Personal finance tips and advice on money and investing to increase your financial intelligence and welfare

Do You Need a Stock Broker?

If you’re looking to invest your money in the stock market, you are probably wondering whether or not you need to have a stock broker. It may seem like a scary proposition to take care of all the work yourself, but if you do the research and know what you’re getting into, doing it yourself could be an opportunity to make more money and learn something new.

stock broker

Image by Ahmad Nawawi

Fees

The biggest problem with stock brokers and other financial advisors is that they eat into your profits, either through fees or a percentage of your earnings. If they don’t cost you anything, you need to be worried, because they’re getting paid somehow, and it’ll probably be commission-based, meaning their goal is to sign you up for as much as they can, whether or not you need it. Whatever their method of payment, you’re ultimately the one to pay for it, and oftentimes the amount they are able to improve your investing doesn’t fully cover that cost, leaving you worse off in the long run.

Doing it Yourself

If you want to avoid the costs and instead take care of your portfolio yourself, you’ll need to do some research, some preparations, and some planning before you jump in. You’ll need to learn some of the big rules of portfolio investments so you can make smart decisions. Taking a class or doing research will help you get a complete idea of what’s necessary when delving into the stock market, but here are a couple of things you need to know when starting out.

One of the biggest tips you should know is that your portfolio should be split up amongst several different investments. If you keep everything in one stock and don’t diversify, all of your savings could disappear if something went wrong. When your money is spread out, you can get a good return and keep the possibility of serious losses down.

You should also be aware of the concept of rebalancing as you track your investments over time. Every few months or so, check your various investments to see if any have become higher or lower percentages of your total portfolio, and buy and sell shares to get them all back into balance. It may sound odd to sell off stock that’s performing well to purchase more of ones that aren’t, but you’re essentially selling high and then buying low. Instead of constantly watching the market and trying to time purchasing and selling, switching from stock to stock, you should do some simple rebalancing every so often.

Index Funds

If diversifying sounds tricky or arduous to you, one easy option to help you split up your investments is to put your money into an index fund. While it does cost you a portion of your earnings, it costs much less than hiring a person or company to do everything, and it’s an extremely simple way to take care of your own portfolio. Look through different index fund options to find the one that works for you, and then all you have to do is put in your money and they split it up into a variety of well-established investments for you. You have control and can change whatever you wish, but it’s basically set up to do most of the work for you. It’s a good in-between option for those who want to invest on their own but don’t feel completely comfortable with the stock market.

If you’re willing to put in a little effort, taking care of your own investments can be profitable, and it can also be an opportunity to learn something new. Look into your various options and find what works for you.

About the Author: Kathy Acorda writes for http://www.tradingacademy.com/ where you can read more about investing in the stock market.