18 yrs old..where should i invest?

i am going to start work soon and i wanted to know where i should invest?...arn't stocks a bit risky for me?....my teacher told me to look into mutual funds...what do u think...i only can only constribute around 20 buks a week

Hi,

There is a way to invest in stocks without a broker and if you keep reading I will tell you how.

The method is called DRIPs.

A DRIP is a Dividend Reinvestment Plan. It offers indidual investors, even a15 year old, a cost-effective way to build equity in a stock.

The DRIP is run by a corporation and it allows people to make cash purchases of stock or to reinvest dividends (if any). I have a DRIP program with Goodyear Tire and Rubber, but it ran into problems a few years ago and stopped paying dividends.

You only need one share of stock to become eligible. In some cases it can be purchased directly from the company, but normally needs to be purchased through a broker. You could have your parents open up an brokerage account and purchase the share in your name.

There are no fees or commissions when you reinvest your dividends.

There are lots of companies that do this - over 1000. The company likes them because it's a low cost way to get capital or cash for their business. Because of that companies welcome new investors into their DRIP plans.

What makes DRIP popular is that most of the plans require very small cash outlays even as low as $10, some as low as $5.

Some of the world's largest companies like IBM, AT&T, and McDonald's have DRIPs.

Very wealthy investor like DRIPs because it allows them to bypass the broker's commisssion which lowers the investors cost of investing

Another benefit is known as dollar-cost averaging where a fixed amount is invested on a regular basis. The stock rises and falls with the market, but by investing periodically, the average cost of the shares tends to average out and not be affected by the market swings.

Liquidating or selling your shares can be a problem because brokers want to get a commission for selling and buying stock for investors, but the company will buy them back in some cases.

Dividends are considered income and used to be taxed by the IRS, but a change in the law makes them non-taxable. But if you sell your shares and make a profit you have to pay tax on the profit. There are two types of taxes for profits or capital gains: one is short term and costs more than the other kind of capital gain which is called a long-term capital gain and that occurs when you hold a stock for more than six months.

Goodyear Tire and Rubber's stock symbol is GT, but don't invest in this one because it doesn't pay a dividend yet..

YUM is the symbol for Yum! Brands, Inc and they own Pizza Hut, Taco Bell, and Kentucky Fried Chicken on the New York Stock Exchange (NYSE)

This Web site has a list of DRIPs: http://www.directinvesting.com/

To find DRIPs that pay good dividends, look in Investors Business Daily, Barrons, or the Wall Street Journal. There is a column that has dividends and return %. Most don't pay as much as a Treasury Note or a CD, but they have earnings growth to offset that income disadvantage. Than look them up in the URL above.

Google this keyword "DRIP lists" for more Web site. Be careful. Some of them charge a fee to sign up.

Kindest Personal Regards,

Walt Brown
Site Build It Certified Webmaster
capecod1@capecod-beaches.com

An indexed mutual fund that follows the s&p500 is probably a good idea. You should learn as much about the market as you can now, while you are still young. It will pay off for you later.

If you want a fun, free site that will teach you about the market, check out http://www.top10traders.com - the site lets you create a portfolio of stocks with "play" money, then ranks your picks compared to other investors at the site.

Good luck!

Try opening a CD at your bank. You can go as low as 6 months. And your money is still available. You'll need more than 20 bucks to open one. Or start your IRA. Think about your retirement. I know, that seems soooo far away, but you'll thank me later.

In my opinion, the easiest way to start investing is with a high yield online savings account. Emigrant Direct and ING Direct are two popular ones to look at. They are much less restrictive than CD's as far as accessing your money if needed.

Open a brokerage account at Zecco and invest in the ETF QQQQ.

Open a roth IRA.

$100 a month, or $20 a week invested in a roth IRA starting at the age of 18 and ending at a age I dont remember and you will have a million bucks by the age of 65.

I think some mutual funds will let you invest with as little as 50$ / month (with automatic deposit) but may require you to put down several thousand dollars up front.

As for which mutual fund, there are a bunch but a number of them (like Fidelity) have funds that automatically spread your investment into the right blend of investment categories based on when you want to retire which means you don't have to worry about how to invest your money ...

Probably a good start for you until you can talk to more people and learn more about retirement investing.

Believe it or not, $20 per week invested can make you a multi-millionaire by the time you retire. I agree that mutual funds tend to be "safer" in the long run than investing in individual stocks. There are a variety of different mutual funds available, usually grouped by category (technology, medical technology, precious metals, futures, etc) - and also grouped by rate of return and investment risk. Your local investment broker (Merrill-Lynch, Morgan Stanley, etc) can give you an idea of what mutual fund products they have available. In my opinion, what is most important is that you diversify your investments as much as possible - don't put all of your money into a single mutual fund, for example - invest in two or three, if possible from different service providers and in different markets. Normally, it takes a minimum of a couple hundred dollars to get a mutual fund account opened from a broker - if you don't have that much cash, look in your area for a Certified Financial Planner - these individuals can typically take your $20 a week and invest it along with money from other clients to give you the power to get into mutual funds and stocks without the high initial investment. When choosing a Certified Financial Planner, be sure and do your homework - ask to speak with some of their older clients if possible. Check them out with the Better Business Bureau and your state licensing agency to ensure their legitimacy.

Another simple way to put money aside is to set up direct deposit of your paycheck to your checking account - most banks will typically allow you to automatically take either a flat amount of money or a percentage from each deposit and transfer it to a savings account every time the direct deposit gets sent in to your bank.

Another good investment is real estate - however pursuing this avenue successfully takes a lot of research and planning - it is possible to buy a house with little to no down payment, then either rent the house for regular income every month, or occupy it for a time, fix it up, and sell it for a lump-sum profit. Since property values typically go up over time (once again, do your homework about real estate trends in the area), having a rented property is like getting free money - the renter pays your mortgage, the value of your property increases, and after a couple of years you can still sell the property for significantly more than you paid for it. At that point, you can take your profits and reinvest them either in investments such as stocks and mutual funds, or use it to purchase more real estate. Keep in mind this is just a generalization of some of the options available, and careful attention must be paid to budgeting and expenses, such as homeowners' insurance, property taxes, etc. If you want to learn more about real estate investing, I would suggest that you contact a local mortgage broker and have them sit down with you and explain the process. Avoid "get rich in real estate" schemes you see on TV - typically they just want you to spend a lot of money on their classes and foreclosure property lists.

If your job offers a 401-K program, check into it - companies that offer 401K programs will typically "match" the money you invest into it up to a certain percentage - for instance if you invest 5% of your paycheck, they'll match that 5% - which means up to the 5% mark, every dollar you invest you'll actually be investing two - one from you, one from your company. A 401K plan typically earns good interest and most companies will allow you to take money out of your 401K plan in as early as two years. Additionally, money going into your 401K plan is tax-deferred - in other words, you don't pay taxes on it until you take money out of your 401K fund - the income tax deducted from your paycheck will only be for the money you've made after your 401K contribution is taken out. The human resources department where you work will be happy to go over the details of their 401K program (or other retirement account programs) with you. Generally, it's a good idea to get into a 401K program at any job you plan on working at for a while - especially if they will match your contribution - this instantly doubles your investment. Additionally, you can use your 401K funds as collateral to borrow against - for instance if you wanted to get a car loan from a bank. Typically a bank will give you a better loan rate on a new car than the financing department at the car dealership - especially if you have a 401K plan as collateral.

Anyhow, those are some of the options I know of. Good luck!

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