Stock Essay

Start Small, End BIG!

Stock Purchasing for the Independent Small Investor

Are you ready to invest in individual stocks?

Here are the main things you should make sure you've done before you plan your initial purchases for your small portfolio:
Spend some time reading some of the books suggested elsewhere on InvestorWeb (Lynch, Graham, Hagstrom, etc.).
Spend time doing your homework on the companies you are interested in. This includes reading financial statements, reading reports, doing some work on finding independent information about them;
Pick out a few companies whose financial situation, competitive situation, management, and price you like.
Make sure you are ready for a long term hold of up to 5 years or even more.
Make sure you will not bolt at the first sign of share price volatility.
Do I need a full service or a discount broker?

To buy stocks, you will need to have a brokerage account. There are

What now?

Hold onto them! And check on a quarterly basis how they are doing. Also consider the basic questions about the business about every six months. Are their earnings steady? How do the company's financial statements look -- are there any pleasant or unpleasant surprises? Has the company launched new products? Are they maintaining market share? What are their competitors doing? Read what you can about the company, and not always just what the company tells you in its annual reports. This is where the information services offered by a "some service" broker come in handy.
If you continue to consider the company a good one, make a decision to keep it. The adage that "it doesn't cost anything to take profits" is not that true for the small independent investor. Why would you sell shares of your favorite company at a good price when all logic told you that because the company was strong, the shares will go to a higher price? If the shares seem cheaply valued or fairly valued, consider buying more shares when you