My Self Directed Investing Experience
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My Journey in Self-Directed Investing
I have just weathered through once again a very volatile market and this experience only enhanced my journey as a self-directed investor. My passion to create wealth is strong which doesn't necessarily mean I've won my gold medals yet, but I have jumped into the pool and I'm swimming, not sinking.
To be honest, I really did not know much about investing before I found myself in the pool. I had no clue about the stock market other than as the playground of the wealthy and a graveyard for amateurs. My family was equally clueless and added risk aversion to ignorance. Like many, they thought that playing the market was gambling and they were not happy at my interest in what they saw as a mix of horse racing, lottery tickets and Russian roulette. Swimming with the sharks is how they put it. Still, I just had to know and in I dove, totally wet but not in the deep end.
Now, after a few years of watching me thrash around as I learned the basic strokes, my family talks about the stock market with less fear, gives advice, reads for tips, asks how it's going but still stays on the edge of the pool with just damp toes. Still, they have a new interest and a new reason to read the news and think about what changes can mean.
My going in advantage in self directed investing
Environment of wealth creation
I have to say though that my parents did have their own history of wealth creation through small business development...but not in the smoke and mirrors of the market. So, I had no real tradition of fear in risk taking and no opportunity to try greed. Fear and greed are to market players what smoking and bad bathing suits are to swimmers, or wind and ripped parachutes are to sky divers. So, I had a real going-in advantage.
Wealth Creation for Small Business Owners: 75 Strategies for Financial Success in Any Economy
Amazon Price: $2.00 (as of 02/23/2012)
List Price: $14.95
Used Price: $0.01
“I jumped into the pool and I'm swimming, not sinking”
My first step in self investing
Manage risk
My husband had the risk tolerance of a popsicle. He lost sleep over wild gambles on Government Bonds and even Money Market Mutuals. Still, he came to the bank to open an online investment account although I could smell the fear! I chose our regular bank because its online investment brokerage had been rated no.1 for several years and it was a comfortable environment with no one visibly setting up a sting operation. Then we walked over to another bank to do a bit of comparison shopping but ended up sticking with what we knew, if only to placate the coward within him, not me! My first dive was shallow not knowing how deep the bottom was and with $5,000 I started to swim, no brokers advice, no life jacket, just dog paddled myself. It was all online too, so no one to rush me or panic me into a bad decision. Just me, swimming.
“I started to swim, no brokers advice, no life jacket, just dog paddled myself.”
I informed myself on the basics of investing
And I just kept learning more about investment
To start on self-directed investing, you have to educate yourself on the basics of investing and learn all you can. I also watched how I reacted to the rise and fall of the market and observed closely how it behaves. I am still learning as the market is changing, too, and one can't predict its behavior. However, you may not be able to predict your own reaction but you you can control how you will respond to the change.
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For those of you interested, here are some help in taking risks
My approach in self directed-investing
No mortgage the house in this approach
The fee back then for every transaction was $25 and whatever I earned was being inhaled by the Bank. I was making them rich, so, as a small defence, I bought some stock in the Bank which has worked out well. At least, I began to benefit a bit in the theft of my own money!
Soon, I found out that if I have a certain amount in the account, I only have to pay $9.95 per transaction. We got that money so I put this in. I could have gone to other discount brokerages but my risk tolerance can't handle that so I stayed in our bank. After putting the amount required, I cut the fees in half. I tried to keep the technical part as simple as possible as I don't have a mass of money and we only put up what we can afford to lose. No mortgage-the-house in this approach. In some of the early years I could only show (small) losses but this was my learning fee, and I kept on swimming. I could use my losses to offset some capital gains in the future so I just kept reporting the losses.
We decided to stick with a cash account, not a margin account so I could not use more money than what I had in cash. (The popsicle was watching!). It was a good disciplinary technique especially when I was just starting and still learning about my own weaknesses and the horrible fabrications of "advisors" and "market analysts" on the assorted television business shows. They desperately hope you'll make them rich by following their advice. What a gang. They could give the TV Evangelists a good name.
