This is part one of a weekly segment I will call “Simplified Sunday” I will try to simplify topics of various nature to help the readers. There is no point on wasting money on memberships or complicated books when your starting out and need some basics. To explore further, by all means grab a book, but make this your starting point each Sunday.

So you want to invest? Great! The time to start could never have been better, with the economy down, its never been a better opportunity to cash in on some value stocks, mutual funds or real estate.

Wow, so there are many ways to invest out there, which one is good for you?

The first step to plan out your strategy is to be realistic about answering these two questions:
1. How much are you willing to invest?
2. How much risk are you willing to accept.

Remember - Nothing is promised investing and with greater risks, can come huge profits, but also big loss, think about that before proceeding.

Once you have ironed out those two questions, you want to pan out and explore the options.

by rednuht

For a low risk investor, the easiest options are a high interest savings account, or a term deposit. The rates fluctuate constantly, but there are sites like www.MoneyAisle.com that can help narrow down the choices based on rate preference and terms within your area of residence. It’s a great utility to save some time and maximize your interest rates. Again, your initial investment is guaranteed, but the return will be small. Some are happy with this and that is all that matters.

Medium risk investors might want to look at mutual funds. In a quick summary, mutual funds pool your money along with that of a large group of investors and then split that investment into various stocks. You can get mutual funds based on industry sectors (technology, farming, Latin American, etc) or based on risk. Some funds will charge a fee, and that is nuts. Don’t bother with those as there are tones of amazing mutual funds out there a person can get into without paying that fee.

One personal reason why I won’t pay that fee is because it makes me think that the fund manager will be doing less work when he/she already for the commission up front…so if you want my investment, you are not going to be charging. Again, talking to your local adviser or doing some searches online can yield some great options. My family deals with The Mutual Fund Store which has been good for them. Although I’m not at the point in my life where I want to invest in mutual funds, this company has got good reviews from people close to me.

High Risk investors are the renegades. We want to walk in and make bets and walk away rich. Okay, its not that dramatic but does require knowledge. If your going to listen to your barber about a stock and then bet the farm on it, your not only going to make a risk investment, but probably a stupid one that is going to make you lose some money.

High risk investments can be done through a personal broker, or yourself via a discount brokerage. I have two, one for Canada (Questrade) and USA TradeKing

Both enable me to manage my own portfolios with ease and charge a small price for commissions. There are other discount brokerages that I have dealt with, E-trade is one, which is okay in my experience, but Trade King just meshed better with me. Some Canadian brokerages connected to banks are options, but expensive if you have less than 100K to invest. When I started out, I was paying $29 commissions to TD Waterhouse but now pay almost nothing since my money has grown. But for a starter, find a place that is no-frills and low fee like (TradeKing

Now to start off on the stock market, I would start with at least $1000. Before you dream of mansions and private jets from this money, please calm yourself down. $1000 with a strong 50% return at the end of the year will mean you made $500 in profits. This might not seem like a lot, but compared to a 3% savings ($30) or 9% ($90) mutual fund, this is awesome. Slowly this grows and you have a larger amount to play with. Understand? Great! If you still think a potential of $500 is not a lot, you can always mail me a $500 cash or compare the things you can get with the various returns. I’m sure $500 can help with bills, groceries, a vacation. $30 can’t even get you a night out with your spouse.

Personally, I play a small gain strategy. I invest in a stock, make some money and get out. The stock might go up more later, but I’m happy if I can make consistent money each day. Its totally doable.

So you have your trading account set up, you have the money in the account, you are ready to invest. Now what? This is the part where you work as hard as you want your money to work for you. Think of it like this example. I have $175,000 invested, that means to me that I run a company with 175,000 employees. Each dollar is my worker. The way I manage my company and my little workers will reflect their performance and my return. So to get the maximum work out of them, what I do is each morning I scan headlines. I watch Bloomberg since they offer more business news without time wasting jokes and sarcastic panic fueled comments (if you have watched CNBC, you know what I’m talking about)

Okay, I am going to pause there, ahhhh a tease haha…no, I think that small steps will enable people starting off to get caught up as trading does not take place over a single night. Get to this point of having an account with funds in it (if your intention is to trade) and we will continue next week. I will also try to talk a little more about low and medium risk products as options.

Until the next installment…

Happy Investing!

Aman, MBA

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