My friend is new to stocks, and is just rushing in for the sake of it. How should I advise him?

I don't do stocks, but we always advise each other on what is wise and unwise (investments etc). He is putting 10k of his tuition $ into stocks with e-trade, jet blue airline and something else. I don't know much about these stocks, but how would you advise him?

He's telling me it's high risk high profit, but he's new to this. He has also only lived in the country for a year.

He laughs at the thought of doing real estate-which I've been trying to convert him to see things my way.

High-risk, high-profit. The same can be said about the Roulette tables in Las Vegas.

Rule Number One about investing in stocks: It is gambling, regardless of the odds or the ratings, it is gambling.

So therefore, do NOT use money that you cannot live without. You do not have control of the market, the market has fluctuations even if it is rising, and you cannot control what your value will be if you HAVE to pull the money out...say, to pay tuition or a mortgage.

Rule Number Two: start small.

If he is new to it, play it small, and slow to get a feel. Learn about limit orders, and get a rhythm going. Dropping $10K on a whim is like putting your wallet on the table. If you're not paying attention, it could be gone before you know it.

Rule Number Three: Diversify.

Have steady-growth stocks, mutual funds, etc...and then have a percentage of it be high-risk, high-profit for the fun and adventure of it all. Hell, make bets with your buddies on certain stocks if you want to. Pick one, put a small amount in it, then bet a case of beer with your friends how much it will grow over a period of time. But keep the rest tied up in lower-risk ventures.

Rule Number Four: Trust the professionals

No one truly 'knows' the market...there are far too many influences to totally predict, you have to ride trends and use insights that are gained over years of experience. At least consult with somebody to start and get a portfolio going. Then, if there's something you think will break out...you can contact your broker, or bite on it yourself, but you at least have support.

Good luck.

well you could wait a few weeks and when it is gone then you won't have to advise him.

It doesnt sound like your friend is going to listen until that $10,000 is gone, and trust me, from the way you have described the situation, his money will be gone soon.

Your first option should be to fund fully a retirement account. If you do this, and you have extra cash, then one of the best things you can do is open a DRIP Plan.

Go to : low-cost-stock-recommendations

.com

They have a DRIP Section and it is free.

These powerful investment plans are seldom talked about because brokers make very little money when they suggest them. Yet, they have proven to be one of the best, if not the best, long-term strategy on Wall Street.

They are perfect for small investors, as well as big investors. They are safe and allow you to not care about whether the market is going up or down. They are a must for any serious investor.

I strongly recommend looking into it. They are great plans.

His tuition money?!?!?! Shouldn't he be paying tuition with that?

Tell him he is a fool. Why does he think he can pick a winner from the hundreds of thousands of stocks out there? Does he not understand that very few stocks soar. Penney stocks are cheap for a reason.

If he wants to invest, put money regularly into good quality mutual funds with proven track records. Let the professional fund managers pick the stocks. That's why they get paid millions.

Let him make his own mistakes.

As a friend, I would convince him to invest $3,000 instead of $10,000.

That will satisfy his curiosity and also give him a good idea of what he's dealing with.

If he loses, you've saved him $7,000.

I of course don't expect he will lose all of his money, it doesn't happen like that.

Regardless of what he does, I think it will be a great learning experience.

Let the man do what he gota do. If he loses his 10k that doesn't mean failure, theirs always positive things that come from the experience. you may not like the thought of him losing the money, either way you gota give the man props for his enthusiasm. you gota love that