How Can I Start Investing In The Stock Market Without A Broker

To begin a stock market investing program, the first question many people, myself included, ask is "how can I start investing in the stock market without a broker?" The actual mechanics of investing without a broker is easy but making money is the hard part. That's why the first thing you must do before you invest a cent, is to pick an investment strategy. Once you've done that, your next job is to know it inside and out. You must devote time to learn your craft. If it were easy to make money in stocks, everyone would be doing it. The key factor in your success or failure is the time you devote to learning and refining your strategy.

For the person just starting to invest in the stock market, there are two basic strategies to choose from -- will you be a growth investor or a value investor. In my opinion, a growth investor is someone who looks for strong earnings that will propel a stock's price higher. A value investor looks for stocks that are basically on sale or underpriced compared to the actual value of the company.

For me, after studying both strategies, it wasn't a question of which one I could use to make money with, it was a question of which one I could make money fastest with. Both will work and either strategy I can implement without a broker. I was swayed heavily by William O'Neil's book, How To Make Money In Stocks.

In it, he outlines how he choses companies based on strong earnings and sales. More than that though he also talked about having specific times to buy AND sell your stocks. This is a distinction that I think is critical because most brokers will tell you to "buy and hold" your investments. But, even the best stocks go down in value. Why ride them down in price if you earned a profit? You must learn to take profits instead of letting Wall Street con you into watching them disappear.

You do that by setting specific sell rules which he outlines in his CANSLIM investment strategy and publishes daily in the Investor's Business Daily. The two he recommends are:

1. Sell every stock that goes down 7-8% in value
2. Sell every stock once it's gone up above 20% (unless it shot up that high in the first 8 weeks, then you hold it)

The goal by establishing these two rules is that you can be right once in three tries and still make money investing in the stock market. He likens it to a baseball player hitting .300. By being right once in 3 attempts, you can learn how to invest in the stock market profitably.