How does the stock market work?

[Cat]

besides that, i have more questions. Like, I'm starting work at 14, and I wanted to know if I have to pay taxes in New York City. So I'm deciding to put most of my money in a bank account and put the rest in the stock market. I think its a good time to buy right now because the prices are down and they'll cost less to get. - Here's the scenerio Im thinking of- lets say I put $100 in Apple or Facebook or something like that. Within a month, the company goes up like 5% so I get 5 bucks. Then the next month it goes down 10% so I lose $10.50. Is that basically how it works? Also, will I ever owe money? Like, besides the $100 I put in, will I owe money if I lose all $100? Thanks!

[MVD34]

You cannot invest in the stock market directly without an adult until you are 18.

Yes, you will have to pay taxes.

[Tigs]

You will not lose more than you put in. You pay for a stock and once you have it, the value can go up and down. If it goes below what you bought it for, you will lose money. If it goes negative, it doesn't mean you own anybody any money. You really don't lose the money unless you sell lower than you purchased or the company goes bust. You are young and its a good time to think about these things. Look into big stable companies that pay dividends. Slowly build the stocks up in a bunch of these companies. Reinvest the dividends, and by time your at your retirement age, you might very well have a nice steady monthly income from dividends alone. You couldn't put 100 on Apple because their stock is much higher than that. You would need a broker that allows you to autoinvest monthly. You will get fractional shares. Like .25 shares Apple or .5 whatever. I use Sharebuilder for this. I am sure there are plenty of other good brokers but this is the one I started with since I already had bank accounts with ING Direct. Good luck. Learn more about everything before you jump in. Ask an adult to help you. As the other person already mentioned, you will need a joint account to do anything at your age. Best of luck!

[drmark27]

I think it's great to start learning about the stock market at such a young age. An introductory book like _Stock Markets for Dummies_ is a good place to start. This will give you a basic explanation of most things there are to know about the mechanics of stock investing including useful websites to surf.

Investors Business Daily (IBD) is a solid daily resource (and its complement, http://www.investors.com ). It's a better newspaper than the Wall Street Journal and it is built around a particular approach to trading. You could read _How to Make Money in Stocks_ by William O'Neil too--he's the founder of IBD.

Search your local library for other books on stock investing. Try to absorb as much knowledge and understanding as you can.

After you have extensively researched and gained a solid foundation/education then look to open a brokerage account (under custodian of a parent unless you're at least 18) and paper trade--this is trading with play money before you put real capital at risk. You should do extensively before you eventually place your first trade live. Your early live trades should be with a very small position size. Only increase position size when you have done well to limit losses when the market has turned against you.

If you have specific questions then feel free to e-mail me.