The Intelligent Investor
Read this before you dive into self directed investing
The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel (Revised Edition)
Amazon Price: $11.48 (as of 02/23/2012)
This book will teach you value investing which you need to understand early on in your growth as a self directed investor. As well, the counsel this book gives is worth the investment.
Here is a lens for beginners in investing
Investment information you will value
Margin Account vs. Cash Account
Know them well
A margin account is a type of brokerage account in which your broker lends you the cash to purchase stocks. There are regulations imposed by your stock brokers. Some will only lend you half of what you have in your investment account. Your cash and stocks in your account become the collateral for your loan.
What is the advantage? Without ready cash, you can buy stocks that you think have reached bottom but have great possibilities for an upturn. How do you know? Read, read, read. When the stock goes up, you profit much and you happily sell the stocks and pay your broker. If your prediction did not work out and the stock even went lower, then you are in deep do-do as you will have to put up that cash when your broker issues the margin call.
A margin call is clearly stipulated by your broker. This is usually 50% of your total cash and securities in your account. So, if what you borrowed to buy those stocks exceeds 50% of your total cash and securities, your broker, will give you a margin call and ask for the money. If you can't come up with the money, the broker may sell your stocks to cover it and you'll end up with a loss. When the stakes are high, the gains are tremendous but it is at this point that my risk intolerant popsicle becomes terror struck because if you lose on your bet........wow. So, to start, it is best to stick to a cash account and invest only the money you can afford to lose. Of course, you go into investment not to lose but to win. But start easy, there is a learning curve...you will get there soon.
To understand margins in investment
Some help for you
Practice in Trading Stocks is Key to Self-Directed Investing
It hones your strategy
I have to admit, while I read a lot before opening the account, I did not practice first. Looking back now, this would have been helpful in understanding the terms and the tools used in online stock trading and in honing a strategy without putting money into the learning process. Especially, when so many online brokers will let you play with a practice account. Even Google and Yahoo Finance allow you to do this. Start with creating a practice investment portfolio and learn the stock trading basics.
Learn more about Practice Investment Portfolio
Always inform yourself
- Permanent Fund to continue securities lending
- By Pat Forgey The Alaska Permanent Fund Corp. will continue lending out stocks in its $40 billion-plus portfolio, despite the losses some other funds have had with the practice. It's called securities lending, but it may be more aptly called securities ...
- IRRC Institute Announces Two $10000 Awards for Best Research on Post-Modern ...
- Reasonable fiduciaries understand the implications of investments decisions in relation to others and the real world, while the rational fiduciary consider only the impact in relation to the financial performance of their portfolios.
- Well-versed in taxes, not necessarily investments
- In fact, to the contrary, it has said,"Chartered Accountants (CAs) offering advice for various financial products should come under the ambit of the regulations, despite the fact that their counsel may be incidental to the accounting practice.
Some help in investing in stocks
Stock trading books to inform you
Strategic Stock Trading: Master Personal Finance Using Wallstreetwindow Stock Investing Strategies With Stock Market Technical Analysis by Michael Swanson
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High Probability Trading Strategies: Entry to Exit Tactics for the Forex, Futures, and Stock Markets (Wiley Trading) by Robert C. Miner
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Candlestick Charting Explained: Timeless Techniques for Trading Stocks and Futures by Gregory L. Morris
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One Good Trade: Inside the Highly Competitive World of Proprietary Trading (Wiley Trading) by Mike Bellafiore
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The Complete Guide to Option Strategies: Advanced and Basic Strategies on Stocks, ETFs, Indexes and Stock Index Futures (Wiley Trading) by Michael Mullaney
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Profitable Patterns for Stock Trading by Larry Pesavento
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Your Preference in Stocks
Let us know
Share the sector you like to invest in.
