07.19.07 | I want to buy some stock - but which one?
While in college, the existence of disposable income is quite rare. However, if you are in this situation, through a co-op or summer job, or just graduated school and are beginning your first year of employment, you may wonder what to do with the savings you accumulate. Of course rent, utilities, credit card, and student loan bills take precedence - but after all that, let’s say you want to play the stock market.
First, you need a way of buying them. You can always call up Charles Schwab and hire a broker, but the volume you’ll be buying in won’t warrant such a luxury (or expense). So, sites like Fidelity, eTrade, TD Ameritrade, etc are all great places to get your feet wet. The trade costs are relatively low and the sites are fairly easy to use.
Second, what should you buy? There are probably 1,000 books and 10 times as many websites which attempt to answer this question. My thoughts towards this is if you don’t need this money for a period of time (a.k.a. 10 years) you most likely won’t get burned by picking up companies within the Fortune 500 list. I say “most likely” because of situations like Enron and Sun Microsystems (went from 60 to 5 and hasn’t rebounded in 6 years). So, peruse through the list and pick out a few that you have some knowledge of. Also, it’s actually better to pick them up after a recent decrease or downward trend. Consider them “on sale” since due to their size, they should come back at some point.
Third, you’ve got a few, and maybe one of them went up a few bucks - should you cash in? This is based on a few factors - necessity, commission cost, capital gains taxes - all of which we’ll go into next time…