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I'm a baby in this field. Currently reading Buffet, Motley Fool's Investment Guide, and the Intelligent Investor (Graham) simultaneously.

If I were to start with a bare minimum with Ameritrade, in order to feel out the new arena, how much would you recommend to start with? $2000, $2500 or $3000?

dumbererr
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No. of Recommendations: 14
Hi Dumbererr,

I'm a baby in this field. Currently reading Buffet, Motley Fool's Investment Guide, and the Intelligent Investor (Graham) simultaneously.


Since you are new to investing; definitely, the minimum $2,000.

It is far more important to contribute regularly. If you can after sending in your $2,000 to open an account send some monthly money up this would be the best way to go.

Be patient, read those books you mentioned and begin to form a system.

1. It is important before you invest that you have establish some way to value a company.

2. You need to be able to locate debt on the balance sheet as well as cash which is also located on the balance sheet of the companies' financial statements.

3. Find some good sources of information by checking out your local libray. They carry an archive of financial magazines as well as some heavy duty financial publications like Value Line.

4. Immediately start a notebook. Take notes on any investments that you make. Before investing a dime in a company, make sure you jotted down in that notebook why you invested in that particular company and what you reasonably expect as far as returns from that company and why.

5. Understand at least the basics facts that the income statement, balance sheet and cash flow statements are telling you about the companies you are investing in.

6. Continue to study as you invest; grow your knowledge along with your investments. Organize what you learn about investing and let your notebooks grow along with your investments. It will be fun to look back on your beginning notes 20 years from now.

7. Learn the difference between a falling stock price due to degrading company fundamentals and a falling stock price due to the general market going down.

8. Don't borrow to invest; don't go on margin

9. Never invest so much you cannot sleep at night. If you have invested wisely and slowly your investments will begin to grow faster than your monthly allotment to investing. Your portfolio will grow because the stocks you bought our appreciating in value not because you are adding more monthly money to your investments.

10. Don't invest money you will need in the short-term. In fact, ideally, you want to invest only the money you will never miss till your retire.

11. Don't worry about mistakes, if you are investing slowly through monthly contributions and diversifying wisely as you go, a few mistakes will not harm your portfolio.

12. Don't give up. Many people give up long before they have a chance to learn how to invest properly and benefit from the rewards of an appreciating portfolio.

13. Read these articles - The Motley Fool has provided many good articles on how to value a company


Inventory Ins and Outs by LouAnn Lofton TMF Bling – March 20, 2003
http://www.fool.com/news/commentary/2003/commentary030320lal.htm

The Inventory Story by TMF Orangeblood Rex Moore – July 15, 2002
http://www.fool.com/news/foth/2002/foth020715.htm

Investigating Inventory by Rex Moore TMF Orangeblood – July 8, 2002
http://www.fool.com/news/foth/2002/foth020708.htm

Indecent Inventory Exposure by Mike Trigg TMF Tonto – March 14, 2001
http://www.fool.com/portfolios/rulemaker/2001/rulemaker010314.htm?source=EDNWFH

EBITA
http://www.fool.com/news/indepth/telecom/content/ebitdalimits.htm

The Value of Cash flow
By Vince Hanks – June 8, 2000
http://www.fool.com/dripport/2000/dripport000608.htm

Lucent cash flow and calculating Lucent cash flow
http://www.fool.com/news/foth/2000/foth001219.htm
http://www.fool.com/news/foth/2000/foth001128.htm

The Motley Fool on valuation
Introduction to valuation
http://www.fool.com/School/IntroductionToValuation.htm

Earnings valuation
http://www.fool.com/School/EarningsBasedValuations.htm

Sales valuation
http://www.fool.com/School/RevenueBasedValuations.htm

Cash flow valuations
http://www.fool.com/School/CashFlowBasedValuations.htm

Equity-based valuations
http://www.fool.com/School/EquityBasedValuations.htm

Yield-based valuations
http://www.fool.com/School/YieldBasedValuations.htm

Member-based valuations
http://www.fool.com/School/MemberBasedValuations.htm

The following series was written by- Randy Befumo TMF Templr
How to read a balance sheet
http://www.fool.com/school/valuation/howtoreadabalancesheet.htm

