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Two things you need to start investing

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  • 10-05-2009
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To start investing you need two things and while they may seem completely obvious there are some important considerations that go along with them. You may want to make a few changes after reading this.

1. Money

Debt should come before Investment
Do not start investing until you have paid off higher interest debt like credit cards. Why you ask? Because a lot of times the credit card will cost us more then the investment (after tax) is going to earn. So, if you have debt like credit cards, that have an interest rate greater than 9% (not a rule, just a guide), pay that off first. Then you can start investing.

Emergencies Come First
Don’t start investing until you have saved up an emergency fund. Investments usually take some time to get the cash out. Even highly liquid exchange traded stocks take five business days to get the money after selling. You should have an emergency fund that you can cash out that day. I even keep a little cash hidden in a safe place just on the low chance something really big happens. Until you have an emergency fund you should not start investing.

2. Stockbroker
To start investing you need to join a registered broker. Brokers have access to stock exchanges, not individual investors. They take your order, route it, and attempt to get you the best price in the market. Here are a few tips on picking a broker.

Online access – Make sure the broker offers online access to your account and let’s you trade online.

Trading commissions – Investing means transactions costs. Try to keep these to a minimum. Online commissions should be below $10 a trade.

Minimum deposits and hidden fees – Make sure you can cover the brokers minimum account size and check for hidden fees before signing up.

Check legitimacy – Check the broker is registered with the Financial Industry Regulatory Authority and insured through Securities Investor Protection Corporation (SIPC).

Quick Last Tip: Some brokers let you sign up with no money you giving access to lots of market and investing research for free.

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