I really don't know if there is a need for this on "Money Money Money...," but it is in the description. I consider myself pretty knowledgeable on the topic of general finances, taxes, and economics. I actively invest, and I consider it a great option for long term monetary growth. You could ask general questions, particular stock advice, market advice, etc. Now is great time to buy some severely under-valued companies, so ask away.

Question about taxes. I have been filing for 3 years. First year I filed I had only worked 2 jobs so I had 2 W2's one which was for a restaurant. i never claimed any tips as we were told not too. (Stupid yes I know) I got a letter from the IRS the other day saying I owe them money and attached to the letter is the W2 from the restaurant. WTF is this about and why is it coming up 3 years later. Should I call the irs, the restaurant, both, throw the letter out and ignore it, or pay them?

what do u think about buying stocks for oil and gold right now?
also as an 18yr old, what is the best way i should be living my life to be able to maximumly achieve financial gain, such as holding a job , no loans etc.

I don't recommend any inexperienced speculator or investor to get into the commodity game, in short, it's above your head. But I think now is an excellent time to consider investments in solid companies. And the best way to be living your life is to save, save, save. Where you put your money is your decision, and there are different growth rates applied depending on this decision. If you were to put it into a savings account, you might make <1%, pretty lame. A money market account like ING, Fidelity mySmart, at al. typically have higher rates and can be used as a checking account. Alternatively you could invest it, possibly netting higher returns through stock growth and dividends. As for investing...

Investing in common stocks requires a little bit of vocab knowledge, it may seem intimidating at first, but with a little studying (even wikipedia) you can become more comfortable with the lingo and decipher some of the more intermediate investing strategies. If you're serious about investing, I recommend reading "The Intelligent Investor" By Benjamin Graham. Graham is a famous investor/teacher/and business man. He was a board member of GEIKO, professor at Columbia, and taught Warren Buffett (most times the richest man in the world). Graham gives helpful insights into the world of investing. I can upload the .pdf if anyone wants it.


Before we get started, let's define investment. (per Graham's definition in The Intelligent Investor)

Investment: through thorough analysis promises safety of principle and an adequate return.

This means that in order to consider a perceived investment as a true investment, it must have little risk, and high expected rate of return.

Anything else is speculation. And try to avoid this.

Anyway, in order to find an appropriate investment, there are two main ways to go from here.
[1] Technical Analysis
[2] Fundamental Analysis
(We won't even mention Quantitative Analysis)

Know that some people find the results they look for using technical analysis, these are generally traders. Traders, different from you or me, watch the market daily and make large volume trades to make pennies on the dollar that in these large volumes, equate to large profits. This is certainly a feasible approach even for a long-term portfolio, but I don't recommend this as it requires a great deal of arguably pointless knowledge. Buffett built his wealth on the principles of Fundamental analysis, and it just so happens, it is a very common-sense approach that is not difficult to grasp.

The idea behind fundamental analysis is such: The market is wrong. The way it prices stocks (and therefore, companies) is not accurate since the market is so strongly influenced by the whims of daily traders. Since this is true, it means a price drop can occur on a company who saw no real decrease in value. This means the company can be had for a bargain.
How to make money using value investing principles:

• Research & Find undervalued companies
• Invest a portion of your portfolio
• Wait for the market prices to correct itself
• Cash out/hold longer

Your goal as an 18 year old kid should not be to make crazy money in a few months, this will more than likely end in failure. You should have a 5-10 year horizon on your investments. The aim here is to allow the market prices to better represent the company you're holding. To do this, you'll need to find companies with a large discrepancy between the market price (the price at which you can buy the stock for) and it's intrinsic value. Now there are many ways to calculate intrinsic value, but all of the goals are the same--The idea is to price the companies shares yourself, and determine it's "true" value. There are many ways of doing this, and I prefer Graham's method as described in his books.

To save time, I'll cut to...

The Valuation of a Stock

Graham used this formula:

Intrinsic Value = E(2R x 8.5)(4.4Y)

where,
E = Annualized earnings, past 5 years (or less/more)
R = Earnings growth rate, next 5 years
8.5 = A value Graham used for the P/E for company with no growth prospects
4.4 = Required Rate of Return for company w/o growth prospects
Y=30yr. AAA Corporate bond yield


This guy gives an excellent explanation,
It's perfectly okay if you don't understand this right away, it uses some foreign vocab, but it's nothing too difficult, I promise you that. I would read as much as you can, as those who don't know the system get played by the system.

[I have to go, I'll edit this later]

Im 18, and want to work for the next 5 years and hopefully save 90% of my earnings during this time which should come out to roughly 120,000 cash. which will then be used to buy a house. (dont want to pay montly mortgage)what does this sound like to you?

dang astronomy good read though i didnt understand that much...
my dads an investment banker and he says he likes warren buffet so i guess hes a legit guy,....
anyways ive been recently listening to economists like jim rogers and peter schiff...the ones that knew this crisis was gonna happen as well as supporters of RON paul in destroying the Federal Reserve....
now if we look at oil....it is cheap and at the same time since oil is a scarce resource thats depleting, dont u think it will go back up by summer?

If you could live with your parents for the time being it would work out great.

I really like where you head is at but you need to think more realistically. Unless you live with your parents for free, don't go to college(nothing wrong with that by the way), don't own a car and don't enjoy yourself at all, saving 90% of what you make is just not going to happen. Go for the mortgage. There is nothing wrong with it and it will be a lot easier to do. If you're buying a house of that price the mortgage is going to be very easy to afford. If your a hard worker and good at saving, you'll be able to pay it off soon enough, trust me. Not to mention you'll start making more money than that as time passes.

Five years is a long time, imagine you get a house in two years, get a housemate and then pay it off three years after that. Now if you want you can sell it and put a down payment on a better house. Better yet, get a second house, live in that one and rent you old one and then you'll have no mortgage payment! I can respect your desire to buy a house for cash, but come on man.

-i live with relatives who i could stay with for the time being if i do my plan.
-not planning on gong to college.
-dont want/need car.
-i dont "enjoy" myself.
-im in high school so i work part time but i make around 1k per week after expenses(train and food)( i have some other money making things on the side as well). ive been at it for 2 months and already have 3.5k, i plan to make this happen.

If you don't want to enjoy yourself, I'd keep on saving. It's doubtful you'd be able to save that much in 5 years, but it really doesn't matter. Save your money, live below your means, and invest your money (be it common stocks, debt equities, or a high yield money market account/fund) to achieve long-term growth and you won't go wrong.