I was told to do stock options over investing in stocks? Yet,I find the risk factor is too high in options. So I rather invest more in stocks and see what type of outcome manifests itself. What would be the first step? Besides going on these sights like Etrade etc. Is wall street still open for the little guy? Please help!!!
Anonymous
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The first step is to educate yourself. There are many books on investing (Investing for Dummies?), and many, many online sites that can help. Every major investment company has a web site with educational info (Schwb, Vanguard, Fidelity, T Rowe Price). Also every mutual fund company. Most novice investors start with money markets and mutual funds. See Morningstar.com for info and fund evaluations.
You need to understand a) the risk of whatever you invest in. There are different kinds of risk, and EVERY investment has SOME kind of risk, even Treasuries.
b) how the investment works: will it produce interest income, dividend income, capital gains, tax writeoffs? How valuable each of these is to you depends in part on your tax bracket and what your goals are (how far along in life you are--are you investing shortterm and need money in x years or months, or are you investing for your children's education or for your own retirement?) Don't invest in anything you don't understand!
c) if someone is selling this product to you, what is their commission? Some products cost 7% upfront. This reduces the amount that is actually invested. If you are buying online, what is the per-trade commission? Are cheap commissions important to you, or is it more important to have a person you can talk to and ask questions of? This will determine WHO you invest with.
Here's a web site with lots of info:
http://www.investopedia.com/terms/i/investmentpyramid.asp
And here's a picture of the "investment risk pyramid", showing least risky investments, going up to the most risky investments.
http://i.investopedia.com/inv/articles/site/investment_pyramid.gif
Good luck to you!
vvswarup
If someone told you, as a starting-out investor, to invest in stock options, they have no idea what they are talking about. I highly recommend staying away from stock options. They are very complicated instruments that even seasoned investors have trouble dealing with.
Now as for stocks, you can definitely make money in the stocks. However, you should realize that you are not going to become a millionaire overnight. In all those stories you hear about people who are millionaires and have money in stock, you probably weren't told that those millionaires have had their money in the stocks for a long time.
As for picking stocks, the key is diversification. You don't want to put all of your eggs in one basket. However, buying a whole bunch of stocks is not easy and it is expensive. A mutual fund may be better for you because you can indirectly take a position in a basket of stocks.