Investing in securities at any level requires some level of knowledge and the understanding that unlike a savings account or certificate of deposit, your money is uninsured and can easily vanish.

Start by figuring out how much of your monthly budget you can set aside that you could afford to do without. If you have the extra money, open an online trading account where there are no fees other than fees to purchase or sell stock. Scottrade, Ameritrade, ETrade, Schwab and a number of brokerage houses have on-line trading web sites that are easy to use.

If you do not have time to do the research and keep up with your investments on a weekly basis, we would recommend putting your money into low risk mutual funds through T Rowe Price or another quality brokerage.

Investing in Stocks

Our recommendation is to purchase at least 100 shares of a single stock. The reason for this is that companies perform stock splits, reverse stock splits or mergers that will affect how you compute your gain or loss when you sell, come tax time. Typically 100 shares are split evenly and make it easier to compute a gain or loss.

Day trading (or short term trading) is a mistake...holding stocks at least 1 year is highly recommended. If the company has a good business model and a revenue stream, over the long term, your chances of making money are pretty high. If there is no real business model or revenue stream, don't bother. Avoid development stage companies!

Stocks that pay dividends should represent at least 40% of your portfolio. You can take the dividends and invest in other stocks. Stocks like Wells Fargo (WFC) and General Electric (GE) pay dividends around 3%. Wait for these stocks to be out of favor a bit and buy 100 shares or more.

Consider purchasing stock in a couple of private equity or business development companies. These companies offer capital to private companies or they buy companies that are struggling. A few good names here include:

Blackstone Group (BX) 4% Dividend
Kohlberg Kravis Roberts (KKR) 8% Dividend
MVC Capital (MVC) 4 % Dividend

Ownership in individual stocks provides you the ability to make your own investment decisions without paying someone else to make those decisions for you. Again this is only recommended to investors that have a few hours a week to research and educate themselves. It's still good to keep at least 80 percent
of your retirement in mutual funds and 50 percent of your taxable savings in mutual funds and invest the remainder on your own if you have the time and interest.

If you have a question please drop us an email.

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