First lesson for the beginner investor: know yourself

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Friday 16 July 2004

I have been asked to be educator-mentor to a newly formed share club. This week's article is the start of a series aimed at new investors wanting to answer the simple, but ultimately very complex, question: "How do you make money out of the sharemarket?".

By The Landlord

# What are you?

The first issue faced by new investors is to define their style. Do you want to just buy and hold, do you want a long-term focus, but still manage a portfolio around the edges, or do you want to actively trade?

The correct answers depend on a person's nature, the time they have available and their ability. And even if you want to be a trader, it will pay to reappraise this after some time – not everyone has the nose, the judgment and the emotional fortitude to actively manage a share portfolio.

# Brokers are your friends

There was a time after the 1987 sharemarket crash when a share broker was as popular at a dinner party as an obnoxious traffic cop.

But most brokers I have known (I worked in the industry for about 15 years) have an intense enthusiasm for the market and a genuine desire to make money for their clients. There are a few who over-trade clients to generate income for themselves, but they are the exception.

A good broker can help with information (including research) and guidance and also offer the odd allocation in new floats.

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