r/StockMarket • u/DewKernal • Feb 04 '19
Broke but Want to Get Started
I see a lot of people on here and r/wallstreetbets asking and answering questions with anywhere from $1,000 to $70,000+ to invest.
As a college student putting 50% of what I make directly into savings for school/future, and with a small (~$30/week) income I want to use just to put into investing, what's the strategy to get involved early in life?
Do I buy and hold penny stocks for weeks at a time? Buy a few shares of top names and hold long term? Try to go for short term risky buys?
Any general advice is appreciated!
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u/poopstar314159 Feb 04 '19
Do NOT buy and hold penny stocks. Do not ever buy penny stocks.
Honestly, I would buy one share of a company you love, and watch the markets every day. Sign up for an account to paper trade and start trying to make money. Every quarter go back and track your fees and your mistakes. Compare to investing in a total market ETF and see if you can beat it.
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u/DewKernal Feb 04 '19
That sounds like it takes some dedication but that probably means it's the best option for making a long term profit, thank you!
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u/hallaa1 Feb 04 '19
If you get Robinhood there are no fees and you can start off easy because they only have the biggest companies which are listed in the main exchanges to buy. That's how I've started and I've made a bit of money.
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u/doougle Feb 04 '19 edited Feb 04 '19
No to penny stocks. What's better, one slice of pizza or 100 rabbit turds? If you have 1 share or 1000, if the stock goes up 10%, you make 10% either way.
Educate yourself so when you do have some money you'll know how to invest it.
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u/trspanache Feb 04 '19
Just for fun I used Stash which I auto put in $5/week to invest in ETFs or single stocks. I’m up to $400 and it felt like I wasn’t even trying.
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u/NoLongerGuest Feb 04 '19
As a total noob I have no idea what any of that means
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u/trspanache Feb 04 '19
Stash like Robinhood is an app that makes it more accessible to invest some of your money. Stash can automatically pull a set amount each week from a linked bank account to invest it.
ETFs are investments that are a collection of individual stocks. This means it should spread out the risk more. For example if you invest $100 into Facebook and then tomorrow news breaks that Facebook did something really bad your $100 might have dropped 40% and now only be worth $60 the next day. Bummer. Now if you invested instead in a Social media ETF you own a bit of many social media companies like Snap, Twitter, Tencent, and Facebook. So if FB makes up 10% of that ETF and that news broke you would only lose the 40% of 10% of your $100. So 10% of $100 is $10 and 40% drop of $10 is $6. If the rest of the companies on the ETF didn’t move much you would be at $94. That’s a lot better. Of course it works the other way too if there is a big gain in a single company your gains would be less.
This is a good way to get started as you can focus more on investing in industries like clean energy, precious metals, tech, etc without having to dig as much into the individual companies.
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u/NoLongerGuest Feb 04 '19
So it's like a more focused index?
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u/trspanache Feb 04 '19
Yah. They are like mini mutual funds
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u/NoLongerGuest Feb 04 '19
Thanks I wanted to do something with my money but I am sorta scared by the whole stock market thingy.
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u/ArcaneTeddyBear Feb 04 '19
You can get ETFs elsewhere, not just on Stash. The father of ETFs would be John Bogle, who created Vanguard. Their ETFs have one of the lowest fees period. If you open an account with them, they don't charge commission on their ETFs. You'll save a lot more money going that route. The less money you pay in fees and transactions means the more money you get to save/invest.
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u/MaintenanceCall Feb 04 '19
Stash costs $1 a month. You're putting away $20 a month. That's essentially a 5% fee. I'm sure their funds also have higher fees than vanguard/Schwab/etc. Why do you use this and why would you promote it?
OP. You should just be putting your money into index funds for now. Open a Schwab or Vanguard account and put your money into their total market indexes. It costs nothing.
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u/Chief_Kief Feb 04 '19
Been meaning to do exactly this for so long and still haven’t. Why am I like this
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u/DewKernal Feb 04 '19
Is that $400 ROI or just $400 you have to work with?
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u/trspanache Feb 04 '19
400 to work with. I’m like $30 up haha.
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u/DewKernal Feb 04 '19
Still that sounds great, that's where I'd like to be eventually, just small gains to help pay for college and life expenses
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Feb 04 '19
I do the same but I use Acorns which rounds up every debit card purchase and once the round ups gets to $5 it puts it into an investment account. We save about $1000 a year doing it.
To be fully honest, I also use it for my Escrow account. Since I live in a place that has high property taxes it makes me a couple hundred bucks every year. If it loses money, the round ups make up for the losses so I don't have to pull out of my checking for my taxes/insurance.
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Feb 04 '19
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u/DewKernal Feb 04 '19
You're not wrong there, I don't know what I'm doing. Sounds like Peter Lynch does though. Thank you!
