If you want to get into the stock market, and you don’t want to lose your money, you can do one of two things. You can invest in low risk-low reward companies and stick with that disciplined approach. Or, open an account with a professional. And when I say a professional, I mean read up on them. Don’t just assume that one of the big brokers is the best. Of course, there are pros and cons to both approaches. On one hand, you could lose your shorts if you go it alone. But, you will certainly pay a pretty penny if you pay a broker.
Going it alone is viewed as playing a lottery pick. Certainly, some people strike it rich by gambling on the stock market. And so many others lose money. If you want to be virtually guaranteed of profiting from your investments, there is a simple formula. Lower the risk. Of course, that also lowers the reward. Riding out bad times in the market does not necessarily guarantee you anything. If you have very little money to invest, the last thing you want to do is lose it all. You simply cannot afford to roll the dice.
The best approach then for going it alone in my mind is to take advantage of certain mutual funds. While mutual funds can eat up gains with fees, you can minimize those fees if you take the right approach to investing mutual funds. I realize that mutual funds are not as thrilling as the stock market itself. There is not much I can do about that. If all you are looking for is a thrill, go to Disney World. At least then, you will have some fond memories to keep with you when you have no money.
Finally, let me mention the old alternative. Brokerage firms exist not just to give us access to the stock market, but also to do it in a way that we make smart decisions. Brokers go through training and testing to ensure that they know the regulations and laws that govern them. They are required to do what is in your best interest. And if they don’t, they will be slapped with a lawsuit. While you will pay a premium for their services, the reality is that a good broker will make you money.
Despite my belief in utilizing a good broker, the reality is that most good brokers probably will pass you off to a new broker if you do not have a lot of money to invest. To be fair to them, they are under a great deal of pressure to make smart decisions. By having too many clients it becomes more difficult for them to do that. To that end, I recommend going with the new broker only if you have confidence in him or her. And even then, do not let them invest your money in stocks right away. Consider utilizing the mutual fund avenue and slowly allow the broker to make decisions on your behalf. If the broker is opposed to this approach, find a new broker.
In the end, the stock market is like anything else. If you jump in to quickly and make rash decisions, you will almost assuredly lose everything. If however, you take small measured steps, you can find that you will profit from your investments. This approach may not be filled with glory and excitement, but it is the approach that stands the test of time. Whether you choose to go it alone or to utilize a broker, slow and steady still wins the race.