College Student Looking to Build Stock Portfolio - Tips/Suggestions?
Hey guys - I have quite a bit of free time before the summer but also want to start building my own long-term portfolio so I'm looking to get myself starting on investing in stocks and securities. I have a general idea of how to go about this but would like some additional insight into building out my portfolio. I would be starting with an initial $10,000 investment and would be most comfortable investing in stocks over options/fx. I've already looked through previous posts on WSO with similar questions but wanted to see if anyone had any specific advice for someone with a profile like mine.
1) Approximately how many stocks should I invest in to properly diversify? Would ETFs be a good option for me?
2) I set up a thinkorswim account and have been diligently following seekingalpha over the past few weeks to get myself accustomed to doing my own research - any additional websites/resources/books/videos you guys would recommend for a beginner like myself?
3) What kinds of "best practices" do you guys utilize when following information on your stocks, and what types of investing strategies (event based, value driven, technical, etc...) would be best for a beginner?
4) Being a college student with only a $10,000 investment, should I be looking for mostly short-term investments of small-cap companies with higher risk/return? How do you originate ideas or find smaller companies? Random searches?
5) With only $10,000, should I focus on stocks with lower prices versus expensive stocks like, say, AAPL?
6) What have you guys learned over the years from making your own mistakes and any general wisdom to impart onto a new investor?
Read security analysis and reminiscence of a stock operator
Market Wizards-read it.
Also, understand what a true portfolio and risk is. Picking a bunch of stocks is not a portfolio, you have to pick stocks that are going to lower your risk. Risk in this case is standard deviation. I'd also look into some of the newer portfolio theories that are coming out as MPT(modern portfolio theory) is becoming out of date. Being in bonds and us equities isn't enough. You are going to want to be in Europe and Asia. The more you add the lower risk your portfolio SHOULD have, if done right.
Consider futures. I'm currently a college student and made close to 10k in a little over a week on them.
bump
Read everything you can get your hands on: Peter Lynch's books and the Intelligent Investor, for example. The Education of a Value Investor is a great book for the "inner game" of investing and also provides a useful reading list in the appendix.
Lynch suggests that you can only follow 10 companies at a time and to only invest in companies you understand and are familiar with ("know what you own"). Diversification for diversification's sake becomes di-worse-ification! Reducing risk is very important but this could be achieved by investing in companies with international outlooks.
With all due respect to carlfox, only approach futures if you can truly state that you understand them and the risks present.
Stop. 10k is a decent cushion for someone your age, start investing when you get meaningful employment. Practice in paper to work on your process. But if you don't have a 3.8 or higher you're wasting your time, or at least not focusing your efforts in the right places.
Be mindful of transaction costs and fees..
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