Getting Started in Investing
It seems so very simple, pick a stock, buy some shares and watch your money grow. At the end of the day retire with money. This is a great over-simplification just like the usual bromides about “buy-low & sell-high” or my favorite, “the way to improve your Golf game is to hit the ball less.” The reality is that to be a “successful” investor you’ll need to be well read and disciplined.

As in many things in life it’s never as easy as it looks. The very bare minimum steps to investing success for the little guy are:

1. Start early, Money doubles in about 10 years at 7 percent return compounded. It then stands to reason that you want as many 10 year periods as possible before retirement or whatever you need the money for. BTW, Google “The rule of 72” for a little math fun or go to http://www.investopedia.com/ask/answers/04/040104.asp . Keep in mind that for well over the last 100 years the stock markets trend line is up; don’t sweat the blips look at the trend.

2. Fully fund any sheltered accounts that are available to you. A work-based 401K that allows you to deduct the money you invest in it from your tax due is the best deal you will ever get since that free bike your dad bought you. Do the math, if you put $3000 in your 401K and your tax rate is 15% then the reality is that you bought a $3,000 for $2,550 or to put it a different way you made 15% return on your investment before the investment grew at all. Of course every year after you put money into the 401K that investment grows and compounds tax free. It’s a wonderful thing. BTW, many states like NY allow you to withdraw retirement funds tax-free; in NY they allow $20K a year per-person to be taken out w/o taxes being due. It is the best deal you'll ever get!

3. Fund your investments by setting up a savings program that takes a percentage of your wages every month before you see the money. You will soon get used to it and it will add up while allowing you to “income-average” into the Stock Market.

4. Preserve your principle; Investment monies are usually the very small sums left over from wages after you’ve paid all the family bills. Any loss of these “leftover” funds will dramatically lower a person’s investment returns. Let’s be careful out there.
5. Spread out your risk, for the small investor buying a single equity forms a heightened risk much like a single bet on the roulette wheel. A basket of equities in a mutual fund or ETF spreads out the risk over many holdings.

6. Anytime you buy an ETF or equity someone else is selling it for stock trades are done in a auction market; it’s always an open question as to if you have the ability and time to “pick” your own investments. There is no shame in buying into an index or mutual fund. In point of fact most mutual fund managers do not beat indexes like the S&P-500 over time.

7. Create a Quarterly Report; it’s all important to be aware of your progress and like any business a quarterly statement forces a close look at what you own and where you're going. The involvement of your spouse is all-important.

8. Plan to achieve “Critical Mass”; that’s the place in life where your investment return matches the funds you need to fund your life-style.

9. Look very carefully, at investments in established companies that have a history of dividend payout and growth. When equity has a 3 or so percent payout it’s a sign of good management and stability. It’s very difficult to make a case where buying a dividend stock ETF like VYM or NOBL would be a mistake. Year-in and year out these typically very large companies perform well with quite a bit less volatility. The other factor in favor of dividend payers is that they are mostly multinational companies that add exposure to worldwide markets.

10. Read everything, Conflicting opinions make you stride through your decision process.