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Investing 4 Teens

Basic Stock Market Investing

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Here I would like to enlighten people as to investing in the stock market. For those who have never done this before it can be very daunting especially for teens who have just worked very hard for their money. It can be very difficult to part with your pay check.


A few guidelines for money to be invested:


1. Never less than atleast $200

Reason: You pay the same fee no matter how much you invest. So investing a small amount makes little sense.

2. This must be money you will not touch for at least 1 year, preferrably quite a bit more.


Reason: The average return of the stock market is about 6-9% and you have to pay broker or trader fees to put it in and out. The more you trade the less you will make in the long run. Think about it. I personally use Scottrade. $7 to put money in and $7 to take money out. You just lost $14 so if you are only going to put this in for short time you will most likely lose money.


Once you have your money it's time to pick a stock. Along the way I'll list and explain the most important statistics on evalutaing stocks.



P/E: This is the Price to Earnings ratio, basically it uses a formula to compare how much money the company is earning to the price of the stock. You want this number to be low. Below 25 is good. Below 20 is very good. Below 15 is excellent.




Dividend: All this is an amount a company will pay you quarterly to own their stock. When the company makes lots of money, you make lots of money. Its pretty much an incentive to purchase their stock.









Price/Book: This simply a ratio of how much the company is worth to how much the stock is worth. Example: If all of their stock is worth $2 million and their actual companies hard assets are worth $1 million the Price/Book ratio is 2. You never want this number above 5. Below 3 is good. Below 2 is very good. Below 1.5 is excellent.





Quarterly Earnings and Revenue Growth: This is simply last quarter compared to the most recent quarter how did their revenue and earnings (Earnings=Profits) change. You do not want to invets in a company that is selling less of its product or service, or is making less money.





Free Cashflow: This basically compares the amount of cash and assets to the amount of immediate debt if this is negative the company is in trouble and should be avoided.





These are important factors when considering a stock. Realize there are many tools at your disposal. For free informatin on stocks visit finance.yahoo.com. They provide free indepth stock quote and analysts opinions. This is also another important thing to consider when buying a stock.







Possibly the best tool to find stocks is yahoo's stock finder. Just punch in statistics for the stock and it pops out the ones that fit your description.

This is a site I desgined especially for teenagers to learn how to better manage their money and plan ahead for things like going to college and buying a car. If you ever have any questions always feel free to email me at ipodfreak15@gmail.com I'm always glad to answer your questions or to receive feedback.