Looking to get started as an investor or perhaps play a bit of catch-up with your retirement savings? Good for you. For long-term types, the stock market is the place to be, plain and simple. What's more, armed with the right information, you can lay a foundation for investment success even in your earliest days. With that in mind, consider the following tips as you go about the business of making your investment choices.
Begin with funds
I'm the Fool's resident fund geek, so I have a bias here, but I think that assembling a portfolio of well-chosen mutual funds is a great first step. Funds provide instant diversification and can help take the sting out of market volatility. Plus, if you do your homework, you can indeed beat the market with funds.
That said, even if you don't consider yourself the fund-investing type, you might at least begin with an index tracker or two. The S&P-based Vanguard 500 Index fund (VFINX), for example, is a great way of getting your investment career off to a smart start, offering a simple, inexpensive way to invest in such big boys as ExxonMobil (NYSE:XOM) and Bank of America (NYSE:BAC).
Both of those household names appeared in the fund's top 10 at the end of July, and once you've anchored your portfolio to such long-haul stalwarts, you'll be in an excellent position to ...
Consider individual stocks
Needless to say, adding individual stocks to your portfolio is riskier and requires more research than buying shares of a mutual fund that simply tracks the broader market. For starters, you'll need to have a sense of your own temperament as an investor. Younger and/or more aggressive types will likely favor riskier fare, such as Apple Computer (NASDAQ:AAPL) or Yahoo! (NASDAQ:YHOO).
These racy companies -- and others that strike a similar profile -- boast outsized earnings growth prospects, but beware: They also have farther to fall when the market takes a dive.
More conservative types, meanwhile, should gravitate toward buttoned-down stocks whose below-average price multiples reflect not distress -- see General Motors (NYSE:GM) for details -- but rather temporary troubles or an opportunity that, for whatever short-term reason, the market simply hasn't tuned in to yet.
On that score, I give you JPMorgan Chase (NYSE:JPM) and Home Depot (NYSE:HD), battle-tested behemoths whose current price-to-earnings ratios clock in below both their average industry competitor and the S&P 500.
The Foolish bottom line
Make no mistake: Even if you go the conservative route, investing in stocks necessarily involves risk. With risk, however, comes reward, and the Fool exists to give you the inside scoop on how to get the biggest bang for your investment buck.
Which strategy might be right for you? Glad you asked. In the latest issue of Motley Fool GreenLight -- which will be released today at 4 p.m. ET -- we provide rapid-fire overviews of a number of different ways to invest, giving you the info you need to decide which might make the best fit for your temperament.
Interested? Excellent. GreenLight is yours free for 30 days. Click here to give it a try.
Shannon Zimmerman runs point on the Fool's Champion Funds newsletter service and co-advises GreenLight. At the time of publication, he didn't own any of the securities mentioned above. Bank of America and JPMorgan are Income Investor recommendations. Home Depot is an Inside Value recommendation. Yahoo! is a Stock Advisor recommendation. You can check out the Fool's strict disclosure policy by clicking right here.
