First off, decide if investing in shares is right for you. Shares offer the possibilities of high returns but can be very risky.
In deciding whether or not you have the risk-appetite for stocks, careful thought should be given to age, disposable income, family commitments, etc. With this done, the decision to invest in stocks should be in the context of an “ideal portfolio mix”.
A portfolio mix in its simplest form involves deciding how much money to invest in stocks (long-term, high risk investments) as opposed to Certificates of Deposit (short- term, low risk..and safe investments) or or in Mutual Funds (medium-term offering risks and returns higher than CDs but lower than stocks).
Because of the risk inherent with stocks, the process of establishing an accurate risk profile and an “ideal portfolio mix” is best carried out with with a Stockbroker who has the requisite training and experience to handle such matters. Stockbrokers act as middlemen for buyers and sellers on the stock market for a disclosed fee and are also important, given the wide variety of stocks and the technical analyses and skilful interpretation required in determining the right stocks to buy.
For the more independent-minded investors, there are many online entities such as Google and Yahoo that offer comprehensive information and analysis on each listed stock. The information provided on Google and Yahoo can be combined with other online companies offering recommendation on which stocks to buy, hold or sell. The latter are typically fee-based and the services normally extend to providing stock trading platforms and “buy/sell” signals.
My recommendation: If you intend to be involved in stocks in any serious way, a combination of the two approaches should be used. In other words, seek out your own information, conduct analyses and you may even want to execute trades yourself. However, a stockbroker, who should have a much broader view of the investing landscape, should always be considered.
Quantitative Analysis Software
You may also want to ask your broker about the use of Quantitative Analysis Software which, increasingly, is being used to analyse stock investments, provide signals indicating when to buy or sell and even go as far as to execute the actual trades. Some market players are finding favor with “computer traded” funds because they eliminate altogether, the human element with their many biases.
Finally: Regardless of the approach, go with a system that will allow you to choose wisely, be patient and the rewards can be very handsome!