Current Assets
http://www.fool.com/School/Valuation/CurrentAssets.htm

Current liabilities
http://www.fool.com/School/Valuation/CurrentLiabilities.htm

Debt and equity
http://www.fool.com/School/Valuation/DebtAndEquity.htm

Current and Quick ratio
http://www.fool.com/School/Valuation/CurrentAndQuickRatio.htm

Working Capital
http://www.fool.com/School/Valuation/WorkingCapital.htm

Price to book - DSO and Turns
http://www.fool.com/School/Valuation/PriceBookDSOAndTurns.htm


Beware the bloated balance sheet
By Bill Mann TMF Otter - August 16, 2000
http://www.fool.com/news/foth/2000/foth000816.htm

Current assets on the balance sheet – Our likes and dislikes
By Phil Weiss TMF Grape – June 27, 2000
http://www.fool.com/portfolios/rulemaker/2000/rulemaker000627.htm

The Many Faces of Debt
By Phil Weiss TMF Grape – August 4, 1999
http://www.fool.com/portfolios/RuleMaker/1999/RuleMaker990804.htm

Beware of Inflated earnings
By Richard McCaffery TMF Gibson – August 17, 2000
http://www.fool.com/news/foth/2000/foth000817.htm

Statement of Cash Flows
Vince Hanks – June 1, 2000
http://www.fool.com/dripport/2000/dripport000601.htm

Series of articles by Vince Hanks 1-12
Intro to SEC forms By Vince Hanks (TMF Elwood) Jan 6, 2000
Back to basics Part 1
http://www.fool.com/dripport/2000/dripport000106.htm

Concepts and Definitions by Vince Hanks
Back to Basics Part 2
http://www.fool.com/dripport/2000/dripport000113.htm

The Balance sheet by Vince Hanks
Back to Basics Part 3

http://www.fool.com/dripport/2000/dripport000120.htm

Non-Current Assets by Vince Hanks
Back to the Basics Part 4
http://www.fool.com/dripport/2000/dripport000127.htm

Current Liabilities Explained by Vince Hanks – Feb 3, 2000
Back to Basics Part 5
http://www.fool.com/dripport/2000/dripport000203.htm

Understanding Non-Current Liabilities by Vince Hanks – Feb 10, 2000
Back to Basics Part 6
http://www.fool.com/dripport/2000/dripport000210.htm

Finishing the Balance Sheet by Vince Hanks – Feb 17, 2000
Back to Basics Part 7
http://www.fool.com/dripport/2000/dripport000217.htm

Fun With Numbers by Vince Hanks – Feb 24, 2000
Back to Basics Part 8
http://www.fool.com/dripport/2000/dripport000224.htm

Balance Sheet Finale by Vince Hanks March 2, 2000
Back to Basics Part 9
http://www.fool.com/dripport/2000/dripport000302.htm

Introducing the Income Statement by Vince Hanks March 16, 2000
Back to Basics Part 10
http://www.fool.com/dripport/2000/dripport000316.htm

Income Statement demystified by Vince hanks – April 6, 2000
Back to Basics Part 11
http://www.fool.com/dripport/2000/dripport000406.htm

The Cost of Doing Business by Vince Hanks – April 13, 2000
Back to Basics Part 12
http://www.fool.com/dripport/2000/dripport000413.htm

Income Statement Odds and Ends by Vince Hanks April 20, 2000
Back to Basics Part 13
http://www.fool.com/dripport/2000/dripport000420.htm

Today's Buzzword EPS by Vince Hanks April 27, 2000
Back to Basic Part 14
http://www.fool.com/dripport/2000/dripport000427.htm

Finding Financial Information by Matt Richey TMF Matt July 14, 1999
http://www.fool.com/dripport/2000/dripport000427.htm

Cash Flow Headaches by Richard McCaffery TMF Gibson April 10, 2000
http://www.fool.com/news/2000/foth000410.htm

The Statement of Cash Flows by Matt Richey TMF Verve – Aug 23, 1999
http://www.fool.com/portfolios/rulemaker/1999/rulemaker990823.htm

Capital Assets – What are they Really? By Roy Lewis TMF Taxes
http://www.fool.com/school/taxes/1999/taxes990507.htm

Dollar Machine Part 1 by Randy Befumo – June 20, 2000
http://www.fool.com/news/2000/foth000620.htm

Dollar Machine Part 2
http://www.fool.com/EveningNews/1997/EveningNews970912.htm#foth

