Fundamentals for investing

I just had an interesting conversation this evening with my uncle.  He was calling me to pick my brain about managing his finances.  Since I am family, and will not receive any compensation for my investment advice, I was happy to be of assistance.  His question was, "I know everything there is to know about investing, but I would like to know what information can a broker could give me?".

First, let me explain my background.  I began working in the financial sector in 1999.  In 2000, I obtained my Series 7 (Securities License) & 63 (State Laws & Regulations).  I worked for three investment advisors as a sales assistant.  There I was introduced to a variety of investment products.  I would have to say even though I switched companies, I was very thankful for the opportunity and experience.  I remained in the financial sector until 2007 until I was downsized.

During our conversation, we definitely spoke on a range of topics.  From Citigroup, to the bailout plan, and the financial markets.  I basically gave my honest opinion and shared my experiences working for investment advisors.  Before you decide to speak with a financial advisor, please make sure that you understand your investment objectives and how much you are willing to invest.

Fundamentals for investing:

1. Investment knowledge: Most people speak with a financial advisor because they are not sure how to handle their money, and the market confuses them.  While this is normal, I would advise you to read at least the fundamentals on investing.  Most financial advisors speak in acronyms, which can make it sometimes difficult to understand the message in which they are trying to relay.  I would suggest buying: 

a) Dictionary of Finance and Investment Terms, by John Downes  

b) Investing Basics, by Quamut

c) Mutual Fund Investing, by Quamut

d) Stock Investing, by Quamut

e) Wall Street Journal Complete Money and Investing Guidebook, Dave Kansas

2. Do not invest in what your friends or spouse are currently investing in or what you hear is the next big company.  What works for them, maybe not work for you.

3. Research.  I cannot stress this point enough.  Research everything about the company or mutual funds that you are about to invest your savings in.  How is it managed?  How long have they been in business?  Do they pay dividends?  Did they make a profit for the previous years?  What is the current news?  What are their goals?

4.  What are your investment goals?  Preserving capital or growth.  Are you a risky investor that can deal with a 30% decline in your portfolio or would you rather take a little risk and lose no more than 10%, if possible.  If you are someone that cringes when you hear news about another company laying off workers or the current mutual fund or stock in your portfolio is trading lower than yesterday, then investing is not for you.  

5.  Keep abreast with the financial and global markets.  Since we are living in the 21st century, US companies are connected globally with other markets.  Know how the market in Japan or China, will affect your current investment.

6.  Investments are not guaranteed.

I wish everyone a happy investment.