Stock Trading Basics
You need to understand these terms
Stock Price refers to the cost of a specific stock. This could be the real time price or the delayed quote price. Your online broker will specify this. Make sure you get a broker account that will give you the real-time price as the price can fluctuate significantly in a minute.
Stock Price Range. This will show you the lowest and highest price a particular stock has traded during the day. This will show you if the stock is going up, fluctuating, dipping or settling down. Based on this, you can make your decision to buy or sell a stock.
Stock Market Cap. This will give you an idea of how big a company is given the total value of all the outstanding shares a company has on the market. So, those that have big market caps are often referred to as blue chip stocks. This is often a good place to start with your picks.
Stock Trading Volume. This refers to the number of shares of the stock traded in the market. Usually, stocks with higher volume will not be subject to drastic price changes than those with lower volume which often fall victims of manipulators.
Stock Dividend. This gives you the payout per share and yield percentage that a company pays its shareholders. Good performing companies often pay better dividends.
Stock P/E Ratio. The price-to-earnings ratio is your gauge of the value of the stock, whether the valuations are low or high which determine if the stock is cheap or expensive. Your online broker gives this info usually. But if not, calculate it by dividing the price per share of the stock with the earnings per share. Use this to compare stocks in the same sector.
Stock EPS: The earnings-per-share gives you an idea of how profitable the company is by giving you how much each share earned based on the company's performance.
Stock Chart. I love looking at this graph. It shows you the stock's performance over a period of time, say, day, month, year, 5years or more. The past does NOT predict the future...but you spot the erratic bouncers quickly.
Of course, when you go online in your account, your brokerage gives more information than just this. They track the news on your portfolio of stocks, the performance of the market in general and other useful information to make you develop a winning portfolio. To start, open a practice portfolio.
Here are some books on stock trading basics
Start reading
Practice Portfolio
This will give you a good start
This is a tool that I wish I had used before I plunged into the pool. Many online finance and brokerage sites allow you to develop one on their site.
So, start filling up your portfolio. Choose the stocks you want to follow and get them at the price you think is reasonable. You can use the stock screener in some of the sites. You can look for stocks that pay dividends or stocks below $10 in the oil sector or in the transportation sector. This will make your choices more focused.
Once you have opened a portfolio, each day you can go back to it and see how your stocks performed. You can see how much money you have gained or lost, the pattern of your transactions (buy and sell orders), and the news relating to stocks in your portfolio.
Not only will your practice portfolio give you all these information, it will hone in your skills in choosing stocks, deciding when to buy or sell, when is the best time to let go of stocks as well as the effort and discipline you need to win in the investment game.
Read about model portfolios
And start building yours
Start investing on your real portfolio
Build it as you learn
Once you feel you have practiced enough, start your real portfolio. Build it slowly and keep learning. The moment you start, a whole new world is open for you to explore.Now that you have stocks in your portfolio, make a list of these stocks in your iGoogle or Yahoo or its equivalent and monitor its progress. Pay attention to the news on your stocks, the volume traded each day and the fluctuation in price and learn from these. Read what analysts say about your stocks but more importantly, read their own reports. Their sites would have all these quarterly and annual reports. find out how they are doing. Compare their growth with the other companies in the sector. As you keep doing this, you learn more.
Clip Art from Microsoft
News to keep you current on your investment
Be an informed investor
- Deutsche Telekom Investment Arm, T-Venture, Invests in Pinger
- In conjunction with the $7.5 million investment, Bernhard Gold, Investment Director at T-Venture, has joined Pinger's Board of Directors. The new investment will be instrumental in fueling Pinger's international growth. Pinger's mission is to build the ...
- Governor Corbett Announces State Investment in 16 Rail Projects
- 23, 2012 /PRNewswire via COMTEX/ -- A $23 million state investment will fund 16 freight-rail improvement projects statewide, Governor Tom Corbett said today. "Pennsylvania has a robust freight rail system that helps connect communities and businesses ...
