New Investor With Small Amount of Money

[rsliu]

Hey,

I just started reading the finance forums, and it got me interested in trying to invest some money. What I want to do is this:

Take $1k out of my poker bankroll and put it into some sort of account where I can actively buy and sell stock (does Etrade do this? If not, what site should I use?). For all intents and purposes that 1k is disposable, as it is not a sizeable portion of my br and I have few financial obligations.

Use the money to make relatively short term bets based upon what I'm reading in the news. For example: If the internet gambling bill passes and neteller stock tanks, I will buy neteller, fully expecting its stock to rebound.

Is this (this form of investment, not the specific idea) a good idea for someone who wants to get a sense of the investment world? If so, how should I get started? If not, why not?

[bills217]

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Use the money to make relatively short term bets based upon what I'm reading in the news. For example: If the internet gambling bill passes and neteller stock tanks, I will buy neteller, fully expecting its stock to rebound.

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It's a littttttttttle more complex than that.

What you described, generally speaking, is a great way to lose money.

Get a beginner's investing book and read it before you do anything. It's also best to invest within an IRA if possible to avoid taxes on your gains. I recommend reading "Rule #1" by Phil Town.

[BigBiceps]

To even think about swing trading stocks you need at least $20k IMO.

$1k is not enough to do much, get a 5.25% savings account until you have more money.

[bills217]

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To even think about swing trading stocks you need at least $20k IMO.


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Why is that? Town says you can start with virtually any amount, although I don't think what he advocates is "swing trading" per se...

[BigBiceps]

Because commissions will be too high a percentage of the trade otherwise.

If you are just buying and holding a position, probably $3-5k is enough.

[rsliu]

I will read some books on investing. That said, why is this a great way to lose money? Also, if it is a great way to lose money, shouldn't I just do the opposite to make money? Am confused.

[kitaristi0]

Because you'll buy the wrong stocks?

[bills217]

Oh ok I see. Commissions are pretty low with some online brokers tho right?

One obstacle I see is that a lot of investing research tools are very expensive (thousands of dollars) and they aren't worth it unless you're investing a ton of money. You can do most of what they do using MSN Money or Yahoo! Finance, but it takes longer and you have to do a lot of research and calculations yourself.

[mwgr5]

If you haven't already, consider using the 1K to fund a Roth IRA contribution. The max contribution you can make this year is 4K. You would need at least 4K earned income to do this. You can invest 1K in a T Rowe price Target Retirement fund. This is a "fund of funds" that holds different mutual fund in a specific allocation. This allows an investor with a small amount of money to have a completely diversified portfolio that is automatically rebalanced. You could also buy a total stock market ETF. With 1K, however, your ability to invest in mutual funds is somewhat limited.

If you could invest at least 3K in a Roth IRA, I would invest in a target retirement fund at Vanguard.

These are passive approach you could take that would allow you to invest without having to read or do a large amount of research and still achieve very good returns that beat the majority of mutual funds managed by “experts” over the long run.

[leto333]

your posts seem to indicate that you wish to speculate with this money, speculating is not the same as investing. Please clarify.