- 1). Determine how much of your overall portfolio you wish to devote to stocks and how much you wish to invest in bonds. Never invest money in stocks if you expect to need those funds within the next five years.
- 2). Use the number of years you have until retirement as a guide when saving for that goal. Investors who are within five years of retirement should strive for a balanced portfolio of 50 percent stocks and 50 percent bonds, while those with decades to go before leaving the workforce might want to allocate 70 percent to 100 percent toward stocks for the possibility of a higher return over time.
- 3). Decide whether you want to invest in individual stocks and bonds or mutual funds. For most small investors, mutual funds provide the kind of diversification that would be nearly impossible to achieve through individual purchases.
- 4). Open a brokerage account if you wish to buy individual stocks. Individual bonds can be purchased through brokerage firms as well, but they can also be purchased through the investment desk at your bank.
- 5). Contact several low-cost mutual fund families to request prospectuses for their stock and bond funds. Consider investing in index funds to trim your costs and eliminate the chances the funds you choose will provide a rate of return that is less than what you could get by simply investing in a stock market index fund.
- 6). Review each prospectus carefully before investing your money. Look at the expense ratio for the funds and compare the expenses among all the funds you are considering. Investing in a stock mutual fund can get your expense ratios down to as low as 0.20 percent. Strive for similarly low rates on your bond funds as well.
- 7). Complete the application for the mutual fund or brokerage firm you wish to open. Be sure to provide complete information to eliminate delays in the processing of your application and your initial deposit.
- 8). Send the completed application and your deposit to the mutual fund family or mutual fund. Be sure to send the application to the right address--many brokerage firms and mutual fund companies use a separate address for overnight mail.
- 9). Establish online access for your account as soon as you receive your account number. This will allow you to trade online and move your money quickly between investments.
- 10
Log on to your account and go to the trading menu. Select the stock, bond or mutual fund you wish to sell. Review the current value of the fund carefully. - 11
Enter the information for the sale, including the ticker symbol of the stock or mutual fund and the number of shares you wish to transact. Review the details of the transaction and click "Submit" to send your order. - 12
Print a copy of your trade confirmation and keep it with your tax records. You will need this information to figure your capital gains when you complete your tax return.
- Advertisement -
- Advertisement -