Learn to Invest in 2010: 4 Steps to Educating Yourself

by Sarah Winfrey on 9 January 2010 8 comments
Photo: rednuht

It's a new year...is it time for your financial makeover? If you'd like to get your money on track, you're probably considering investing for the first time or making some changes to your current portfolio. Before you do that, though, wouldn't it be nice to know what you're getting into?

Sure, you can always hand your money over to a professional, but if you're at all like me, there's a niggling sensation at the back of your head that wonders if that person is really doing all they can to make your money grow. They have the training, but it's not their money. Maybe you could do better, if only you knew how to get started.

Fortunately, there are some easy steps you can take to learn about investing that don't put too much of your money at risk. Once you're comfortable, you can choose to handle your own portfolio or at least check up on the trades your investment pro is making for you.

Read Good Stuff

Reading is always one of the best places to start when learning anything new and investing is no different. Pick up some good books, read some good blogs, and find the information that's most pertinent to you.

The sheer number of words that have been written about investing is enough to overwhelm some people, and it doesn't help that many of them aren't very good. Check out the list below for some quality information you can trust.

Blogs & Websites:

The Motley Fool

Trader Mike

Morningstar

Books:

How to Be a Billionaire (Martin S. Fridson)

The Intelligent Investor (Benjamin Graham)

One Up on Wall Street (Peter Lynch)

The Little Book of Common Sense Investing (John C. Bogle)

The Essays of Warren Buffet (Warren Buffet)

Common Stocks and Uncommon Profits (Philip Fisher)

Find an Investment Club

Once you have a little background knowledge, find an investment club. You can find one that's tailored toward your interests, like focusing on international investing, or toward your demographic group, like a women-only club.

These clubs are places where people who have been investing for a long time will teach newcomers about the basics: how to read annual reports, how to choose a broker, how to pick your first stocks, etc.

In addition, members of the club may pool their funds to invest money together. Usually, they don't ask for a large financial commitment and it is all for the purpose of learning by doing.

If you're interested, find an investment club that fits your needs at Better Investing.

Practice, Practice, Practice!

When you feel like you have the background to strike out on your own, get in some individual practice before you actually risk your money. Virtual investing is becoming more and more popular, as individuals learn about the market and see how their investments pay out before actually putting money down.

There are several places online where you can practice investing. Make sure that any site you choose is free (or that nominal fees also cover other services) and well-reviewed online. That way, you'll be sure that the education you're getting is accurate and useful in real-world scenarios.

Sites:

Virtual Stock Exchange

Investopedia Stock Simulator

Trial and Error

Finally, you're ready to put some money into the market. Now is not the time to put down everything you own, though, or start risking your life savings. Make sure that whatever you put into the market at this point is money you can afford to lose.

If you still don't want to invest on your own, find someone with experience who is willing to walk through the first several months of investing with you. While this person can't control whether the stocks go up and down, they can help you make trading decisions and evaluate your performance.

By this point, you should be gaining confidence as an investor. You should be getting to know some of the ways and wiles of the market and have a feeling for risks that are worth taking and ones that aren't. When you're ready, take over some of the investing for your portfolio and see how you do.

Have you learned about investing? Tell us how you did it!

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Guest

Are you sure you want to use a picture of day traders to illustrate a story about "investing"?

Guest's picture
jon

-Minimize costs, though appreciate good customer service.
-Don't take people words at face value, doubt everything.
-Don't get attached to a position for the wrong reasons. There is a difference between holding on hoping to get money back, and holding on because a stock is great to keep.

Invest by your own choices! Investing is one of those things, like growing up, where you are the one who should make the mistakes. Making mistakes is not always a bad thing, with it comes experience.

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john personna

Those blogs look a little "sell side" to me. I'd add Barry Ritholtz' The Big Picture to start, and Calculated Risk as a follow-on. Zero Hedge if you dare. Bogleheads if you don't.

Guest's picture

I agree that financial blogs can sharpen one's chances of gaining the wisdom necessary for running a business which involves the investing of capital.

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javier

Hi,

I read The Intelligent Investor and Security Analysis from Ben Graham in 2009 and since then I average a 200% average return.

These 2 books changed my life.

Regards!

Guest's picture

Why do I need a Brokerage Account? I have a couple thoudand dollars so I can probably do more than an DRP or just an index by itself. This information implies other advantages to a Brokerage Account but I am new to this and dont understand. Can't I just drop my several thousand into an Index fund and forget about it? is their a more aggressive option for me?

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The mortgage loans suppose to be very useful for guys, which are willing to organize their organization. As a fact, that's easy to receive a sba loan.

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abel

Get an overview of various investment options such stocks, gold, real estate. Investing our money in good investment option is very important. Read good books, good articles. Decide a plan and stick to it. Analyze how much money you can invest and for how much period of time.