Dollar Machine Part 3
http://www.fool.com/EveningNews/1997/EveningNews970915.htm#foth

Don't Forget Debt by Whitney Tilson Oct 16, 2001
http://www.fool.com/news/foth/2001/foth011016.htm

Debt is not always Bad – Brian Graney TMF Panic April 23, 2001
http://www.fool.com/news/foth/2001/foth010423.htm


Debt; The Good, The Bad and The Ugly- Phil Weiss TMF Grape
Part 1 Aug 31, 1999
http://www.fool.com/portfolios/rulemaker/1999/rulemaker990831.htm

Part 2 Debt; The Good, The Bad & The Ugly -
http://www.fool.com/portfolios/rulemaker/1999/rulemaker990901.htm
Return on Equity a Definition
http://www.fool.com/school/returnonequity/returnonequitypartonedefinition.htm

Return on Equity – profit margin
http://www.fool.com/School/ReturnOnEquity/ReturnOnEquityPartTwoProfitMargin.htm

Return on Equity – Asset Managemenet
http://www.fool.com/School/ReturnOnEquity/ReturnOnEquityPartThreeAssetManagement.htm

Return On Equity Leverage
http://www.fool.com/School/ReturnOnEquity/ReturnOnEquityPartFourLeverage.htm

Return on Equity – An example
http://www.fool.com/School/ReturnOnEquity/ReturnOnEquityPartFiveExample.htm

A Look at ROIC - introduction
http://www.fool.com/school/roic/roic.htm

A Look at Roic – Better than ROE by Dale Wettlaufer TMF Ralegh
http://www.fool.com/School/roic/roic01.htm

A Look at ROIC An example by TMF Ralegh
http://www.fool.com/School/roic/roic02.htm

A Look at ROIC True Performance TMF Ralegh
http://www.fool.com/School/roic/roic03.htm

A Look at Roic – A declining ROIC TMF Ralegh
http://www.fool.com/School/roic/roic04.htm

A Look at ROIC – Equity isn't free by TMF Ralegh
http://www.fool.com/School/roic/roic05.htm

A Look at ROIC – Cash Role by Tmf Ralgh Dale Wettlaufer
http://www.fool.com/School/roic/roic06.htm

Security Analysis – Introduction by Randy Befumo TMF Templr
http://www.fool.com/School/SecurityAnalysis.htm

Security Analysis – A crazy lil thing called stock by Randy befumo
http://www.fool.com/School/SecurityAnalysis01.htm

Security Analysis – Valuation The price paid to the Cash Created
http://www.fool.com/School/SecurityAnalysis02.htm

Security Analysis – Quality the Measure of Excellence
http://www.fool.com/School/SecurityAnalysis03.htm

Security Analysis – Depth of Knowledge: The Circle of Competence
http://www.fool.com/School/SecurityAnalysis04.htm

Security Analysis – Time the Ultimate Arbiter of Returns
http://www.fool.com/School/SecurityAnalysis05.htm

Finding Information by Randy Befumo
http://www.fool.com/School/SecurityAnalysisFindingInfo.htm


Thinking of ROA by Paul Lawson June 21, 1999
http://www.fool.com/EveningNews/foth/1999/foth990621.htm

The Uselessness of PSR by Paul Larson TMF Parlay Aug 1, 2000
http://www.fool.com/research/2000/foolsden000801.htm

P/E Is not a Magic Number Zeke Ashton TMF Centaur
Part 1 March 23, 2000
http://www.fool.com/research/2000/features000323.htm

P/E Is not a Magic Number Part 2 TMF Centaur March 30, 20000
http://www.fool.com/research/2000/features000330.htm

Calculating Cash Flow Ratios Phil Weiss TMF Grape July 7, 2000
http://www.fool.com/research/2000/features000707.htm

Debt Beyond the Balance Sheet by Richard Mccaffery May 2, 2002 TMF Gibson
http://www.fool.com/news/2000/foth000502.htm

Beta
http://www.fool.com/FoolFAQ/foolfaq0045.htm

Dividend Discount Formula – John Del Vecchio TMF Fuz
http://www.fool.com/research/2000/features000406.htm


Cash Flow and the Federal Reserve by TMF Otter Bill Mann
http://www.fool.com/portfolios/rulemaker/2000/rulemaker000517.htm

