Invest Like a Wall Street Professional

Posted on April 18, 2007

Investing in the stock market can be a daunting experience. Unsure of what asset allocation to select, what stocks to pick, and doubting your timing can all be stressful reasons to just not invest.

1. The first step to investing in the stock market is to select your asset allocation, in other words select how you will divide your money up between stocks and bonds. One simple way to select how much of your investment should be stocks and how much should be bonds is to subtract your age from 110 and that number is the percentage that should be invested in stocks. For example, if you are 25 years old then 110-25=85% invested in stocks. This allocation could be more aggressive depending on your tolerance for market fluctuation.

2. The second step is deciding what stocks to purchase for your portfolio. Buying individual stocks takes a serious amount of research that many professionals are already doing. Why not let them do the work for you and purchase Index Funds. An index fund replicates an entire portion of a market by owning and investing in numerous stocks. The advantages of index funds are low fees, simplicity, and a low amount of trading by the fund manager. By investing in an index fund consistently each month an investor will lower the timing concern of investing in the stock market.

Share and Enjoy: These icons link to social bookmarking sites where readers can share and discover new web pages.