Stop Before You Start …

Okay, by now, after reading the past articles here on the site, you understand a few of the basics. You’ve learned about stocks versus bonds and the definition of a mutual fund.

You’re rarin’ to go …

Stop.

Because there are a few important things that need to be done before you make the first online trade or visit to the brokerage office. Sure, sure, I understand that you’re on fire, that you’ve put aside some cash and are ready to open that discount brokerage account on the Internet. But these tips can save you from initial disaster with your investing portfolio. There’s nothing more discouraging than to get started and lose money right off the bat. It will cause you to want to pack it all in — which is the very worst thing you can do.

So instead, take a deep breath and let’s go over some key initial steps you need to ensure better success in investing.

First item on your agenda: pay off your credit card debt. This is really Finances/Investing 101 information, but solid as a rock and something we all need to hear many times. When interest is being paid on credit card debt to the tune of 18 or 20% annually, there is hardly a stock investment with a better return than paying off that debt.

The second thing you’re going to need is a computer. I am making the assumption that if you’re reading this article, you are at least computer savvy enough (you savvy gal, you!) to get online and get to a particular Web site of choice. Now, it’s about delving into the computer for financial matters.

But, don’t expect to be zipping around on the Internet the first few visits — it will take some time to find the Web sites that make investing in the stock market easier. (I’m going to give you some of those in future articles, so stay tuned!) You are also going to want to eliminate those you don’t like. This is personal choice by trial and error. Don’t be afraid to experiment, and don’t be afraid to change your mind.

The third thing you’ll need is an investment philosophy to go along with your computer savvy-ness. Here’s what I mean by “investment philosophy”: what are your goals in terms of investing? Are you in for the long haul — say, for retirement — or is it about getting in, being profitable, and then putting the proceeds into something more secure like a CD (or new carpet)? Are you interested in growth stocks or those that provide a dividend yield?

All of these questions are basic to developing an overall commitment to the way you invest your money … and it is important this is established before getting swept away emotionally by some fly-by-night stock tip heard at last night’s cocktail party. Where do you go to establish this philosophy? Well, you can start out by asking yourself some basic questions: How long do I have to invest? (In other words, your age factors into this decision.) How comfortable am I with higher risk (perhaps higher return) stocks rather than safer ones? How much time and effort do I want to put into managing and overseeing my portfolio once it is established? (Some of you will discover that you love watching your stocks; others of you will just want to buy and put them aside to focus on other things of more interest.)

Once these start-up procedures have been established, once credit card debt is eliminated (and you have thereby freed up some cash to invest in the stock market), once you have a computer to use for navigation of the stock market and research, and once you have given lots of thought to your investment philosophy, you’ll be good to go.

One more cautionary word of advice: ASK QUESTIONS! Find someone who knows more than you do, ask if he/she wouldn’t mind being a source of information while you’re just an investor novice (my suspicion is that they will be flattered and say yes as long as you don’t call them 52 times a day), and then keep a list of questions as you go. You will have many questions, that’s for sure, so don’t be surprised when this happens. In fact, I would be concerned if you DIDN’T have questions.

Hang in there. I can promise you that if you give this the time it warrants, within a few months you’ll be investing like a pro.

You may even be writing a column like this (but somewhere else, I hope, and not at TheSavvyGal.com!).

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