some of my money is by using a robo advisor. It is easy to research different robo advisors that offer different rates online, some even invest your money at no charge. They allow you to indicate what level of risk you are willing to take on and select your investment plan from there. Then the computer does the rest for you! It takes some research to find the right provider for you, but a great and easy way to get started investing.
Hope this helped!
I am by no means a stock market expert, but one way I have gotten to invest some of my money is by using a robo advisor. It is easy to research different robo advisors that offer different rates online, some even invest your money at no charge. They allow you to indicate what level of risk you are willing to take on and select your investment plan from there. Then the computer does the rest for you! It takes some research to find the right provider for you, but a great and easy way to get started investing.
Hope this helped!
Kurt Maier
Investment Advisor
1
Answer
Tiburon, California
Updated
Kurt’s Answer
Hello Sanghmitra. Your question is a very practical one and should be taught in all high schools!
There are many ways to think about the topic. First off, recognize what investing is...placing money (capital) into a business (a single specific stock like Apple, BMW or Tata) or into a fund (a collection of companies or businesses) with the hope or expectation that the value of that investment (business) goes up over some time horizon.
Directly answering your first question, if you don't want to invest much money, it is most often more appropriate to invest into a fund instead of a single specific stock/company because with a fund you get diversification (as a fund will own many companies...perhaps hundreds...which is certainly safer, lower risk, than owning only one business/company) and the fund is set up for smaller investment amounts.
I would strongly suggest you study what you are interested in investing into...whether it is a single stock or a fund or the entire market (via an index)...know what you're buying! If it is a single stock, why do you want to own it? Do you actually use the product or service? If so, do you like it? If you do not actually use the product/service, why do you want to invest into the company? Do you feel good about how the company goes about doing their business? Are the company executives ethical in their work?
If you choose to invest via a fund instead, how does the fund decide which companies/businesses to invest into? Are they focused on businesses located in a given region or country? Are they focused only on certain industries? Are they focused on companies of a certain size (small, medium or large)? Are they 'value' or 'growth' oriented? (Those are very different types of companies and you should look into the difference).
As for investing to 'avoid a loss'.....that becomes tricky. Of course everyone would like to invest without the risk of losses! And yes, there are investment strategies which attempt to do just that but it's not so easy...one must ask HOW do they avoid any losses as that is critical to many aspects of their specific strategy. Simply put, risk and reward generally go hand in hand...if you are looking for greater returns, you often must take more risk in some manner. For more sophisticated investors, certain option strategies might be appropriate; for wealthier investors, certain hedge funds might be appropriate. But neither of those strategies are appropriate for novice or small investment amount investors unfortunately.
One idea which I would strongly suggest is to set up a hypothetical investment account and follow how it does...don't invest any actual capital but act as if you have and follow the performance of the company or fund in real time to learn how it moves relative to the overall market or it's own specific industry. That will provide a sense of how VOLITILE the investment is...which can be a good thing or a not so good thing, all depends on what you're expecting. The key to this is realize you're young and have many years to invest. Learn how to invest with an account on paper only first...don't spend any money until you have a better understanding what you're doing, why you're doing it, and what might the various outcomes be with either your single stock/company strategy or a fund.
We could talk for days on the question you ask but these are my initial thoughts.
Good luck with your efforts!
Read! A few great books to consider: A Random Walk Down Wall Street (Burton Malkiel); Weekly issues of Barron's newspaper
There are many ways to think about the topic. First off, recognize what investing is...placing money (capital) into a business (a single specific stock like Apple, BMW or Tata) or into a fund (a collection of companies or businesses) with the hope or expectation that the value of that investment (business) goes up over some time horizon.
Directly answering your first question, if you don't want to invest much money, it is most often more appropriate to invest into a fund instead of a single specific stock/company because with a fund you get diversification (as a fund will own many companies...perhaps hundreds...which is certainly safer, lower risk, than owning only one business/company) and the fund is set up for smaller investment amounts.
I would strongly suggest you study what you are interested in investing into...whether it is a single stock or a fund or the entire market (via an index)...know what you're buying! If it is a single stock, why do you want to own it? Do you actually use the product or service? If so, do you like it? If you do not actually use the product/service, why do you want to invest into the company? Do you feel good about how the company goes about doing their business? Are the company executives ethical in their work?
If you choose to invest via a fund instead, how does the fund decide which companies/businesses to invest into? Are they focused on businesses located in a given region or country? Are they focused only on certain industries? Are they focused on companies of a certain size (small, medium or large)? Are they 'value' or 'growth' oriented? (Those are very different types of companies and you should look into the difference).
As for investing to 'avoid a loss'.....that becomes tricky. Of course everyone would like to invest without the risk of losses! And yes, there are investment strategies which attempt to do just that but it's not so easy...one must ask HOW do they avoid any losses as that is critical to many aspects of their specific strategy. Simply put, risk and reward generally go hand in hand...if you are looking for greater returns, you often must take more risk in some manner. For more sophisticated investors, certain option strategies might be appropriate; for wealthier investors, certain hedge funds might be appropriate. But neither of those strategies are appropriate for novice or small investment amount investors unfortunately.
