Take Control Of Your Finances

Whether you want to make a lot of money or you simply want to invest in your future, the stock market can help you. But before you take any steps toward investing, you should define your goals. David Chapman, a professional trader with Westminster Securities, advises that you ask yourself: "Are you doing it for long-term investment, for income, for capital gains? Short-term trading or long-term? What is your objective?" You should consider what your motivation is for getting involved in the stock market in the first place. You also need to establish, financially, where you would like to be in the next few years, as well as what kind of risks you are willing to take to get there. Without first establishing your goals, you risk being left adrift -- and possibly broke.

THE SMART WAY

Once you have established what you want the stock market to do for you, you need to learn how it can do it. "Learn about the stuff before you get heavily involved," Chapman says. If you want your money to work for you, then you need to take the time to become an expert in the stock market. How well you do over the years will depend on how much time you are willing to put into the process. It is important for you as a beginner to have a grasp on at least the basics of how the market works. There is a multitude of websites that can provide you with free tutorials on the stock market in general, and some go into detail. You can also purchase investing primers from investing associations or your local bookstore. Finally, for the serious investor, there is no shortage of online or local courses that you can enroll in for nominal fees. By investing a little time and money in your preliminary research, you greatly increase your chances of success. "Investing is an ongoing learning experience," says Brian Wadsworth, a broker for Union Securities. And it needs to be, he adds, because "the stock market is a complex business."

Wadsworth also opined: "It is important to research companies to determine if the company is financially sound and what its prospects are for the future." Even though you will most likely be investing through a broker, you will still need to put considerable time into investigating the companies you are interested in. You don't want to start out by putting all your money into one highly speculative company, because you can -- and will, sooner or later -- end up losing all of it.

Instead, he goes on to say, "a beginner should focus on companies he or she understands." He goes on to use as an example gold or mining stocks and points out that both are influenced by numerous variables -- so many that there is no point in buying them, not when there are so many other companies that can be assessed in a much simpler manner. Instead, you should be watching for a company with a solid financial track record that has been around for several years. As you gain experience, you can begin to invest more speculatively, but to begin with, you should be aiming for stability and steady growth. Just how stable and long term a return you are aiming for is something you can determine when you consider your ultimate goals and the level of risk you are willing to accept.

HOW MUCH?

With your preliminary research done, your goals set, and the stocks you intend to purchase chosen, your next step is to establish how much. How much are you willing to invest? This is the tricky part. Some brokers require their customers to make a minimum investment, and you may have a hard time finding someone to take you on if you haven't saved up enough seed money. Professionals advise that you first contact several brokers and request that they send you their information packets. By looking at the base investment requirements of local brokers, combined with the information you've already gathered, you should be able to determine how much of an initial investment you need.

With the expansion of the financial arena on the Internet, it has become commonplace for private investors to begin to speculate independently. With low commission rates, ready access, and complete control, you may be tempted to strike out on your own. Wadsworth warns against this. "It is better to work with a professional than trying to invest while still learning how the industry works," he observes. A good broker can share a wealth of experience and knowledge with you while leaving ultimate control of your investments in your hands. Your money will always be better off if a professional second opinion confirms and guides your decisions.

Finding a broker may not be as simple as it first appears. Many brokers set minimum investment limits, and some also require that their clients have a certain amount of experience. How, then, does an investor with only a small amount of money and no experience find a quality broker? Trying calling around to various brokerage firms in your area, explain your relative lack of experience, and ask if anyone there might be willing to work with you.

GETTING STARTED

Once you find a broker amenable to doing so, you will know that you are dealing with someone willing to work with you despite your scant experience and the set initial investment you have available. This is your opportunity to get to know each other. Let the broker know you are a committed investor by demonstrating you have not only researched the market but also the companies you are interested in. At the same time, make sure you pay attention to how this broker works and what kind of person he or she is. "Remember, you have to feel comfortable with that individual, so while it is the prerogative of a broker to decide who he or she will take on as new clients, you should not feel obligated to deal with the first broker you are introduced to," Wadsworth says. This person will also be someone you work with and talk to on a regular basis. If you can't see eye to eye on anything, if you don't feel you're being treated well, or if you generally don't like your broker, the relationship may color your experience on the stock market in general. With that in mind, be sure to take the time to research and pick the broker that is right for you. "Find out what you are talking about, and start small," advises Westminster Securities' David Chapman.

"Never let the lure of easy money govern your investment decisions," sums up Brian Wadsworth. "Investing is hard work, and it is the research that takes up most of the time, but good research ultimately pays off."

Megan Potter is a freelance writer, researcher and editor. She is the editor of a website for writers, Writing Corner (www.writingcorner.com), as well as a member of the Women's Writing Guild.

Current and past articles from Working Money, The Investors' Magazine, can be found at Working-Money.com.

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