Getting started, other tips for 'small' investor

The Ticker

March 12, 1997|By Julius Westheimer

HOW SHOULD the small investor begin to invest in the stock market? Today, Part One.

First, I detest the term "small investor" because the amount invested by that person is rarely small to him or her. Nevertheless, because the term is widely used I decided to find out about the small investor and see if I could be helpful.

I spoke by telephone to Jim Gard, author of "The Small Investor: A Beginner's Guide To Stocks, Bonds and Mutual Funds" ($11.95), at his home in Durham, N.C.

"The small investor," he explained, "has a little money that can be spared and risked for investment purposes. That idea of 'a little' is up to each individual. It could be $500, $5,000 or $50,000.

"He or she generally has little experience or knowledge of the financial world and is usually frightened and suspicious about the business of investing."

Here is some advice I gathered from our conversation, plus some thoughts of my own:

The small investor generally needs help and should start by interviewing several brokers. First, ask friends and family who they use. If any of them has a broker they've been satisfied with for five or more years, talk to that person. Seek a broker with several years' experience.

Should you use a full-service or discount broker? Gard says, "If you feel that you need the advice of professional analysts before buying or selling, the full-service broker offers exactly that.

"But if you consider yourself knowledgeable and decisive on making investment decisions, a discount broker will be easy to work with."

My advice is to start with a full-service broker. With that broker, the small investor should not buy anything he or she does not fully understand, whether it's stock, bonds or mutual funds.

Avoid buying and selling based on someone else's idea, unless you have done your homework. This can be modified after you have worked with an adviser or broker for a year and grown into a trusting relationship. Remember: It's your money and nobody cares as much about it as you should.

More advice for small investors:

Realize that investing is not a contest. Don't worry about how someone else is doing -- pay attention to how you are doing.

Risk and reward do not always go hand in hand.

Don't expect to find perfect information.

You can't convince the market you are right and it is wrong. The market is always right.

Pub Date: 3/12/97

Baltimore Sun Articles
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.