Learning To Invest Summary Make a list of the poducts you use.

See if these companies fit your risk profile.

Consult our sample portfolios as a guide to your selection process.

For smaller investors, mutual funds are the way to go.

Look for no-load index funds.
Selecting Securities
You now have the framework, as you know what types of securities to invest in, and how to diversify your portfolio. Unfortunately, that still leaves hundreds of possible securities to invest in. How do you select one from the other? Simple, first get a sheet of paper and a pencil. Keep the paper with you for a few days, and just observe the products you use yourself. Note what you eat, where you shop, what kind of shoes you where, where you surf on the internet, what kind of pizza you order, which phone carrier you employ, the software programs you use, the bank you frequent, your headache medicine, the car you drive, and so forth. This comprises the most likelihood theory. If you buy it, most likely others will too. Then after a week or so review the list, and look for companies that fit into your portfolio. If you discover you are a conservative investor who favors high quality corporate bonds, and you drive an Explorer, consider an investment in Ford bonds. Also, take a look at our sample portfolios. They are a great way to see if your portfolio has covered all of the necessary asset classes. Plus you can compare your return to ours. Advantageous for their flexibility, buying individual stocks and bonds presents the most attractive option. However, if you are starting with limited capital, mutual funds may be the only way to go. With this in mind be sure to look for the following things in a mutual fund:

A relatively new class of securities, the exchange traded fund (ETF), has provided the indexing investor with a tremendous new opportunity. These funds trade like stocks, allowing you to buy and sell shares of the fund as you would with a normal stock, while at the same time allowing the individual investor with limited funds to buy the indexes. The new ishares family provide "stocks" that track numerous indexes, including not only the popular S&P 500 and the Dow Jones Industrial Average, but also less well known indexes, such as the Lehman Aggregate Bond Index. Additionally, ishares also has index "stocks" that track foreign markets, both developed and emerging. As these funds use the indexing approach the expenses associated with these funds are considerably lower than most mutual funds. The breath of the issues offered allows any investor, whether they have large portfolio and an aggressive risk level or a few hundred dollars and a conservative style, to create a diversified indexed portfolio.

A key resource at LearningToInvest.com are the sample portfolios, which provide a model to look at and study. [Click Here To Continue...]