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Investing Question w/ Stock Market?

I am in high school and I currently have saved ~ 7000 dollars. For years, I have had CD accounts with APYs around 4%. I learned in my personal finance class that returns/year in the stock market over the past 70-some years have average 10%/year, which is much better than CDs, especially once I have to renew mine later this year with CD rates in my area below 3%. I was looking at maybe investing some of my money into the stock market, but I am unsure how much I should invest; 5%, 10%, 20%, 50%, etc, I have no idea how much I should aim to invest given the economy's present state. In addition, I don't have a clue which stocks to invest in. What stocks do you predict will have good returns that are better than my CD rate of 4%...and what stocks do you think have a good chance of doing well in the long run, like from now to 2020 or 2030?

Public Comments

  1. If you are looking for the basic 10% rates, your best bet would be something like the S&P 500 or the Russel 3000. These are low risk but have been pretty dependable for decades. You may want to wait a while though, as the economy has been dropping, if you can get in near the low point you may even get higher returns for a while until it gets back to where it should be. But then, looking at the US economy with a more pessimistic view, it may be better to invest in foreign stocks, such as the Hong Kong market. If you want something that's higher return than CD's but not quite as high risk as stocks, you could look into bonds or preferred stock as well.
  2. Companies that are investing in Green energy will do well. And, for the short term, Gold will continue to do very well.
  3. I like to recommend DRIP plans to people who have a long-term view on their investments. They are seldom talked about because brokers make very little money when they suggest them. Yet, they have proven to be one of the best, if not the best, long-term strategy on Wall Street. The best part is you get solid annual returns from well-known, safe Blue Chip companies like: McDonalds, General Electric, Pfizer, Walmart, US Bancorp.......etc........ They are inexpensive to start and maintain, and your dividends are reinvested for free. They are perfect for small investors, as well as big investors. They are safe and allow you to not care about whether the market is going up or down. Look at all the advice you get and talk with your parents before making a decision. I know $7,000 was a fortune to me when I was your age. Good Luck
  4. Don't ask for stock tips on the internet. You have no idea who is advising you, their motives, or their knowledge. There are many options available. You can get a CD tied to silver or gold ( check out www.everbank.com)-these are investments that have done very well. You need to talk to your parents and ask for help investing your money. You need to start reading. Lots of good websites are available to educate yourself-including www.bloomberg.com, Yahoo Finance is terrific, Investors Business Daily is terrific. Do not purchase stocks until you know your appetite for risk, and know how to plan entrance and exit strategies, and can analyze the financial information. You start by paper-trading for six months, so you learn how to handle your money. There is no magic money-making formula. I can recommend a real good book that you can buy on Amazon.com. It is called Trade Your Way to Wealth, by Bill Kraft. It will teach you how to evaluate and control risk The book costs around $40.00-- it is one of the best I've read lately. I like the Schwab website, too. There are a lot of free educational materials on it. Use them. You are so smart to start now, while you are in high school. Well, you have to learn to invest, just like you have to learn chem and biology, and everything else in life! Your chances of success are very great, depending upon how well you prepare yourself to trade. Your ambition is wonderful. Go for it!
  5. Depending on how/what you invest in will greatly affect the overall return. You need to determine how much you feel comfortable investing in the stock market. Not every stock or investment is going to average 10% returns. It sounds like you are looking for growth in this investment. Maybe you should consider investing in a mutual fund. You will get more diversification, not having all your investments in one company. Plus the fund will be actively managed. Investing is not for everyone. You run the risk of lossing money. Possibly everything that you invest. So ask yourself, If I lose 10-20% of my investment, how would that make me feel? Hopefully that gives you some insight.
  6. I would recommend you seek some professional advice, picking stocks is very tough with this amount of money, the key is diversification, mutal funds will do this for you.
  7. You are correct to say the stock market has produced the greatest return. If you want to start learning about the stock market visit: www.TheMapleInvestor.com
  8. You started very young and that is good. You learned about the fixed income of CD and their reliability. However you are correct about the LONG term- these fixed incomes will not hold up to inflation as rates go as low as 1% and sometimes higher than 5% but on the average about 3+ %. So as you have suggested you need to get into the stock market and even into the bond market. Since you have no idea where to start I would advice you start with MUTUAL FUNDS. These funds contain hundreds of stocks or bonds in each fund so you don't have to worry about 1 or more individual stocks going south since you have hundreds in these funds. PLUS one or more professionals manage the funds for you. There are fees but make sure you only buy NO LOAD MUTUAL FUNDS (that means to load fees for sales people) Get some of these funds labeled as INDEX funds. I would go to VANGUARD Funds since they have some of the lowest costs in the industry. Since you are so young going with a high percent of Stock Mutual Funds would be smart. Somepeople would suggest even up to 80% stocks but personally I would cut that back a bit especially since you have only used CD's and a bad market could make you jumpy. Keep some of those CD's, get mostly Stock Mutual Funds, and get 10% bond Mutual Funds. Since the market is very variable at this time it will be hard for you to get started high in stocks but by 2020 you will be glad you did because those poor producing stocks today will inflate significantly by then.
  9. If you plan on holding your investment from now to 2020, then you should just invest in a stock index fund or some other instrument that simply follows the market index. Reason being, individual stocks may not weather the test of time, because companies can go out of business or have other problems that cause their stock to underperform. So, rather than trying to identify good stocks and taking a hit and miss risk, just buy a stock market index. Now remember that we are in the beginning of a bear market, which means there's a good chance the stock market will decline over the next few years. Maybe not the best time to buy into an index. On the other hand, since you plan to hold it for twenty years, maybe you don't care about paper losses in the meantime. More stock market tips at http://commonsensetrading.googlepages.com
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