Since I have been a part of this forum, I have learned a lot of really good information about stocks and trading. This year I am going to make it a point to invest a little money, even if it is only like $5 a month. I have to start some where and grow my money. I am really excited to get started. Do any of you know if TD Ameritrade deals with any low budget or penny stocks? This is the company I am leaning toward to get started, but could really use some advice from those of you who are much more educated at this than I am.
Rosy - TD Ameritrade does indeed trade penny stocks. If they are traded, then you can access them through a TD account. That said, it doesn't sound like penny stocks are the best place for someone who is beginning to invest a little money. You don't often see "investing" and "penny stocks" in the same sentence. Penny stocks can be extremely risky, and a little money can evaporate very quickly. I have no idea what your situation is (age, income, goals, etc), but it's always best to start to invest with vehicles that are a bit more balanced. Money market accounts or diversified mutual funds might be a place to start investigating. Penny stocks would be appropriate once you begin to have a little extra that you can put at risk, but not as the means to begin investing a little money. Also, depending on your situation most Financial Planners recommend you have 3-6 months of expenses saved in an emergency fund (a liquid account).
Peakwealth pretty much hit the spot with his post, penny stocks aren't for your situation. I know it seems tempting, since you can get a lot for so little, but it's just not worth it in the long run. (unless you can pick them really well) If we are talking about very small amounts like $5/month then I see mutual funds as the only way to go, mainly because there are mutual funds which you can get for no commission. Even if we are talking about $1 commission per trade, you would still be looking at almost 2% in fees even if you buy with $60. ($5 x 12 months)
Do you have a work plan such as a 401k? I would hope you would be taking advantage of such a tax-advantaged account if it was available through work - particularly if they offer some form of matching. If you work but don't have a work plan, consider an IRA / Roth IRA through a discount broker. I'd perhaps start with an index fund once you have the $ in the account to buy at least one share. And be sure to contribute to the account every payday.
Yes, I have a retirement account through work and pay into it each and every payday. It is not exactly where I would like it to be, but it is something that I know will grow over time. I thought the penny stock idea would be a good one, but I see why you all are recommending against it. Is there a way to invest in stocks so that I can pull out and sell in the event I need the money for something? You can't do this easy with a retirement account.
No, you don't want to pull $ out of your retirement account. If you're thinking about having the money easily available if you need it, you'd want to keep that money in a regular taxable account. You'd probably want to keep at least some of it invested more conservatively in things like short term debt that pays interest, guarantees a return of principal, and matures frequently at short intervals.
I did the mistake of going into penny stocks when I started out, got burned quickly by investing into a bunch of risky penny stocks and then I lost my appetite for investments for something like half a year, even though I didn't lose a lot of money. I suppose the stock market hurt my feelings , but I got into investing again and started making some gains. I'd suggest you buy stock that's not likely to be very volatile. Actually, scrap that, if you're only going to invest a little money you might as well try to win big
Good luck on the penny stocks front. As a lot of people have probably mentioned there can be a lot of risk associated with these types of stocks. At the same time, they are very high reward if you get it right. That's always the "if"....
Shares that are being held in a regular taxable account can be sold at any time when the market is open... so pretty much on any business day. I actually can't remember how fast you get the money in the USA... but for European equities it's 2 days later. I imagine it to be something similar on the other side of the pond. So yes, there you can definitely liquidate fast if you need the money.
$5 a month isn't going to do anything for you. You don't want to "invest" in a penny stock. You can make money on them but it is risky and isn't easy. Your biggest issue is your budget. TD Ameritrade charges $9.99 a trade. So you need double what you want to spend a month just to pay for your trade. Then you need money to buy the stock. And if you spend $5 on a stock you would have to grow that 500% just to break even. They can climb that much but it doesn't happen every day. It is asking a lot. With more money you don't need as big of a gain to break even. You also need to have a job that will allow you to watch the stock so you can home to get out at all. You also need $500 to open an account with Ameritrade. So you have to be willing to put $500 in an account before you can start all of this. If you can only spare $5 a month I wouldn't risk it on pennys. Only do it with money you can lose. If you can't take a huge risk but can get that $500 together then you should look at stocks on the big exchanges. I would looking into the options the other members suggested. James
