Conventional wisdom tells us that if you want to invest in the markets andbe ready for retirement, or just get rich, you need to spend your time researching which company to pay to manage your money. Conventional wisdom also used to say the Earth was flat. If you happen to be one of thone people who has bought into conventional wisdom over the years, you’ve probably wept silently to yourself andwhen you see how much you’ve paid in fees over the years. Well weep no more friend. Today, you can begin the process to fire your broker. Behold the 6 step process to freedom!
Step 1: Read my blog.
I know you’re thinking, “well obviously Donald, but you don’t update very often and I have questions you haven’t addressed yet.” Ok, fine then.
The real step 1: Knowledge is everything
If your knowledge about the market and how it functions isn’t very good, then the first thing to do is educate yourself. Resources such as Investopedia, Google + (there are tons of communities dedicated to sharing information on the topic), and even books by well known investors such as Benjamin Graham, or Warren Buffet can be a good start.
What’s more, if you have a broker such as Edward Jones, or its ilk, they pride themselves on having face time with clients. You are already paying them to manage your money, use that face time to have them teach you about the market. Write down any and all questions you have, no matter how simple or stupid you think they are. Make sure you take notes on the answers you are given (and compare them to your own research). If your broker doesn’t want to answer them, then that should be a very clear sign it’s time to get out of dodge.
Step 2: Learn where to find information about the companies you want to invest in.
For the most part you should be able to go to a companies website and locate a link titled “Investor Relations” under which you can get access to things such as market news about the company, information regarding dividends, and even access to conference calls.
If for whatever reason, the website doesn’t have this information, generally a well phrased Google search will aid you in finding what you want. A resource I use is charts.com, as not only does it provide chart data, but links to news and other relevant information about the company.
Step 3: Learn how to buy stocks on your own.
There are a few ways in which you can invest in a company without having a broker. First is buying direct from the company. Under that “Investor Relations” tab we discussed earlier, there will occasionally be a link that says something along the lines of “Become an Investor”. From there you can either get a form online to fill out, or call a number and have them send you the packet, which should include a prospectus and any forms needed to get started.
Another option and the one I happen to use is, find the group who manages the companies stock and buy directly from them. For example a company like Computershare, manages the direct buying for over 1,000 companies, most of which may be ones you’d want to invest in (if your portfolio is going to look anything like mine).
Step 4: PAY ATTENTION!
One of the most ofimportant things you will have to do when managing your own portfolio is to actually manage it. This doesn’t mean become a day trader and buy or sell on every up and down. That’s where home investors lose money. You are not that smart, no one is. Trying to game every move for maximum profit is not only unlikely to be accomplished (PH.D’s in mathematics have spent years trying to do this and failed), but it is also going to drive you criminally insane. In reality you need to be monitoring the news around the companies you are either in, or want to be in to make sure something doesn’t catch you off guard. If a stock you own goes down by 30% and you didn’t see it coming, you’re doing a bad job.
For me I have a widget on my phone called mini stocks, which lets me see the daily changes in what I own and what I’m watching. That coupled with spending about an hour or two a day reading news articles about the market and those companies keeps me well informed as to what is going on with my stocks.
Step 5: Make your money work for you.
Things you may get to do that your broker may or may not do for you is get yourself into some DRIPs. DRIPs (Direct ReInvestment Plans) allow you to take the dividends you get from a company and automatically buy more shares in the company with them. In doing this, you can spend less time fiddling with dividend checks and calculating where you need to put that money, and just let your portfolio grow itself.
Step 6: Be patient
Building a retirement portfolio takes time. As I posted in an earlier article, you are an investor not a daytrader. Your portfolio isn’t going to grow 30% a week. So just relax, the market will have ups and downs, your stock will rise and fall in price, etc. If you are doing your due diligence, you can take advantage of price drops to buy more and subsequently sell of some when you catch a huge spike in price to either reinvest or buy yourself something pretty. At the end of the day, a solid portfolio takes decades to build so go in knowing that and you’ll do fine.
So that covers it for this one, Ill try to get back to posting more regularly as life is beginning to calm down some. Till next time.