PEGulator
http://www.fool.com/pegulator/pegulator.htm

Return on (Marginal) Invested Capital by Bob Fredeen (TMF Bobdog)
http://www.fool.com/research/2000/features001019.htm

14. If you do not understand them thoroughly ask someone from the boards to help you with what is not clear.

tom




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No. of Recommendations: 1
Before U become a total mass of confusion and walk into a wall,pulling your hair out.Go and either buy or get hold of some books on Index Mutual Funds.A good book to start with has been written by the Father of Indexing John Bogle,Common Sense on Mutual Funds. Don"t get boged down with the TEchnical junk in the book.Just catch as much of the guidance stuff as best U can .I can"t believe that some one would introduce to investing the way 1000 has.What he has proposed and presented to U as a newbie would frighten and scare the hell outa me.
Good Luck and may U become 1of the super rich.
A reader
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Thank you sire!
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If I were to start with a bare minimum with Ameritrade, in order to feel out the new arena, how much would you recommend to start with? $2000, $2500 or $3000?

IMO, as much as you feel you can currently put in without leaving yourself with no emergency funds. IMO a better thing to get into the habit of is regularly contributing to the account. Try and start with a fixed percentage of each pay check, say 5%. And pay that first above all things.

Then as a practical matter, don't buy a stock with less than about 100 times what you pay for two trades. If your broker charges $6.95, no less than $1400. That's how much you need to make the fees (commissions, spread, etc) come out to be about 1%. Assuming you hold any stock for at least a year.


A couple of comments on 1000's excellent post:
4. Immediately start a notebook. Take notes on any investments that you make. Before investing a dime in a company, make sure you jotted down in that notebook why you invested in that particular company and what you reasonably expect as far as returns from that company and why.

Set a certain period (3 months) where you go back and review the company to see if it still meets the criteria you chose it for.

Also, when you record your investment decisions, also record the alternatives. If you decide to sell a stock, try and keep track of what would have happened had you kept it. You'll often learn more from your mistakes as from your successes. And you'll also tend to sweat those mistakes more. Try and keep sight of the overall picture.

You've got 20+ years of investing in front of you. Take it slow.


I can't believe that some one would introduce to investing the way 1000 has.What he has proposed and presented to U as a newbie would frighten and scare the hell outa me.

When you consider that most of what 1000 recommended are 2-3 page articles, then that list could be easily read in a weekend.

doc
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I would recommend that you first start with a long term savings strategy, and that your initial investments are primarily indexed mutual funds. These require a lot less work and you lose a lot less money while you learn the ropes.

A good mix might be 80% indexed funds and 20% individual stocks. Therefore, I would invest all of it, and put 2400 into VTSMX (vanguard total stock market) and 300 bucks each into two stocks you have researched. Yes, the comissions are high and you will lose a lot just on that (go with Scottrade or another really cheap comission place). However, your real money in the market will make you pay attention and you will learn fast how things work on a simple level.

Meanwhile, continue contributing, and keep up the 80/20 split, and don't invest the 20 part until you have enough in there to make it worthwhile for a particular stock.
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Greetings!

Education comes first; you're on the right track.

I have an account with Ameritrade and like them very much. $2000 is a good starting amount for an investment account, AFTER you have done two important things: established a 3-6 month emergency funds account, held in something liquid and safe like a money market fund or short-term CDs, and eliminated your credit card debt.

I highly recommend Bernstein's book, 'The Intelligent Asset Allocator.' Read it thru at least twice.

In the long run, you will be well-served by:

- Dividing your investment account(s) between non-correlated asset classes, and changing the stocks-to-bonds ratio as you get older towards less stock and more bond/fixed income.

- Investing long-term by indexing via low-cost (e.g. Vanguard) mutual funds or exchange-traded funds instead of individual company stocks (it's easier, simpler, cheaper, and reduces risk)

- Rebalancing your account(s) periodically (once every 12 to 18 months)

- Ignoring day-to-day market fluctuations and especially 'noise' in the financial press.

- Staying away from options, futures, margin investing, commodities, full-service brokers, and 'hot tips' from your friends and relatives.

- Taking it all in stride and enjoying life.

I also highly recommend Scott Burns' column in the Dallas Morning News on Couch Potato Investing:
http://www.dallasnews.com/business/scottburns/

Regards,
Frank

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