Advice for Small Investors: 4 Beginning Hints for Investors

I've been an investor for a lot of years; I've made money and I've lost money. More importantly than that, I've seized and missed OPPORTUNITIES. Probably the biggest mistake would be investors make is missing the opportunities when they are evident; an even bigger mistake investors make is running after a departed train once it's already left the station. There are four key things that all would be investors should do before taking the plunge into the world of the stock market.

1)
Observe: I don't know how many people I've met who are so casual about their investing ("peh, it's only money!") If that is you, then that's great for you; however most of us want to have some kind of return on our money and aren't just foolishly flushing money down the tubes. So if you've got any interest in investing the best thing you can do is become familiar with the industry; learn the language, watch CNBC, read business section of the paper, go to Borders and look at the investing books and magazines (heck; why not support a writer and buy one!), see what people say. You'll begin to hear a lot of the same stuff being churned around the pot; one of these 'oh so common' themes are that many young investors...

2)
Aren't In it to Win It: Many times what young investors will do is see a phenomenon, the most recent one which comes to mind is Google; they'll watch as it goes up and up and then they'll buy into it and as soon as there's any dip in the price, they'll panic and sell out (usually at a loss). You've got to know what you're investing in and you've got to know that what you're investing in will go down. Prices go up and prices go down. But if you catch onto a flaming comet and then sell out at a loss, then no one wins. Especially when you look at the stock in three months and it's corrected itself and has fixed itself.

3)
Don't Spend What You Can't Afford to Lose: If you're considering getting into the market with your lunch money or next months rent money (or last months rent money!), you should not be in the market. Money in the market needs to be able to be invested for the long haul (barring any unforeseen emergencies, at least 6 months) to have any kind of opportunity to do anything real. Yes, there are exceptions; we all saw movies like Wall Street; fortunes are won and lost on a whim. Unfortunately that's not what has any staying power in the great majority of cases. I like to think of investing like baseball; while there are streaks of glory (expansion clubs and wild cards only exacerbate this anomaly) for some underdog team to squeak through to the pennant, in the large majority of cases, even these underdog teams have, at their core, good fundamentals and good management and that's what carries them through. It's the same with investing; while there is the occasional hot streak; good fundamentals and good management win out in the long run every time.

4)
Jump Right In: In the end, the only thing you can do is give it a shot. There are any number of times you can go for it, but if you sit too long on the sidelines, you could end up second guessing yourself into inertia.

Investing is a great thing for anyone who is interested in learning about making money and anyone who is interested in learning about the way the markets function. Whether you're investing in a small money market, Roth IRA through your employer, mutual funds, or actual stocks there is a myriad of risk levels and potential returns for you to participate in. But you need to get yourself familiar with the territory before you start out. You of course eventually need to get in or move on with your life and do other things with your money, but those Manolo shoes won't fund your retirement in 40 years; they likely won't even be in your closet anymore.

Just a thought.