Four Steps for New Investors

Many new investors will always ask about what "individual" stocks they should be investing in. I find it somewhat sad because I know they will more than likely lose their investment and lose it quickly.

There are four main steps, in my opinion, every new investor should ask themselves before they invest in anything.

Step 1: Do you have an emergency fund in place?

Many people simply do not plan for the worst, and then when the worst happens they have no money to get them through their rough patch in life. Before anyone decides to invest in anything they need to make sure they have an emergency fund in place. This is to cover themselves in case of an unexpected life emergency such as the lose of a job.

Step 2: Do you know anything about investing in the stock market?

Many people see television shows that make it seem like it is so simple to pick a stock and make money off of it. Well that simply is not true. It is very difficult for any investor, especially a novice investor, to consistently pick winning "individual" stocks. If you have never invested in the stock market in your life; then you need to take the time to at least learn the basics or you will lose money very quickly.

Step 3: Do you know how to pick the right broker?

In today's fast-paced online trading environment there are many online brokers who offer very different services at very different prices. Commission cost can be very expensive for someone that wants to be an active trader. However, there is a trend in today's world that has brought on a lot of competition in the online broker world. A few brokers actually offer commission free trading, but of course they do not offer a lot of the trading tools offered by more expensive brokers. This means if you can teach yourself what you need to know, instead of relying on a brokers assistance, you will have a much more cost effective way of trading by using a commission free broker.

Step 4: Do you have the time to pick the right stocks?

In this fast-paced world spending hours looking over stock charts is probably not realistic. Which means today's average investor probably needs to make the decision of whether they should simply invest in mutual funds instead of "individual" stocks, or use a professional technical analysis company to assist in narrowing down their choices. There are a few good companies out there that specialize in this kind of assistance, but there are also a lot of bad one's as well. So investors should do some research to get some unbiased reviews of these companies.

Every new investor really has to take the time to understand what they are getting themselves into before they invest any of their hard earned money. I have seen to many people jump into the stock market without any real knowledge of what they are getting themselves into.