Investing: Doing it Yourself - Part 1

This is the first of a multi-series piece focused on sharing my views on getting involved in Capital Markets  (specifically Stocks and ETFS) as a “do it yourself” investor / traders.
Many friends ask me….. “How do I start investing in Stocks, Can I invest without an adviser”? How do I know what to buy, when to buy?

Curiosity is the starting point and beyond the stage of the curious mind, you may want to ask yourself if you’ll like “self investing”. If you don’t like researching stocks or investing time in knowing more about valuing publicly traded firms then you may want to make sure you have a very trustworthy financial adviser and focus on other things you may enjoy. The truth is….it is NOT for everyone and being profitable requires due diligence. The only reason you’ll want to do your due diligence is …if you really start to like it because as a beginner, you probably have no history of success to serve as that extra factor of encouragement.

Now there are people that go through the initial soul searching and cannot say for certain if they want to become “do it yourself investors” or not. Perhaps you are in the middle, and thinking….”I may or may not like this stocks thing”. If you fall in this category, the best and surest way to get a certain answer is to commit a small amount of money (let’s say $250) to invest. Make sure you commit something you can lose. Starting the process encourages you to go on and try. Find a broker, open account, deposit your start up funds. Opening an online stock trading account is fairly straightforward.

- Selecting a Broker

Today, most Brokers are based online and in many cases, you can sign up for an account online, get approved and deposit funds in your account via ACH or Back wire all in a few minutes. Make sure you use a reputable Broker. There are many Brokers to choose from e.g Charles Schwab, TD Ameritrade, Trading Direct, Just2Trade and to my favorite…Scottstrade to name just a few. I personally like Scottrade because of their excellent customer service, reasonable cost (about $7.00 per trade to buy or sell) and for beginners, they also have local offices all over the United States where you can walk-in and get help from setting up your account to having basic account questions answered

There are several things to consider when selecting a Broker. Some Brokers are known for their low fees but have low quality analysis tools. Some have higher fees but have excellent stock screening tools, great customer service, first class charts and analysis tools. Some brokers require that you keep a minimum balance at all times, some want you to open with a minimum balance and your balance after that is up to you. Scottrade for example, has a $500 initial deposit and no account minimums after that. Some Brokers have inactivity fees while other do not. For a beginner, a broker with NO inactivity fees, NO account minimums, NO account maintenance fees, good to excellent analytical tools and commission fees below $10.00 per trade will be best. For a list of online brokers and how they rank under different categories (Commission, Customer Service, Speed of execution etc) check out Smart Money’s 2009 ranking at http://www.smartmoney.com/Investing/Stocks/SmartMoney-2009-Broker-Survey/


 - Now You’ve Selected a Broker


Now you’ve selected a broker and deposited some cash into your account and ready to buy “something”. Your level of interest should start to pick up           (I hope), now you’ll start trying to figure out what to buy. If this interest translates to you spending 1 – 2 hours over the weekend reading a little more about stocks, looking at recommendations, trying to find out more about a publicly traded firm etc then you’ll probably be a “long timer”. On the contrary, if after opening an account and funding it ,you’re still NOT inspired enough to have some interest , then it’s time to get off the fence and focus on forming a great relationship with your financial advisor I will guess you may not fit well into the “do it yourself investor” Category.

If you passed the first test, and you are itching to learn more, and want to invest your money, it is important to be patient! Patience is the first key word. There are few more things to throw in the mix while journeying towards the goal of your first trade. I recommend that you read part 2 of this series.