One idea which I would strongly suggest is to set up a hypothetical investment account and follow how it does...don't invest any actual capital but act as if you have and follow the performance of the company or fund in real time to learn how it moves relative to the overall market or it's own specific industry. That will provide a sense of how VOLITILE the investment is...which can be a good thing or a not so good thing, all depends on what you're expecting. The key to this is realize you're young and have many years to invest. Learn how to invest with an account on paper only first...don't spend any money until you have a better understanding what you're doing, why you're doing it, and what might the various outcomes be with either your single stock/company strategy or a fund.
We could talk for days on the question you ask but these are my initial thoughts.
Good luck with your efforts!
Kurt recommends the following next steps:
Sean DelConte
2
Answers
Updated
Sean’s Answer
Hello Sanghmitra -
I'm also by no means a financial expert, but one investment strategy that has worked for me is to use dollar cost averaging to accumulate wealth over a period of time. Identify a specific amount of money you want to invest, and instead of buying all at once, invest at regular intervals (i.e. monthly) over a period of time. Using this strategy can reduce your risk since you aren't trying to time the market (i.e. identifying a market low) but rather spreading your risk over a period of time as the market moves up and down. Another way to reduce risk is to diversify your exposure to the market. Instead of buying a single stock, a good way to diversify is to purchase equity index funds which track a number of holdings (e.g. an ETF for the S&P 500 which tracks the largest 500 companies in the United States, for example). The fact that you are thinking about investing at a young age means you are already on the right path!
Hope this helps!
I'm also by no means a financial expert, but one investment strategy that has worked for me is to use dollar cost averaging to accumulate wealth over a period of time. Identify a specific amount of money you want to invest, and instead of buying all at once, invest at regular intervals (i.e. monthly) over a period of time. Using this strategy can reduce your risk since you aren't trying to time the market (i.e. identifying a market low) but rather spreading your risk over a period of time as the market moves up and down. Another way to reduce risk is to diversify your exposure to the market. Instead of buying a single stock, a good way to diversify is to purchase equity index funds which track a number of holdings (e.g. an ETF for the S&P 500 which tracks the largest 500 companies in the United States, for example). The fact that you are thinking about investing at a young age means you are already on the right path!
Hope this helps!
Tammy Laframboise
Present pension and financial planning information to members of a pension
43
Answers
Toronto, Ontario, Canada
Updated
Tammy’s Answer
Hi Sanghmitra,
You start to invest by doing it. If you are too young to legally open an account than your parents or guardians must support you by opening the account. This is a perfect opportunity to seek their advice and experience to help you make the best decisions. However, no amount of reading or asking advice will replace the experience of actually investing. You can replicate this experience by practicing your investing decisions by choosing investments to buy but instead of buying them, just track them.
Read as much as you can about investing. There are many books and blogs which will help you to understand the intricacies of the market and how it works. The first thing you must understand is that capital markets, where investments "live", go up and down. You can't have the up without the down. Down markets present an opportunity to investors. The old saying " buy low, sell high" means that at some point the market was, is or will be down.
Time is the secret sauce of generating wealth. The longer that you have to invest and the sooner that you start, the more opportunity your future investments will have to grow. And the ride is unlikely to be straight up. There will be times that the investments have "lost" money but it is only a true loss if you panic and sell the investments. Good investors have a long term perspective.
Another thing to ask yourself is "what the objective of your investments". Is it retirement many years in the future? Is it a down payment on a house 10 years in the future or a car 3 years in the future? These questions will help you to understand how much risk you are willing to take of losing your money or not having it's value appreciate when you need it to be on one of it's "ups".
Best of luck!
You start to invest by doing it. If you are too young to legally open an account than your parents or guardians must support you by opening the account. This is a perfect opportunity to seek their advice and experience to help you make the best decisions. However, no amount of reading or asking advice will replace the experience of actually investing. You can replicate this experience by practicing your investing decisions by choosing investments to buy but instead of buying them, just track them.
Read as much as you can about investing. There are many books and blogs which will help you to understand the intricacies of the market and how it works. The first thing you must understand is that capital markets, where investments "live", go up and down. You can't have the up without the down. Down markets present an opportunity to investors. The old saying " buy low, sell high" means that at some point the market was, is or will be down.
Time is the secret sauce of generating wealth. The longer that you have to invest and the sooner that you start, the more opportunity your future investments will have to grow. And the ride is unlikely to be straight up. There will be times that the investments have "lost" money but it is only a true loss if you panic and sell the investments. Good investors have a long term perspective.
Another thing to ask yourself is "what the objective of your investments". Is it retirement many years in the future? Is it a down payment on a house 10 years in the future or a car 3 years in the future? These questions will help you to understand how much risk you are willing to take of losing your money or not having it's value appreciate when you need it to be on one of it's "ups".
Best of luck!