<p>I am a 17 year old student interested in investing my summer earnings into the stock market. I have already discussed this with my parents and they are fine with it(in very worst case scenario i lost it all it would be ok.. my parents and i see it as a good learning experience). I won't be investing much since I received a 'stipend'(aka very low amount..$1500) from government for researching at a national facility. I'm fairly comfortable with the basics of trading due to my participation in a virtual stock market competition(I won!) and watching my dad(pre- dotcom burst).. he used to make me watch the tickers on CNN for him. </p>
<p>Anyways the point is, are there any online sites where I can invest? Once again, I'm 17 and I'm not sure if there any sites that would allow 17 year old to invest. The only one I know of is etrade and you have to be 18 to get an account. I just created my own bank account, so I would be able to fund it. Any alternatives? Maybe my dad could open an account and I could invest under his name(although it would be half as exciting).</p>
<p>Depends on whether you want to do active trading (bit difficult when you start with just $1500, the commissions will be a large% of that), or if you want to put it into a mutual fund and watch it grow. I've seen other e-brokers that offer reduced commissions (Scott?) .</p>
<p>One suggestion - you may want to put this into an IRA account, Roth or regular, which can have stocks and/or mutual funds. This defers any tax-related issues from capital gains, assuming you make profits. The fact that you are under 18 should not be a problem - you can open an account under the Uniform Gifts to Minors Act, designating your dad as the required adult 'supervisor' (not quite the right word). The $ belong to you, and you can then trade in this account to your heart's content.</p>
<p>I second the retirement plan option, I think 1500 invested at age 17 might be quite useful in 45 years. It might not count against you as a student applying for financial aid. $1500 is not a good investment amount for day trading or highly active trading.</p>
<p>You can pick and choose from a variety of mutual funds that offer different levels of risk and a wider variety of investments from stock to international investments and real estate. Pick a risk level and let it ride..at your age and needs a higher risk is acceptable....you can add to it when you want...borrow against it if you are in desparate need...and then change the package during your life to move it from higher risk to low risk as you approach retirement....which happens faster than you can imagine.</p>
<p>I wasn't planning on day trading(not worth my time). Probably more along the line of once a month. when i start making real money, i plan to contribute to IRA, i just thought for the current purposes it might be better just to keep the cash, to buy little things etc. </p>
<p>Do I have to file federal taxes if I invest? The IRA sounds like a good idea, but would I still be able to invest the money etc? Maybe someone could explain it more in detail.</p>
<p>Whats the best online service? I read about scottrade, etrade, fidelity. For my purposes the top priorities are easy-to-use internet interface and CHEAP commisions.
Thanks so far,
Confidential</p>
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Do I have to file federal taxes if I invest? The IRA sounds like a good idea, but would I still be able to invest the money etc? Maybe someone could explain it more in detail
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<p>You only have to pay taxes if you have gains ;). If you were to put it into a Roth IRA, you can trade to your heart's content and not have to pay taxes on the earnings.</p>
<p>Ok I think I'm sold on Roth IRA. What is IRA recharacterization? I looked at Miscellaneous fees for Scottrade and it costs $50 for an IRA recharacterization. Is that something I have to do everytime I trade a stock? </p>
<p>BTW I don't mean to come off as overconfident. I am well aware of the risks in investing and the market's unpredictable nature. But with this amount of money involved, I'm comfortable with taking some risks and I understand I might not get gains. On the same note, I will do a lot of research and maximize my potential of getting gains and not making rookie mistakes. I've played around with virtual stock markets for a while and I have a good feeling about making good choices. One thing that will hinder me is working with the costs of commission. I will probably only own stock of 1-3 companies because of the commission costs, so so much for diversification. </p>
<p>For commission costs, what consistutes a transaction? Buying stock of one company? Or can you buy stocks of multiple companies at the same instant?
Also, which would be better for me, roth IRA or traditional IRA?</p>
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Also, which would be better for me, roth IRA or traditional IRA?
