How You Can Manage Your Own Stock Portfolio

Most people can and should manage their own stock portfolio. Why? You are your own best advocate. You know what keeps you up at night and whether or not you can handle aggressive investments. You - not your stock broker - are the one who cares whether you have something for your retirement. Managing a stock portfolio is not difficult to do if you're willing to take a little time to learn something about stock. I promise you, no one can do it better than you can do it for yourself. I am not a certified financial planner and my business degree is in marketing - not accounting or finance. However, I have always handled my own stock portfolio. I began my stock portfolio soon after I graduated from college and have managed it now for 20 years. I've done pretty well for the most part. And I've learned one or two hard lessons along the way. Here's what I would tell anyone who is just starting out.

Manage Your Own Stock Portfolio - Begin Simply, Save Money

To manage your own stock portfolio you first have to have some money to buy some stocks to manage. Therefore, the first thing you must do each month is pay yourself. Even if you are in debt, you must put something away in a savings account. Why? Because saving needs to become a habit and this is the best way to begin the habit. Have the money taken directly from your paycheck.

If you think savings account interest rates are too low at your local bank, try one of the Internet Banks. Some well-known ones are HSBCDirect.com, INGDirect.com, and Everbank.com. Interest rates at Internet Banks are higher for savings accounts than you will find at your local bank and you will be able to open an account with as little as a $1. I have used Everbank.com and am happy with it.

Manage Your Own Stock Portfolio - Open a Stock Account

Once you have accumulated at least $500 dollars in your savings account, it is time to open a stock account. There are several ways you can go at this point. You can open an account through a brokerage such as Merrill Lynch. I would not recommend this. There is nothing wrong with such a step but it is probably much, much more than you need as a beginner. I know from personal experience because I made this mistake! You're reading this article because you want to manage your own stock portfolio - not turn it over to a broker - remember?

You can also open an account through an online trading company such as Ameritrade.com or ETrade.com. This is a little better option but, you're still probably not ready for this.

As a newbie to the stock market, you should strongly consider picking a well-known mutual fund company such as Vanguard.com, Wisdomtree.com, or Fidelity-Magellan. Are there better (as in better return on your investment) fund families out there? Sure. But someone will always be telling you that you should be with another fund family. Don't become so confused that you end up doing nothing. You've got to start somewhere. When you're just starting out there's nothing wrong with following the crowd for awhile. These are large well-known fund families and while you won't make a fortune, you aren't as likely to get burned, either.

Manage Your Own Stock Portfolio - Learn the Lingo

Once you've decided on a mutual fund company, you need to learn the lingo. Mutual fund, ETF, load and no-load, index fund, equity fund, and dollar cost averaging are just some of the words that you will need to learn as a new investor. Don't worry. These are simple concepts and you'll get the hang of it quickly. The mutual fund family you select should have a introductory section that explains these concepts to you. If you don't follow what the beginner info is telling you, pick another fund! Another non-threatening place to learn these concepts is MotleyFool.com.

Manage Your Own Stock Portfolio - Pick a Simple Fund to Begin

As a beginner, you should pick a simple fund with a broad base of companies. Some of the simplest funds are index funds. Index funds follow a specific financial market, such as the S&P 500 and you can hardly go wrong starting in a fund that mirrors the S&P 500. Again, you won't get rich overnight here. But the idea right now is just to get your feet wet and gain an understanding as to how all of this works. With an S&P index fund, you won't lose your shirt while you're learning your way around the stock market. Expenses are low for index funds, too, so you won't be paying out larger than necessary management fees for your mutual fund when the stock market is having a down year.

How often should you invest in your chosen fund? Monthly. This is known as dollar-cost-averaging. You will hear arguments pro and con about this. But, right now, investing monthly can only be a pro for you. Why? You're new to this and you're trying to establish a habit. And bad news, you'll need to up your deduction to your savings account (at least a little bit) to cover your monthly stock purchases AND maintain something in savings. Don't know how you are going to save more? Cut out the daily mocha cappuccinos - they just make you fat. Or, write some articles for Associated Content.

Manage Your Own Stock Portfolio - Diversify, Diversify, Diversify

One of the nice things about an S&P Index fund is that you get built-in diversification. Great! But soon you will want to play around. Tech stocks, emerging markets, or some other specialty field will begin to whisper in your ear. This is when you need to take another step in your education. You must be sure you diversify your stock portfolio. That's why they call it a portfolio. Your collection (portfolio) of investments should be divided among several different kinds of stocks in different companies, different industries, and different countries. Otherwise, one day when you least expect it, you will take a big hit. Believe me, you will. If you have a 401(k) at work and it includes some stock don't forget to consider your 401(k) investments as you make your new stock purchases.

Manage Your Own Stock Portfolio - Yes, You Really Can

By the time you are ready to venture beyond a S&P Index Fund, you will know whether you are an aggressive investor or a conservative one. You'll also know how many more years you have to invest before you reach retirement and how much you need to have for retirement. These are all factors in where and how you will decide to diversify your portfolio. And by the time you're asking - and answering - these questions for yourself, you'll realize how far you've come. Yes, you were totally capable of managing your portfolio all along.

After a few years of investing you'll still have questions but by now you should know where to go to get answers. If you now decide to go with a brokerage you'll know what to watch out for, be able to take the lead, and won't be blindly taking suggestions from your broker. If you decide to continue on your own, you'll be ready to open up an account with an online trading company. Either way, managing your own portfolio can be a fascinating and enriching experience. In more ways than one.