Investor Summer School: 2 Key Tools You Need to Start Investing

Two tools to get started investing
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If you don't want to become one of the financial casualties of American society, you need to invest. Even a modest level of savings can put you among the elite investors in the U.S.: 57% of Americans have saved less than $25,000 toward their retirement, and 28 percent haven't reached the $1,000 mark, according to the Employee Benefit Research Institute.

This week, we're running our Investor Summer School series on basic investing lessons, trying to give novices the information they need to invest their money and make it work harder for them. We've already covered the basics on finding ways to save more to put toward your investments, the five most common types of investment you might buy, and three popular investing strategies for beginners.

In this fourth lesson, we'll take a look at two of the main tools you'll need, and how best to use them.

Tool 1: The Right Investment Account

Opening an investment account can seem intimidating, but it doesn't have to be. The key thing to remember is that the companies involved that want your business will do everything in their power to make it as easy as possible for you to get started.

If you have to pick a single account to use for your investing, make it a brokerage account. Brokers give you access to individual stocks, bonds, and exchange-traded funds, as well as slightly more sophisticated investments like options and futures. Most brokerage companies also offer mutual-fund trading on their platforms, giving you all-inclusive access to just about every type of investment you'll want to start out with.

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The easiest way to open an account with online brokers is to fill out an application through their websites. But companies will also let you download and print out paper copies or send you an application in the mail if you prefer.

Don't let the size of those applications scare you. Brokers are required by the SEC and other regulators to gather a lot of information, but it's very unlikely that you'll get turned down for an account.

If you only want to invest in mutual funds, you can go directly to most mutual-fund companies and buy shares from them yourself. You'll need to fill out a separate account application for each fund company, but it closely resembles the brokerage-account paperwork. After a while, filling out these sorts of forms becomes second nature when you want to expand your portfolio.

Tool 2: The Right Resources For Unearthing Smart Investments

Discount brokers used to leave you largely on your own in choosing investments, but now, even low-cost brokerage firms offer a variety of different resources to help you find promising investments. They include:

  • Screeners. These tools let you select certain desirable characteristics, such as high dividends, attractive valuations, or low expenses, and then give you a list of investments that meet your criteria. From there, you can do further research to whittle down your list.

  • Third-party professional research. Some brokers have arrangements with outside investment analysts who provide their proprietary research to certain brokerage clients. The wider the range of research offerings, the more complete a picture of a prospective investment you'll have before you decide to buy or sell.

  • Corporate financial information. Every investor has access to company financials, both through the company's investor relations department as well as by looking at SEC filings. But some brokers make it easier for you to access and use that information, providing a more uniform presentation format and combing through detailed fine print to dig out key facts to consider.

  • Alert systems and automated trading. Increasingly, brokers will let you set alarms that will inform you when a stock price reaches a certain level or when important news comes out about a stock you own. A few more-sophisticated brokerage platforms allow you to arrange to have orders automatically placed to buy or sell investments if certain pre-set conditions you select occur.

  • Mobile access. Recently, being able to access accounts on a smartphone or tablet has become indispensable, and the best brokers are keeping up with technology by improving their mobile trading platforms to allow access from anywhere.

At first, the sheer volume of resources available will leave you wondering where to begin. But don't feel like you need to take advantage of every offering you have.

Instead, in selecting a broker to work with, glance at these research tools with the goal of deciding which ones you'd be most comfortable using in the future. From there, making an informed choice will be a lot simpler.

One Step at a Time

Dealing with all the paperwork involved in setting up investment accounts can seem like too high a hurdle to overcome. Researching thousands of potential investments to find the best ones for your portfolio can seem downright impossible.

Yet by taking these processes one step at a time, you'll find yourself working through them before you know it. Then, you'll be able to move forward with your investing and start the journey toward reaching all of your financial dreams.

In our final lesson, we'll give you some helpful tips from investing experts that beginners can use to improve their results.