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<p>I am not an acc't, but this is what I remember: With traditional IRA, it is before tax going in and taxed coming out (at retirement age). With Roth, after tax going in and not taxed coming out. I assume you're in a low tax bracket, so Roth would be the way to go for you. Don't do any IRA at all if you plan on spending it before retirement.</p>
<p>Be aware that some financial institutions will open an IRA for you when you are under 18, and some will not. We use Fidelity, but they would not take an IRA for S until he was 18. So we started out at another bank, and moved it when he reached 18.</p>
<p>confidential, good for you for thinking about this and getting as much advice as you can glean before you start.</p>
<p>I recommend the Roth IRA route. Although you don't have <em>gobs</em> of money, you might want to put some of it in an Index fund and some in individual stocks. Index funds track the broad market (QQQ, Dow, S&P etc.). Individual stocks would be good learning about - how to research a company, how to track a company's performance and prospects, how much to diversify...</p>
<p>with 1500$ I wouldn't get much experience by sticking money in an index fund. my plan is to stay individual stocks right now.. knowing that when i get a real job and continue contributing to this fund(assuming i dont ibank which would make me ineligble! id rather go into consulting bcuz i would have a well balanced life) i will then take a more safe route and stick money in index fund.</p>
<p>I heard theres also a 5% annual compound interest program thats fixed. Is this true? Later on down the road, it might be safer to go with a fixed rate for retirement funds.</p>
<p>once again, thanks for answering my seemingly infinite questions.</p>
<p>Confidential - Do both with the $1500. Take $500 as "play money" or money you manage and invest in individual stocks; learn various research and investing techniques, etc.. Take the other $1000 and put it into an index fund such as the Wilshire 5000 which tracks the entire market and then put it away in a safe place and forget it. Visit Scottburns.com for various excellent articles over several years (including last Sunday, July 31st) about the superiority in stock market performance of index funds over actively managed funds (led by the Wharties, Harvard MBA's, and the like). Scott Burns is a financial advice columnist for the Dallas Morning News whose articles are also syndicated nationally. He is a graduate of MIT who went into financial writing many years ago. Burns is well-known for inventing the term, "couch potato" portfolio back in the 80's. The couch potato portfolio is invested in a few index funds (such as the Wilshire 5000 and Lehman's Bond Index portfolio) which the couch potato investor "balances" out his/her stock/bond allocactionsin a few minutes once a year. And then it's back to the couch. The principles are extremely low annual management fees (such as 20 basis points (one-fifth of one percent) at Vanguard versus an average of over 125 basis points (1.25 percent0 at actively managed funds); removal of emotion from your investment decisions which is what sinks the majority of investors like you and me when we generally pick the wrong times to buy/sell; and index funds (such as the S&P 500) performing than 75 percent of actively managed funds over virtually all periods from five years out to decades.</p>
<p>Sweat, exhilirate, emote with the $500, but take the other $1000 and let the "majic of compounding" quietly grow in its couch potato way over some years.</p>
<p>Lonestardad: while I think your investing advice is quite sound, and I appreciate the recommendation of Scott Burns, who clearly has a sensible point of view, I <em>am</em> amused that you've mentioned his MIT degree a few times, too. (FWIW, MBA, 2002) However, I feel compelled to mention that even an MIT degree does not automatically incur financial sense on its holder. Many many people have advocated index funds, including John Bogle at Vanguard, back in the 70s. (My mother was one of their first investors.)</p>
<p>dmd77 - And I hope your mother is now on "Easy Street" from her early Vanguard adventures with John Bogle. As you would guess, I am also a Bogle fan. He is a genuine "curmudgeon" who is still blasting away at the Wall Street world and high fund management fees even after his heart transplant surgery from several years ago.</p>
<p>By the way, I mentioned Scott Burns' MIT degree as he has a very quantitative and data analysis approach to his financial advice, yet he is very down-to-earth and practical as well. He can duke it out with the "quants" and "wonks" but remembers that he is always advising the "little guy".</p>
