Investing On Your Own Getting Easier

Investing on your own used to be an uphill fight.

Now, the playing field for the average individual investor is becoming more level in terms of online resources, tools and services available.

How those tools are used -- along with doing research, thinking long-term and keeping balance both in your portfolio and in life -- can help create a good track record of investments.

"DIY investing is simply taking control of your own portfolio," said Jason Kelly, author of "The Neatest Little Guide to Do-It-Yourself Investing," in an e-mail interview.

He said DIY investing is ideal for people who have an interest in money and business.

"More people are going it alone than ever before," Kelly said. "They're starting at a younger age, too, judging by the reader feedback I get."

Kelly said he's heard about investing from college students and people who have just started to work after graduating. The second biggest group of feedback he gets is from 30-somethings who are settled in their careers and are looking to get ahead.

"There is no scarcity of tools or information for do-it-yourselfers. Anybody can use anything the pros use," he said. "That makes the pros a lot less necessary than they were a generation ago."

Starting out involves some legwork that includes both learning how to research and then doing it. Kelly suggested going to sites such as Yahoo! Finance to look up basic key statistics for a stock, its news history and then making sense out of it.

"Ask yourself why: Is the stock or fund trading at a discount to where it normally trades? Why? Do you think there's something in the future that could change the stock's fortune? If so, what? " he said. "Try to calculate the odds of it panning out the way you see it. Then, very importantly, figure out the impact if you're wrong."

It doesn't hurt to read about investing, either. That will help in evaluating companies and knowing when it's worth it to pay more on a company's stock.

Stocks are largely considered long-term investments, spanning five or 10 or more years. Kelly recommended starting out small and going slowly.

"Make your mistakes hurt as little as possible. Don't bet on the farm," he said. "Later, when you've developed a sense for what type of investing makes you enough money without making your life unduly stressful, you can increase the amount of your savings that you want to actively manage."

Not only does starting out small cut risk, but diversifying with mutual funds or exchange traded funds -- which are several stocks that mirror an index such as the S&P 500 -- can help gauge an investor's threshold. Kelly said to find an emotional comfort level.

"Limiting damage when you're wrong will protect your money to try to be right at a later date. Letting damage spiral out of control is a great way to get frustrated," Kelly said.

Once the money's there, set it and forget it.

"The individuals who do best at investing are the ones who take a long-term approach to it and refrain from watching it too closely. The ones who crash and burn are the day traders," he said.

Mistakes Can Be Made

When mistakes are made, learn from them. By starting small and slowly, chances are the screw-up probably won't hit as hard. Kelly said it's also a mistake to think you'll never be wrong.

"When you take that plunge, though, you should know that you won't be right all the time," Kelly said. "Be sure you're prepared for when you're wrong. If you do that, and you do your other research well, you'll stick with it and become wealthy."

Kelly said the biggest mistake that investors commonly make is putting too much money into one investment.

"The way this usually comes about is by buying it too high, then buying more when it drops, then more, then more, then more, until one day you realize all of your money is in this one position, and it's dropping still," he said.

Another mistake is to spend too much time managing money, leaving little time for anything else. Balance not only applies to a portfolio.

"Buying and holding is a great approach, and it leaves you free to live your life," Kelly said.

Don't buy on tips or act based on news surrounding a particular company and its stock. He said sticking with what works will keep the do-it-yourselfer from derailing.

"Following the media blindly is a big no-no," Kelly stressed. "If you read enough and take notes, you'll soon find yourself with a list of recommendations covering every stock in the known universe. Keep your focus. Know what you do well, know what you like and put your efforts there."

Do-it-yourself investing is not for everyone, particularly those who don't like managing money. In that case, it may be time to call in the big guns.

"Left to their own devices, (some people would) leave everything in a bank account earning minimal interest. That's not good, and almost any planner can do better than that. Too, there are some excellent planners out there who are worth every penny," he said.

When hiring a professional financial planner, seek recommendations from friends or talk to an industry association to find one locally.

Andrew Housser, co-chief executive officer of Bills.com, said the difference between a financial planner and broker is that planners focus on overall diversification.

"They're not going to tell you which stocks to buy," Housser said. "They're going to help you diversify so you can optimize."

He said that planners look at your financial goals to optimize your plan for retirement, save for your children's college education, estate planning, protect assets from litigation, make sure your insurance is covered and diversify your financial portfolio.

Housser said even experienced investors can benefit from having someone else review their strategy. He suggested going with someone who is recommended and who is a chartered financial analyst or certified financial planner.

Housser stressed choosing a professional who works on an hourly basis rather on a commission because they may or may not sell products that are ideal for you.

If the person paid at an hourly rate is really good at what he or she does, the client will earn back the out-of-pocket dollars 10 times over, he said.

Housser said if someone charges $150 per hour, the client might pay $500 to $1,000, but if he or she did the math, the financial planner could end up saving the client millions.