You are going to learn in this article the basics of investing that
can be very rewarding. You'll be a able to take what you learn here and
study with other lessons and be able to
invest with confidence.
Trading or Investing.
The words 'trading' and 'investing' are mostly interchangeable in
Trading, is normally recognized as the act of
performing buy/ sells frequently- TRADES.
Investing, on the other hand, is most often recognized as a more
long-term approach and not necessarily frequent.
This article is intended for the retail investor
starting out with little or no knowledge of buying and selling stocks in the
Before you go and buy that stock or fund, you need a little house cleaning,
that is, get your financial affairs in order.
Managing the plan.
To do that you need to hire a CEO and a CFO. That's right a CEO. If
you want to play with the big boys, you need someone to sit down, make a
plan, assign tasks and be responsible for actions in your plan.
Unless you're rich and can hire one, you are going to be
the CEO and you can also take on the duties of CFO or delegate that to your
As the CEO, Chief Executive Officer, you need to set up some rules, make a plan
and hire a Chief Financial Officer to setup a budget- and most importantly, setup
a reserve fund.
Now we know you are going to play both parts unless
you get help from your spouse. Obviously I make this as a major point, being
a CEO, CFO, to get your attention to the fact that money management is very
Very important is having a budget, to know and control how much
comes in, and how much goes out.
One product of a budget is knowing how much you have
Also you need a reserve, a cash fund--
maybe a money market-- cash that can get you through an emergency if
one develops. As an investor, the last thing you'll want to do is
have to sell an investment before its time.
All budgets need reserves. How much is something you
need to decide,
but it probably should hold enough for several months.
Now that you are considering a budget, reserve fund,
setting up a plan and managing it, let's now turn to shares of ownership of a
company-- stock in a company-- and mutual funds.