How To Invest Site

By : Gilbert M. De Los Reyes

1. Investing is a business not an adventure.  Some people would dabble in investing, lose money, and decide it is not for them.  The key word is dabble.  Does one think to dabble in a profession to earn a living? Would you invest in the market because you heard it is exciting? Investing is serious business, carefully planned and thought out.  It should not be regarded in the same light as going to a casino. One might argue that there seems to be a similarity between day trading and playing roulette. But that is not what serious investing is all about.
2. Have an objective for investing. Investment objective stems from an assessment of one’s future needs. This could be saving money to buy a house, for children’s college tuition, for retirement  and others. Having an objective means you will need a plan to accomplish it.  Furthermore, having a plan means you need  some criteria  to measure the degree of success. This is where the discipline of investing begins.
3. How much money are you setting aside to accomplish  your objective? Most people have the notion that investing is only for the rich.  Not so.  It is for anyone who has the discipline to set aside a certain amount of money for the future. Is the money you are investing one lump sum, or will there be periodic additions? Remember that this money should be a dedicated amount, and not part of your day to day living budget. Drawing out investment money to pay for living expenses can ruin investment plans.
4. What is your time frame to accomplish your objective? Relative to the amount invested, is this a realistic time frame?
5. Be realistic about your expected rate of return. Remember, the higher the rate of return the higher the risk.
6. What kind of a risk-taker are you? Would you be lying awake all night worrying about your investment? Keep in mind that everything is relative. The more money you invest, the less time you would need to meet your objective, and the less risk you will have to take.
7. Understand the risk characteristics of the different types of investments.  Do some due diligence on your own. Check out Treasuries,  CD’s, Blue Chip Stocks, Penny Stocks,  Municipal Bonds, Mutual Funds, ETF’s, and other investments you might be interested in. Kick the tires, so to speak.  Look under the hood. Read, ask questions. On the right sidebar of this site there are some information to get you started.
8. Have a clear plan  of retreat.  The market is subject to seasonality and cycles.  Unfortunately,  seasonality and cycles are less predictable than the weather.  When the headlights of a cascading market hit you in the eye,  do not freeze into a catatonic state.  Have the presence of mind to run.  At what point  do you bolt? Most advisers recommend  a 20% loss. If the market turns around after you sold, just live with it and fight another day.
9. Understand  the types of services provided and the fee structure of the company and agent you are dealing with. A brokerage firm and their agents generally earn their living from commissions.  They earn commission when you buy a  security, and they earn commission when you sell a security. On the other hand,  a fee-only registered investment adviser company and their representatives earn their money based on a set percentage of  the market value of the assets in your portfolio. If your portfolio earns more, they earn more.  If your portfolio earns less, they earn less.
10. Research the track record of the company and agent you are dealing with. There are a couple of  things we learned from the Cold War: glasnost, meaning openness, and trust but verify. The biggest and most successful investment company and agent may not be the most honest. NASD through finra.org provides the means to look into their records and check any wrong doings and complaints. You are basically dealing with one person, your broker or investment advisor.  Thus, his/her honesty and candor are important.  However, the firm management can also exert undue influence on the agent’s judgment.  Due diligence may save you heartaches and nightmares later on.

Share on Facebook