There are innumerable ways to invest in the securities market, depending on your investment goals. There are packaged products such as mutual funds, unit investment trusts (UIT) and exchange-traded funds (ETF). These are portfolios assembled by investment professionals. If you wish to choose and create your own portfolio, you can buy individual bonds, preferred stocks and common stocks. All these investments can be purchased through a reputable full-service brokerage firm or a bank with a broker-dealer subsidiary. They can also be purchased from an online brokerage firm.
Open a brokerage account with a reputable online broker. Using online brokers is advantageous because they provide interactive decision-making tools, research reports, company news, tutorials and access to customer representatives who can answer your questions. They also allow easy 24-hour order input and trade tracking.
Determine your investment goals. If you want conservative income, consider bonds, preferred stock or dividend-paying common stock. If you want conservative price appreciation, consider blue chip stocks listed on the major stock indexes such as the Dow Jones Industrial Average (DJIA) or the Standard & Poor's 100 or 500 (S&P 100 or S&P 500). If you want aggressive price appreciation, consider the Russell 2000. Day traders prefer penny stocks traded on the Pink Sheets.
Examine your own personality with respect to your tolerance of market fluctuations. There will be times when you check the prices of your investments and find that they are worth less than you paid for them — possibly much less. If this will upset you, seek out conservative investments.
Research the investments you feel most comfortable with according to your goals and risk tolerance. Learn how to use the tools and information available through your online brokerage account.
Move your money into the market in stages. Divide the amount you intend to invest into at least three equal amounts, and invest that money in your selected vehicles over a period of a few weeks or months. This is called dollar-cost averaging and will help you avoid putting all your money into the market during a temporary high.
- Use good sense and knowledge. They are your allies. Greed and impetuousness are your enemies. Whenever you are confused or in doubt, take advantage of investment professionals who can answer your questions and guide you to a decision compatible with your risk tolerance and goals.
- Ignore hot stock tips from your friends and emailed stock promotions. By the time your well-meaning friend tells you about how much money he is making in his investment, the opportunity has likely passed. Stock promoters are generally talking their own portfolios. They are trying to encourage greedy buying to goose the price of their stock so they can sell it at a profit.
Victoria Duff specializes in entrepreneurial subjects, drawing on her experience as an acclaimed start-up facilitator, venture catalyst and investor relations manager. Since 1995 she has written many articles for e-zines and was a regular columnist for "Digital Coast Reporter" and "Developments Magazine." She holds a Bachelor of Arts in public administration from the University of California at Berkeley.