Continuing on our previously weeks topic of investing, the one main question many of us, to include myself have is, where to start? If you have never thought about investing money, this can be a daunting task. With so many possibilities such as savings accounts, bonds, stock market, IRA and so on and so forth, this all can seem overwhelming. For myself, Investopedia, has been a wealth of knowledge and a trusted source for financial education for me. You will see me refer or get information from this site often when discussing these subjects.
Today we will be covering some homework that should be done prior to investing in the stock market. Again, my little disclaimer, I am not a financial professional and no information shared counts as credited financial tips or actionable recommendations. Prior to investing, please conduct your own research or seek the guidance of a certified professional. I am here sharing my processes and hopefully sharing my educational journey about my financial processes. (They do not sponsor me at all, and you are free to choose to get information where you many, they have been recommended to me and I find their resources easy to use.)
Now that is out of the way, what can we say about investing. This previous year I have tried to learn more about investing in the stock market. I must admit, my research was not in great detail, but my realization that I had no financial education previously, came out. When I did go to set up an account with an online broker (there are many and you must choose the best for you and your situation) I had went with popular recommendations. This is not always the best choice.
When it comes to investing, this is almost a personal decision, and a one size fits all program does not really exist. Each one of us has different reasons, risk levels, and outcomes desired when it comes to our financial goals. So we will start to cover educational ways for you to try and make informed decisions toward your own goals.
Where to Start?
Firstly, if looking to invest in the stock market, you need to be comfortable with a SEC-10K form. Now to back up a second the SEC, is the Securities and Exchange Commission, but basically it is the regulatory body that overseas the financial actions of companies and brokers to file their financial statements and disclosures. It also makes the same people file Prospectus, which is mandatory to provide details about the company’s management, financial health, operational results and risks the company is willing to take. It must transparent to give us the investor statements about the company’s information to make sure they company is not misleading the public and can make informed decisions about the company prior to investing.
Secondly the 10-k is the annual business report that provides and overall analysis of the financial condition of the company and has several parts. It is important to keep us the investor aware of a companies financial condition and have enough information prior to buying or selling the company as stock. According to Investopedia, it is important to pay special attention to the footnotes in this form as they can make you aware of any questionable accounting practices prior to investing. This form is filled annually with the SEC.
Next week we will break down the SEC 10-K in depth with a company and learn how to read this form more in depth. It is said that Warren Buffet does his research on the SEC 10-K prior to making decisions about which stocks he purchases. Financially educated people often think of 10-K’s as little treasure hunts and dig through even the microscopic footnotes to find out more about a company prior to investing, states CNBC.
These are vital pieces of information when deciding where to put your hard-earned money, and without good information, you stand to make bad investments which can cause you to lose money rather than have your money work for you.