Where to Start?
At The Beginning
While those who are already investing may think the basics are too simple to need explanation, not everyone is at the same place.
Where Are You
Perhaps you are at the stage when you want to start, and not sure how or where.
One needs some money to invest. So, let’s consider what one needs to start.
First
First, one should have some savings and an emergency fund. Savings should be enough to cover needed living expenses for a few months. Investing involves risk, and investing without backup savings and an emergency fund is too much risk.
Since we never know what might happen, having enough in savings to tide one over should unexpected events occur is how to protect oneself. Only then should one contemplate investing.
Step Two
There are two ways to begin investing: brokers or transfer agents. Both have their advantages and disadvantages. Let’s take them one at a time.
Use a broker: This is he most common way. Deposit some money with a broker, and you can buy any kind of stock. Once you account is set up, transactions can be almost immediate. Be sure to check fees and commissions. These days, it is possible to buy or sell stock without commissions, although it is prudent to investigate what fees there may be for other services. For example, does that broker allow dividend reinvestment without commissions or fees? Are there fees for transferring money in and out of the account? And so on.
Use a company’s transfer agent: Some, but not all, companies allow purchase of shares through their transfer agent. This method can be appropriate for dollar-cost investing. One disadvantage is that buying or selling using a transfer agent is not quick; a transaction could take several days and exact prices are never known until after the fact. Sometimes there are fees to buy and sell through a transfer agent.
Every public company has one and only one transfer agent. There are several major transfer agents, so an inquiry to the company you are interested in investing in can tell you the neame of their transfer agent. Check if you can buy shares through the transfer agent. All of this can be done online.
Who To Invest In?
The world is full of an almost endless number of companies in many industries that one can invest in. There are endless books and websites with advice and statistics and data. Every broker can provide information. Suffice it to say it can be overwhelming to know where to start.
Therefore
As a result, it is appropriate to start small and get one’s feet wet before investing a large sum of money. Best to avoid treating investing as a form of gambling. Instead, treat it as if you are preparing a future for oneself one brick at a time.
The Hardest Part
There are actually two points that need to be accomplished in order to start investing.
The first is to determine what to invest in.
The second is to actually do it: to put money down to pave the way to financial success. It is surprising, but not unusual, how many people hesitate at this step. Successfully move through this and we are on our way to financial freedom.
Did you start? How did you start? Let me know here.
The illustration is from the 1837 Japanese book “Seisen Matsuranfu: shokoku bonsai shashin” (“A Careful Selection of Whisk Ferns”) by Gyokuseidō Fukami. Courtesy The Biodiversity Heritage Library at the Smithsonian Institution.
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