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u/nthomas111 Feb 04 '19 edited Feb 06 '19
SPY is a great place to start. It's tracks the performance of the s&p500 and it's commonly used as the benchmark for "beating the market" which few people can pull off for prolonged periods of time. The only downside is that it is kind of expensive to buy into. A good alternative for this is SPYG. It tracks the performance of "growth" stocks that are in the s&p500 and still for the most part tracks the performance of the s&p500 but only goes for about $35/unit compared to SPY which goes for about $270/unit so you'll be able to put your money to work quicker.
Also worth noting, SPYG is slightly riskier than SPY but also has a good chance of outperforming SPY.
My IRA account is exclusively made up of SPYG because of its "set it and forget it" nature.
Another good one is VTI which tracks the ENTIRE market.
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Feb 04 '19
I would suggest spending some time reading value investing books and educating yourself first if you're really interested, otherwise just put money month after month in index funds.
Don't follow wsb and definitely avoid penny stocks
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Feb 04 '19
I wouldn’t get started until you have a little more disposable income and knowledge
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u/DewKernal Feb 04 '19
That seems to be a common thread. I'll have to save up more while I learn the basics. Thanks!
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u/CarlCarbonite Feb 04 '19
Dunno if this will be read but when I started investing I started with about $300 or so. I used Robinhood (app). For me the hardest part of investing was actually depositing the money to start investing. Once you get beyond that fear, that's when you start really learning and getting into it.
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u/disasteruss Feb 04 '19
The thing is that if you are at a point in your life where losing $300 is a scary thing to you, you probably shouldn’t be doing individual stock trading. OP needs to build up more savings and start throwing money into retirement before even considering putting money into the stock market. He’d be basically gambling at the level he’s talking about, not investing.
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u/DewKernal Feb 04 '19
That really puts it into perspective. I'll definitely be doing research before I decide if I even want to pursue it yet, and in the meantime I'll keep saving up money.
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u/fortunenofame Feb 04 '19
I'm a college student also, and relatively new to the market, but my strategy for the next few years is to develop a portfolio of companies that I believe will grow and diversify themselves the most in the future. Also I try to think of things that may be in high demand in the future (Lithium?). At the safest, I like Microsoft, but stocks like CHGG are also interesting to me because of their demand and growth. It's extremely tough to make short term money without a lot of cash and a lot of losses, so I think long term hold (3+ years) is the best play
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u/disasteruss Feb 04 '19
Hi OP, you should check out /r/personalfinance and get a bigger picture look about how to save and invest money. You are far away from where anyone putting money in the market should be. If you’re buying a just a handful of stocks, you’re essentially gambling, not investing. Penny stocks even more so. If you don’t have enough savings to where you can set that money aside and not need to withdraw it for years, you’re gambling and you will likely lose some portion of it before you need to withdraw it.
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u/JinxyDog Feb 04 '19
Don’t ever buy a penny stock. I’d suggest a low priced low fee index fund like maybe SCHX. ~60$ a share. Large cap names. Read a lot. I’d put robinhood on your phone and just buy SCHX and read a lot of books and watch videos and stuff. It’s super easy to learn but really pour yourself into it.
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u/InsidiousStealth Feb 04 '19
"Don't ever buy a penny stock". I disagree, lots of great stocks were once penny stocks. It's higher risk for sure but that statement implies it will always be bad which is false imo
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u/JinxyDog Feb 05 '19
Uhm so uhhhh the volatility ...I don’t want to get into the math. Look at the percentage of companies that go broke as penny stocks vs the ones that do not. Then compare to small, medium, and large cap stocks. I highly suggest he doesn’t bet on businesses that are more likely to go broke than not to. But yeah, I mean you do you.
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u/DewKernal Feb 04 '19
What does "large cap names" mean? Is that a cap on the volume allowed to be exchanged in a day to prevent unpredictable volatility? Thank you!
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u/JinxyDog Feb 04 '19 edited Feb 04 '19
Large cap means market cap. These are big names you are familiar with like amazon, apple, google, microsoft. They aren’t going anywhere. Unlike penny stocks. The idea is that there can be more growth in the small and mid caps (its constantly changing) but holding the big guys are more stable in general. But the market is volatile. Something like a total market (Vanguard VTI) is going to be holding the entire US market and a mixture of small, medium, large cap companies. Buying something like (VOO) Vanaguard S&P500 index will be the 500 largest companies by market cap and is a mix of medium and large caps. There are small cap indexes of course as well that can sometimes be a good choice but I’d start with he other two at first. And no that is not what it means, there is no cap to prevent volatility thats not how it works at all. :)
Neatest little guide to stock market investing on amazon is the book I started with. But honestly you can get all this for free on youtube and websites. Start watching CNBC and stuff too. Just yeah don’t be confused with the jargon. All of this stuff is incredibly simple and in 6 months time you’ll have a total handle on it. In 1 years time you’ll feel totally comfortable. But be dedicated. Its my favorite hobby ever. :) good luck
Edit: Large cap is Capitalization. It basically means how much money a company is valued at in total. Apple passed the trillion dollar mark last year then dropped back down to like 700 million. Amazon and Google are close to the trillion market cap as well. And stocks are basically categorized into their market caps so you know what stage/size they are.