- Putin promises military investment
- At a time when US President Barack Obama has instigated a strategic review of US military spending that could result in massive budget cuts, his counterpart in Russia has taken a decidedly different approach. This week, Vladimir Putin announced he ...
Here's a blog that might be helpful
Take a peek
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Read this book
Cotter On Investing: How to succeed as a self-directed investor
Amazon Price: $18.97 (as of 02/23/2012)
Cotter has years in finance with Barclays and still maintains Cotter's Corner in the Barclays Stockbroker website. This is good book to start your self-directed investing.
To invest, create wealth
Creating wealth is key to investment
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Express your views on self investment
Others can learn from these
Is it better for you to invest your own money?
Fetching blurbs now... please stand byYes, I find it better to invest my own money
araxes says:
With money being so important to our financial {and physical] security, each of us should learn as much as possible about money to safeguard ourselves. Do not believe all those so-called experts, most are snake-oil salesmen; enriching themselves & the financial institutions they work for.
Learn how to invest, do it yourself. It is, at the most basic, not difficult - just obscured by smoke & mirrors
Posted September 28, 2011
ajgodinho says:
I truly believe that everyone should take the time to learn some of the basics of investing. I took control of all my investments since early 2004 and have had a successful run without a single losing year!
Posted January 24, 2011
DinosaurEgg says:
Yes, if you have the time to give it the necessary attention and the willingness to learn. No one else cares more about your money.
Posted December 05, 2010
nort43 says:
Yes....go for it......the experts are slow.....miss the moment....have too many pressures in buying and selling large funds....and hope you will help them by buying or selling to affect their portfolio. Like you said....take charge.
Posted September 23, 2010
No, I prefer to let the finance experts do it
These items are just for you
Gifts for your self directed investor friends
Have you done any investing?
Share what you've learned
Or, just leave a message.
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Hypersapien
Feb 14, 2012 @ 12:52 pm | delete
- Awesome lens. I've always done my own investing and I prefer it that way.
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Hypersapien
Feb 14, 2012 @ 12:52 pm | delete
- Awesome lens. I've always done my own investing and I prefer it that way.
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rozalex
Oct 27, 2011 @ 8:04 am | delete
- Always better to do it yourself when it comes to money
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sema
Sep 29, 2011 @ 1:10 pm | delete
- Well explained lens for beginners to get a grasp of how to start investing.
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ajgodinho Jan 24, 2011 @ 10:36 pm | delete
- In early 2004, after examining what was happening with retirement funds being managed by mutual fund managers, I decided to take control of my own investments. It was a huge learning curve, but worth it. I've never had a losing year since I started trading in April 2004. I mainly trade equities and ETFs in the US and Canadian markets. Good information here on investing!
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jackiebolen
Jan 13, 2011 @ 7:54 pm | delete
- No one cares more about your money than you do! So, definitely do it yourself I think.
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LabKitty
Dec 10, 2010 @ 7:52 pm | delete
- #1 tip - don't invest money you can't afford to lose....
When there's big shifts, like the market crash in 2008, it's reasonably easy to make money if you go in with cash after the fact. But most of the time, when things are just "business as usual", the stock market just feels to be too weird and capricious to win. It's especially discouraging to read of big winners who then wind up doing 5 to 10 in some minimum security facility somewhere down the road. They didn't "invest," they "cheated."
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DinosaurEgg
Dec 5, 2010 @ 2:28 pm | delete
- Simply explained. Good stuff.
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Secrets of the Millionaire Mind: Mastering the Inner Game of Wealth
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This is one book that has made me understand my mental habits that are stopping me from enjoying prosperity. After I read the book, I made changes in my mind and eventually those blocks to prosperity just disappeared. I have confronted the problem. Get this book to help you understand the power of your mind and how you can reorient your thinking towards winning th emoney game.
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