First Time Investors
This part guides the individual to the steps to be taken to start investing in the global securities markets. At times, the markets are volatile therefore the value of an investment can go up as well as down. The information herein is not related to a specific security. Investors should be cautious of the endorsements of celebrities, and financial-influencers statements, which might be concealed as marketing of certain investment scheme, as well as the mis-selling scandals by supposedly professional financial advisors. The Financial Times recently reported that the persons aged between 18-29 trust such influencers.
Investing: This is a brief description about investing, it aims to enhance the financial security of the investor by making better investment decision for the long-term, particularly for retirement. Investing by ordinary people is not complex as described below. If you are comfortable with the concept and already familiar with investing, you can skip this part.
There are numerous types of investment:
- actively managed funds are constructed of shares of many companies, or
- bonds,
- industry sector funds,
- exchange traded funds (ETF) also known as trackers and are listed on principal exchanges such as The London Stock Exchange (LSE), New York Stock Exchange (NYSE), many others in Europe, and the Far East.
Most ETFs are broad-based, like the FTSE100 index tracks the largest 100 companies in the UK, Standard and Poor (S&P)500 largest companies in the United States, and the other major indexes Eurostoxx600, and the Nikkei 225 too. They are also considered as benchmarks to measure the performance of their respective markets. These ETFs securities are passively managed, such that the fund manager aims to track the index and not to attempt to outperform it, as such, ETFs are normally the low-cost securities in which to invest.
Also, there are some ETFs managed by a fund manager with a view on timing the market and trying to outperform the benchmark. Such securities are to be avoided, as well as alternatives, such as hedge funds, private equity, and venture capital, for they are too costly and risky for individual investors and can underperform their benchmarks. Hence, individual investors are better off to avoid timing the market, and focus on low-cost broadly-based ETFs containing shares, and bonds. More detailed information on risk and portfolio choice on home page private Investors and Investing.
Account opening: In most instances an investor will need to open an account for trading securities. Various financial institutions such as banks, stockbrokers, and online platforms offer personal trading accounts. The reputation and financial strength of these institutions are factors to consider when selecting your trading account provider. It is advisable to select an institution with accessibility to online trading. Many institutions have a low threshold amount for opening an account, this information should be on their website, describing their services. The brokerage account will provide the investor the opportunity to access monthly statements and to view the value of the account including their cash balance. Many brokers offer investors margin account that allows borrowing money to buy securities; however, such account is not suitable for individual investors, for their main goal starts with saving to invest.
Trade confirmation: An investor can buy or sell securities in his account by entering an order either at market price, or limited price. Market price means the best available price at that specific time. A limited price is the price specified by the investor whereby if that price is not reached the trade will not be made. All orders are day-orders and expire at the end of the day if not executed, unless otherwise specified such as good-until-cancelled. Once the trade has been executed, the broker will issue a trade confirmation or trade report with all details of the trade. This provides the investor with the relevant information for tax filings or to ensure that there were no discrepancies with the trade.
Trading securities: You have now a fair and good idea about the financial firms that hold your account for investing, you can learn how to begin trading index funds for long-term in a form that is best described as buy-and-hold within your account. This process should not be intimidating when you are familiar with terms described herein. This guide to online trading will give you a starting point and confidence in choosing the ETFs to build your portfolio for long-term investment after choosing a diversified portfolio based on the level of risk that makes you comfortable.
Securities ownership: When you buy a share, or bond, or ETF or any such securities in your account, these securities are purchased for you in your name at your broker, or the financial institution that hold your account in your statement of account, but these securities are registered in the name of the entity that holds your account not in your name. This is known as the securities are registered in Street Name. This setting shows that your financial institution guaranties your account, but also there are other government regulatory agencies that offer limited guaranty on your securities account (USA $250,000 and UK £85.000) and other banking regulators offer some types of guaranties to individuals holding accounts in their country’s financial institutions; best to check with the financial institution in which you open your account. However, the regulators require all financial institutions to have a segregated account that holds their clients’ assets and not to comingled it with their own proprietary account.
Below are some of the popular financial institutions offering services to investors.