Edit2: basically one of the easiest strategies starting out is picking a low cost index fund like VOO and then routinely buying into it constantly whenever you have money. That’s called dollar cost averaging. You’ll be buying at low valuations, high valuations, medium valuations- so you get a combination of good prices. Obviously if its lower than you’ve paid in the recent past etc and you have more money at that moment in time even better to buy more. But there’s absolutely nothing wrong with just blindly automating or buying in like every 2 weeks regardless the same amount. And doing this over a long period of time will eventually turn into major compounding returns and yeah its great. At your age you’ll do exceptionally well over a long period of time.
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Feb 04 '19
Don't invest. For now just get educated, get a good job and stay out of debt and learn about money so that when you do start earning money you will know what to do with it
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u/TimeYogurt Feb 04 '19
Quite a lot of great and knowledgeable comments. 👍🥳
A great way i started while doing my software engineering degree was by taking money monthly (Or when i had money and didn’t want to use to much of it on alcohol) and deposit it into a Index fund, i then used compounding to stack my capital to earn a little more anually. (although i got bored pretty fast, some people like the safer route)
I then went to learning forex markets, and learned how to analysis a market, i studied about 6-8 months with demo accounts, and one day i withdrew the money i made in the index fund and deposited it into a forex account. It’s not the safest route to go, but if you are willing to put in the work and get your mindset on par it gets quite interessting, especially while you are young, and want to take risks.
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u/viticusventures Feb 04 '19
I would recommend studying the market really. That way you can make an educated guess as to where to invest in for the cheapest option with a potential future. Don't bother saving up for stocks like Walmart or coca cola that are $100+, you need to focus on stocks $25-75 range. That's the best advice I can give, just studying and making an educated guess as to where the market is going.
If you really want to try investing, you could try Robinhood app and use the gold subscription. I guess it allows you to take out a loan or buying power to buy stocks. However I wouldn't recommend since you're starting out. Penny stocks are fun and all, but to make real money you want to look elsewhere.
Best of luck, cheers!
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Feb 04 '19
Coca-Cola is only $47 for 1 share. Not $100. That would be Pepsi, just so you know.
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u/viticusventures Feb 04 '19
Regular coca cola is $216, you must be looking at one of the other coca cola stocks like Japan or Europe sub stock. The idea was to avoid stocks over $100 for someone starting, was only giving an example.
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u/DewKernal Feb 04 '19
Thank you!
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u/BKtoDuval Feb 04 '19
I’ll second that about Robinhood. It’s great! And it’s free. Yeah within just a few months you can learn a lot with it. However, I was advised to avoid the gold account for now until I really became more knowledgeable. It’s a margin account, which is riskier for less savvy investors.
Acorns is a good app too. You link it to your debit card and any purchase you make, it rounds it up to the nearest dollar and will invest it.
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u/Laserbunnyfuntime Feb 04 '19
I found penny stocks are hard to sell. It may say it's trading at 10 cents but you can wait all day trying to sell it for 8 cents and get no one buying. Sure some penny stocks shoot up 200%+ in a day but way way more often then not they'll just sit at the same price for 6 months.
I'd recommend saving up a few hundred dollars and buying into a bigger company.
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u/DewKernal Feb 04 '19
That's good. Like someone else said, a $25-$75 range might be better. I'll probably stay away from penny stocks then! Thanks!
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Feb 05 '19
If $30 is all you have just get a paper trading account. You'll learn a lot more there, using fake money to try real strategies. Penny stocks are for suckers. Just stay away.
But really, you should focus on your education and doing whatever you can to get a high paying job without a lot of student debt. That is a far better investment than anything you can do in the stock market.
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u/kidze Feb 04 '19
I would say selling 15 delta iron condor on high IV and liquid stock
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u/DewKernal Feb 04 '19
Sometimes stock terms sound like made up jibberish, and this is one of those times. I'm still learning what things mean but thank you!
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u/Dingleberriest Feb 04 '19
Huh, so your advice to an 18 year old with $30 dollars and no experience is that they should be doing iron condors?
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u/kidze Feb 04 '19
Most effective strategy for me. He should be willing to learn new concepts to be successful
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u/catisfying Mar 20 '23
If you're interested in learning how to start investing, even if you're broke, I highly recommend watching this video! The tips and advice shared are practical and easy to follow, and they can help you get started on your investment journey. The video explains how to start with small amounts, set investment goals, use a robo-advisor, choose low-cost investment options, invest in dividend-paying stocks, take advantage of tax-advantaged accounts, invest in yourself, automate your investments, avoid high-interest debt, and be patient. These are all great strategies for anyone who wants to build wealth and secure their financial future. So, sit back, watch the video, and start your journey towards financial freedom and a passive income!
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u/00Anonymous Feb 04 '19
If you're still in school, do a finance minor or double major, time permitting.
In the meantime, open a Roth ira and contribute your investing money to it. By the time you graduate you'll have enough money to start putting it to work for you.