<p>lonestardad, my mother died in 2002, with $2500 left of her money (age 86)--but she never lacked for anything, and her goal was to spend down all her capital as she went along and leave us nothing (which was fine with all of us). It would have lasted a lot longer if she hadn't fallen for a gambler 25 years her junior a few years after my father died--he spent $15000 of her money in one night (and that's only what she admitted to). </p>
<p>I definitely approve of the MIT degree as meaning he knows how to do proper data analysis--but I am terribly leary of the financial quacks who claim their "MIT degree" or "Harvard degree" automatically makes them trustworthy.</p>
<p>dmd77 - You are so right about the financial advice quacks that can abound at every turn. A degree from a high brow institution does not convey much more than you got a degree from that institution.</p>
<p>In the same vein of irony and mothers, my 80 year old mother worked for many years at a mutual funds company that processed Vanguard funds back in the '60's and early 70's. As a kid, I remember her talking about processing deadlines for the "Wellington fund". Unfortunately, not one dime of our family savings (as it was) ever made it into the coffers of that fine family of Vanguard funds. So close yet so far.</p>
<p>My mother liked to tell the story of how she insisted on meeting John Bogle and "looking into his eyes to make sure he was telling the truth" before investing with him.</p>
<p>I'd suggest he do some reading before he does anything. The investment world is full of folks and their products who would like nothing better than to have a piece of the OP's nest egg. </p>
<p>The world of investing is unendingly complex - IRA accounts in many flavors; stocks around the world; mutual funds in infinite variety; fixed income investments; annuities, commodities, etc. Then we have CAPM, Beta, indexing, Options pricing models, and so forth.</p>
<p>So, confidential, PLEASE go to a library and get a book or two on elementary investing before you do anything. Otherwise, you have a real chance of having noting to invest in a relatively short time. I am not kidding.</p>
<p>I know a bit about investing... namely because my dad would make me watch the ticker on cnn and tell him what INTC(intel) was selling at.</p>
<p>If I were to buy a book, what would be a good book? Newmassdad, it seems like you're being a little dramatic there. I plan on investing in blue-chip stocks since those belong to companies I'm most familiar with and be willing to research.</p>
<p>Confidential, I think you can take a risk with this money if you want - you certainly can't develop a diversified portfolio of individual stocks with $1500 to invest, and while a mutual fund would be the most logical investment it won't teach you much or keep you personally involved in the market. If you can sleep at night knowing that you could take a loss on this sum, buy one or two individual stocks. (Note that no knowledgeable investment advisor would give you such dumb advice. :))</p>
<p>In the worst case, if you make horrible decisions you'll be out less than fifteen hundred dollars. Just avoid hot tips... do your homework, and if a stock looks cheap to you, try to understand why it's out of favor before you snap it up.</p>
<p>A Roth IRA is almost certainly the best vehicle if these are very long term savings, as the current year deduction you'll get for a standard IRA won't be worth much, if anything, to you. The tax-free proceeds in the distant future will be far sweeter.</p>
<p>Confidential - Michael Sivy is an excellent source for blue chip and other solid solid investment advice. Sivy writes for Money Magazine and cnnfn.com. He is also a "do it yourselfer" who likes to invest in individual stocks of solid, growing companies rather than going the mutual fund route. Also, google up some of Sivy's writings.</p>
<p>For general investment philosophy, you also can't beat the "Oracle of Omaha", Warren Buffet (second richest man in the world) who dispenses his philosophy in Berkshire Hathaway's annual reports. Another renowned investor is Peter Lynch - formerly a stellar investment manager of Fidelity's Magellan Fund. A couple of his books are "Beating the Street" and "One Up on Wall Street". Lynch was famous for investing in companies where he as a consumer would appreciate and know the products. He rarely invested in high flying tech stocks where there was no way he had the technical expertise to fundamentally know the tech firm's products and whether they were better than the competitor down the street.</p>
<p>Warren Buffet also invests in what he knows. An example is GEICO, a solid insurance company whose products he knows very well, Coca Cola, and Gilette. See a pattern?</p>