Invest Wisely: The How Tos

Investment in the stock market can be done either online with a brokerage or through an off line brokerage. Off line brokers are more accessible, but also their trading costs are usually slightly higher than on line brokers who often charge flat rate fees.

Consider online discount brokers. They can offer you trades for $4 to $7 and sometimes even free trades.

Make sure your brokerage firm is a member of the Security and Investors Protection Corporation (SIPC).

Read and make sure you understand all of your New Market Account Agreement. This will be the basis of your investment relationship with your brokerage. Ask about anything you do not understand before signing.

Decide on a plan for investment—aggressive or conservative. The more aggressive you are, the more you might make but also the more you might lose. A general rule of thumb is if you want to make about 25% on what you invest, your chance of loss is about 20%. If you want to make about 10%, your loss risk is 2%.

Diversify. This means you should have different numbers of high and low risk investment to balance your holdings. For example, you might have 2 high risk investments, 7 low risk investments, and 6 medium risk investments. Also diversify among commodities, value stocks, emerging markets, Blue Chip stocks, and bonds.

It is recommended you have about 20% of your investments in foreign stocks, especially when the dollar is weak.

Keep records of all your investments and investment stocks. Create a logical filing system that will allow you to keep track and be responsible for all your money.

Be watchful of your investments.

1. Study and read about investments and investment practices.
2. If you see a lot of trading in your accounts by your broker, it might be a tip that they are making changes to accumulate fees.
3. Do not invest over the phone.
4. Do not trust too-good-to-be-true advertising or guarantees. You will not double your money in 6 months.

If you have trouble with your investment company, contact the U.S. Securities and Exchange Commission for recourse.

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