The Right Place to Start Investing Nowhttp://www.fool.com/investing/beginning/2009/10/23/the-right-place-to-start-investing-now.aspx Dan Caplinger
October 23, 2009
When it comes to setting up a winning portfolio, picking the best investments is essential. But what stops many potential investors from ever getting started is the mistaken impression that you need a huge amount of money before you can begin implementing a smart investing strategy.
I'll admit to being guilty of giving advice like that in some of the articles I've written. From time to time, I've suggested that people drop $5,000 into a Roth IRA or buy 100 shares of half a dozen different stocks, even while I know that most people don't have thousands of dollars sitting around. And although mutual funds and direct stock purchase plans let you get started with $100 or less, you may well want to strive for the bigger rewards that choosing individual stocks can give you.
So, if you're tired of hearing advice that you can't afford to take, let me tell you how you can prioritize your investing without giving up on your ultimate goal of financial independence.
Where you are
But that doesn't mean you should just pick stocks willy-nilly. The best way to concentrate your attention in the right place is to take a good, hard look at your time horizon and risk tolerance. That should get you pointed in the right direction.
In particular, here are some thoughts on how people in common situations can best start a stock portfolio.
When time is on your side
To make the most of the opportunity you have, take a close look at small-cap stocks. Over time, smaller companies outperform their larger rivals, and as they grow, they give you the potential for explosive growth. Stocks like Dynamic Materials (Nasdaq: BOOM ) and Innophos Holdings (Nasdaq: IPHS ) might make your portfolio a bit volatile, especially at first, but the chances of earning a high return on your investment are better than if you buy more mature companies with fewer prospects.
When things are more urgent