Today's hot stock market is both inviting and intimidating to new investors. Here's how to start an investment portfolio of your own.
Things You'll Need
Paper And Pencils
Get educated: Read about stocks and the market, take a seminar or class on investing and review online financial sites.
Develop financial goals and an investing and stock-picking strategy.
Research individual stocks by reading annual reports, quarterly reports and other documents on file with the Securities and Exchange Commission. Look them up online at www.freedgar.com
Invest in what you know. Consider the stocks of local companies with which you are familiar and in which you have confidence.
Check out the holdings of some successful mutual-fund companies. If they are winning with particular stocks, perhaps you will too.
Diversify. Avoid putting your money in just one or two stocks or, for that matter, in one or two industries.
Use a discount brokerage to buy stocks if you are confident in your investment skills and have the time to do your own investing. You'll save on commissions.
Buy stocks that you will feel comfortable holding for three to five years. Resist the temptation to dump a stock the moment its price drops a few percentage points. Give it a chance.
Tips & Warnings
Know your appetite for risk before you start investing. The stock market can be a roller-coaster ride.
If you don't have time to research and review stocks daily, try investing in a mutual fund account, at least to get started.
Look for value. Use price-earnings ratios, usually reported in newspapers' stock tables, to compare a stock to industry norms before you buy.
Take advantage of investing through 401(k) plans, Individual Retirement Accounts and Keogh plans. These provide tax breaks to the investor.
Don't think that by investing all your money today, you will be a millionaire next month. Invest for the long term.