The stock market can be very risky as we have seen over the past few months. There were tons of people who lots tons of money due to the market collapse, I mean I'm talking 40-50% of their retirement nest egg. A good amount of our US population is baby boomers, and they are all getting ready to retire within the next few years. Those people are some of the people who have been hit the hardest, they may have to put retirement off for years and continue to work (if they can keep their jobs). I only say that regarding keeping their jobs because of the fact we are in a "recession", and during recessions there tends to be lay offs, so hopefully none of those people will get laid off...well hopefully there wont be any lay offs, hopefully as a whole the economy turns around quickly.
So as I just stated, this is a tough time for anybody in the market, but it can be good for us young people. Think about it, the stock market is selling at levels that it was at 7 years ago...if you can get some money into the market now (mutual funds, index funds, or individual stocks - if you know what you are doing) its kind of like having started years earlier. I heard a person say the other day "we are all going to be kicking ourselves in 24 months because we did not take mortgages out on our homes and put it into the market" - that's if we could even get loans now because there has been a loan freeze recently and its been very difficult to get loans. What he was saying was that he was optimistic about the market over the next few years. Now that was not Warren Buffett who told me that, but it makes sense that the stocks will rebound. Buy low sell high, that's the first rule of investing in stocks and now could be a great opportunity to buy low.
Below are a few links to articles about legendary investors discussing how there are some GREAT values out there in the market right now.
Going against the theme above, there are other ways that you can look at this economic catastrophe. The US savings rate is somewhere in the area of -2%...yes that's a negative, the US as a whole spends more than they make. You can have this current turmoil be a reality check for you, for years the economy was good, the market was great and we did not even think of anything like this happening, so we may not have thought about building up a nice emergency fund in cash sitting in a high yield savings account building for us. That is something everyone needs to have, you need to be prepared for the worst, you need to be prepared for job loss or your extra income being cut. So you can either be optimistic on the market and put some money into the stocks and hoping that is turns around and you get a nice amount of money WORKING FOR YOU in the stock market, or you can build up a nice cash hoard for any hardship you may come across.
If you want to open a brokerage account and start investing, I'd recommend Scottrate, Charles Schwab or even Sharebuilder. These companies all have low commissions on your trade so you can make more of your money work for you as opposed to going to expenses of making a trade.
If you want to build up a CASH HOARD (I like the sound of that, it sounds cool, the word HOARD) I would recommend setting up an ING Direct savings account or E*Trade. ING Direct does not have the highest rate out there right now but they do offer $25 bonuses for opening an account (which I can hook you up with, just send me an e-mail) and honestly, they could not be easier, I have used ING for the past 4 years and I have never had an issue and the site is so easy. E*Trade pays a bit more in interest, and I don't have much experience with them, but I do have an account with them and they are pretty good too.
Let me know if you want a bonus link, or want information on opening a brokerage account.
Check out these articles.