I am no guru, I am no professional. I just want to share my views on how to get started because I get people asking me this pretty often.
Some examples given in the article are more relevant to investing in Singapore, but generally the tips given are pretty useful for investing across most stock market.
1. Love money!
Huge investment reap bigger returns hence there is often a misconception that people who are poor can never afford to invest. I would say someone with about US$3000-5000 is a good amount to start with, but do not expect huge returns in the short run because very often to see true returns, a stock has to be held over a few years.
2. Buy a book on investments.
When I was a young, underage wannabe trader, my dad introduced me to a few sites to help him keep track on the share prices he monitors. One of which is Wallstraits.com and I got my first investment related book from there which I highly recommend. It is easy to understand and words are kept simple.
3. Find a mentor, if you can.
My dad was my mentor but very often I was stubborn and think he’s one old fashioned mule so I formed my own opinions and found my “mentors” online – forums. Forums are a good way to start because some questions you have may be answered on the forums by experienced traders already. However you might end up just blindly following the crowd and consequences may be terrible.
It is important to learn the techniques to analyse and form your own opinions and I’m working on this at the moment too.
4. Commence pseudo-trade on sites like Yahoo Finance!
If you don’t have the money, imaginary money is good too. Assume you have a certain sum of money ($20,000) and trade away! Selecting blue chip stocks (SIA, Creative, Osim, Ascott) or well established brand names will be easier to keep yourself updated on the activities as compared to penny stocks (stocks that cost less than $1 or so) because the media usually report more on these companies and you tend to be more familiar with their industry. Diversifying your stock picks is very important. Read more from the book on investments.
5. Open a brokerage account.
You can either trade online, or through a broker. Trading is not done by the broker and he merely follows your instructions and sometimes, give you tips to follow at your own risk. If you want trading to be done by someone, you might want to look at fund management or unit trusts. Trading online is good as the charges are considerably lower but it is only good if you work in an office where you can have an access to a computer easily.
Popular brokerage houses (in Singapore) are like UOBKayHian, Philips Securities, DBSVickers and GK Goh. The investment reports given by the brokerage houses are excellent research materials that are relevant and recent news. Most of the time these reports are complimentary so why not use them for your own research.
6. Be very sensitive to the market forces before/during/after you commence real trading.
You can lurk around the brokerage sites and read up the emails they send you because it’s good research stuff and everything is packed nicely in a mail for you to read. Wait for the right time to enter the market when share prices are falling and everyone is selling. The worst feeling I’ve ever felt is to realise I have no more money to invest when I have a golden opportunity.
7. Conservative investing.
Start small, adopt similar strategies and methods you use on your psuedo portfolio, and set yourself a limit price for profits and losses so you don’t go overboard if you are a conservative investor. Diversify your portfolio to minimise risks, buy blue-chip stocks if you can.
8. Everyday learning.
Always continue to read up and have an interest in the market forces, and researching is a daily task. Have the same passion for finance as how you love reading blogs, magazines, tabloids.