America always has been a land of promise.
Whatever the course of our economy in the years immediately ahead, it is likely
that opportunities for investment will be both numerous and attractive.
Energetic new companies will emerge, looking for venture capital. Solid old
companies will come forth with exciting new products. One industry or another
will enjoy a boom period relative to the rest. And, of course, there will be
casualties, too. There inevitably are.
For the observant investor this activity,
properly evaluated and properly timed, will bring rewards. There will be
chances to buy stocks before they have called attention to themselves and begun
to rise, or to buy a Blue Chip, temporarily out of favor, at a depressed price.
There will be stock splits, dividend increases, new issues, mergers, spin-offs,
as well as the tidal rise and fall of stock prices all of this characteristic
of the restless life of the market as a reflection of American business.
If you have never invested before, you are
bound to be tempted.
Whether or not you yield will depend on your
answer to the first hard question about investing: Can you afford it?
It is a lonely question and only you can
answer it, for it involves not only how much money you feel able to invest, but
what kind of person you are. Actually, it is several questions wrapped into
one. You are asking, first, whether your financial condition permits you to
invest; second, whether you can assume the risk implicit in stock investment;
and, third, whether the market is a safe place for you to be.
Let's take them one at a time.
Your Financial Position: One point should be
made clear at the outset: you don't have to be wealthy to invest. Among
outsiders you can hear it said that stock ownership is a rich man's game. This
can mean any of several things: that the market is too complicated for the
little man, that brokers aren't interested in small orders, that only the
person who can lose a bundle without feeling it should invest. However
persuasive these arguments, they are all untrue.
The fact is-according to a recent New York
Stock Exchange Survey-that almost half of all shareowners are in the
$5,000-$10,000 a year income bracket. The median income of the 3,860,000 people
who have become stockholders since 1956 is $6,900.
This would seem to suggest that an
understanding of market operations is not too difficult to acquire, and that an
attentive, interested broker is not too hard to find. It can also be assumed
that these are shareowners with a fair appreciation of the value of a dollar
and in no position to laugh off losses.
The goals a small investor can hope to
achieve and the pattern of investment possible within the limits of a modest
income will be outlined further on. The conclusion to be reached here is that
investment is not a matter of enlarging a fortune you already possess, but of
making available some money, however small the amount, to start with.
Regardless of your salary or income level,
investment is possible if three conditions can be met:
1. If you are assured of a steady income.
2. If you are meeting your current running
expenses and obligations.
3. If you have a cash reserve with which to
meet unforeseen emergencies.
These conditions are, first of all,
safeguards made necessary by the inescapable fact that stock prices fluctuate.
Your judgment of when to buy, when to sell, and how long to hold should never
be dictated by outside circumstances. Investment should be undertaken only with
funds you can honestly and legitimately earmark as extra. With a regular income
and your monthly bills paid, you know where you
stand and what amount can be put aside, in
reserve, for any investment opportunity that arises. Or, of course, for
emergencies. A sudden demand for ready cash-to pay a hospital bill, an
insurance premium, or your income tax-should come, if possible, from your
reserve, not from cashing in your investments. Whether your stocks are up or
down, you are likely to take a loss-on the downswing because you may be selling
at less than you paid, on the upswing because you may be selling at less than
the potential.
A reserve also enables you to pick and
choose. The fact that you have a few hundred dollars lying idle does not
automatically mean the time is ripe to buy stocks. There's no hurry. As the
professionals say, "The market is always there." If the trend of the market
isn't to your liking, or the price of a stock is higher than you want to pay, a
reserve allows you the luxury of waiting for a more favorable situation.
Finally, a reserve permits investment over a
period of time rather than all at once. As you learn more about the market, you
will hear both sides of this argument. Some experts feel you should back what
seems to be a good situation with all the investment funds at your command.
Others will warn against getting greedy, and advise partial investment here and
there, at different times, to spread the risk. This is not the place to discuss
the merits of these techniques. The point is to give yourself the flexibility
of moving either way your judgment dictates.
Remember: your income need not be large, so long
as it is regular and enables you to put aside a surplus after you have taken
care of your bills and the possibility of trouble. The surplus need not be
large, either. Saving, as has been said many times, is a matter of regularity.
No one considers $5 too small an amount to put into a savings bank; don't worry
if that's all you can save each week for your accumulating investment reserve.
In most markets, brokers usually can suggest a number of sound, solid stocks,
offering liberal yields, that sell for less than $20 per share.
There is no rule about the number of shares
an investor must buy. If you can afford a single share (plus commissions), a
broker will get it for you. As a matter of fact, through the Monthly Investment
Plan you can buy a fraction of a share, although the Plan requires a minimum
investment every month.
To invest in the Forex, you will probably
need a float of around $400 and invest from $1 to $10 per pip to start with,
then reinvest your profits.
So there is a much smaller outlay required to
invest in Forex, although it is more speculative.
Good Forex software will help to reduce the
risks involved.
