COLUMN: Ask the Money Lady – Starting to invest

Hey there, time traveller!
This article was published 01/12/2024 (348 days ago), so information in it may no longer be current.

Dear Money Lady,

I have just started trading in the stock market on my own (I don’t have that much saved yet) and I wondered if you could give me any information about investing as new trader. Do you think I can do this myself, or should I get a bank advisor?

Mike

Sure Mike, I can give you some pointers to get started. Remember, knowledge is power!

The more you know the better!

Even if you plan to get a banker to invest for you – it is a good idea to have some idea of what is happening in the stock market and how it could affect you in the future.

The first thing I would say to get started, would be to make sure you align your personality with your investment strategy. If you’ve got a short attention span – you might not be good at long-term swing trades. If you plan to be a long-haul investor then just follow your strategy with or without your banker, and don’t bother watching the market every day. And if you want to be a day-trader, then remember, investing is not gambling. You can’t hop in and out of the market like a profit chasing junkie. The market enjoys eating up inexperienced investors every single day. To do it yourself, there’s plenty of software tools out there to allow you to practice first, Mike. Not until you start making money paper trading, preferably multiple times, should you ever consider moving into a live account. You want to make sure your strategies are viable so practice them first. Of course, it won’t help you with the emotional aspects of trading, so always rember your capital is everything. This goes for your banker too. Make sure you understand their strategy, rationale, and investment goals with your money, before you hire them to work with you.

Here’s some other things you should know about the stock market. The three most popular indicies for an investor to follow are the S&P 500, the Dow Jones Industrial Average, and the Nasdaq Composite. The S&P monitors the top 500 companies in the U.S., the Dow covers the top 30 largest and most influential blue chip companies in the U.S. and the Nasdaq covers all the stock traded on the Nasdaq stock exchange, (usually followed to see how technology stocks are doing). Another index to check out would be the Wilshire 5000. This is a total market index and includes all publicly traded companies in the U.S. Now if your looking for Mid- or Small-Cap stock picks, you will want to check out the S&P Mid-Cap 400, the Russell Midcap or the Russell 2000. For bonds you want to check out the 10 year T-note Futures and also the 20 year Treasury bond futures.

You may be wondering why you should bother with these indices? Well, they provide an insight on the economy, give us indicators for new trends and most of all they show investor sentiment. They are also used as benchmark indicies for some Exchange Traded Funds (ETFs) and Mutual Funds (MFs) that you may want to invest in for the long term.

Take it slow. Get some books on investing and you’ll get it.

^

Christine Ibbotson is a Canadian finance writer, radio host & YouTuber. For more advice check out her YouTube channel: ASK THE MONEY LADY – Your Canadian Finance Coach.