Individual Investor Guide to Investing 101

As an individual investor, you're likely eager to start investing and growing your wealth. The first step is to understand your investment goals and risk tolerance, which will help determine the right investment mix for you.

A key consideration is your time horizon - how long you can afford to keep your money invested. If you're saving for a short-term goal, like a down payment on a house, you may want to focus on low-risk investments like bonds or savings accounts.

Investing in a diversified portfolio can help spread out your risk and increase potential returns. Aim to allocate your investments across different asset classes, such as stocks, bonds, and real estate.

Don't put all your eggs in one basket - diversification can help you ride out market fluctuations and avoid significant losses.

As a retail investor, you're not a professional investor, but rather an individual who buys and sells securities for personal accounts. You can execute trades through traditional or online brokerage firms, or other types of investment accounts.

Retail investors typically invest smaller amounts compared to institutional investors, often in the hundreds or thousands of dollars. Institutional investors, on the other hand, can move millions of dollars with every trade.

The Securities and Exchange Commission (SEC) protects retail investors by enforcing securities laws and providing online education for investors. This helps ensure that the markets function in a fair and orderly manner.

Retail investors can diversify their portfolios by investing in various securities, such as stocks, bonds, and alternative investments. This can help reduce risk by spreading investments across multiple assets rather than being heavily concentrated in just one or a few investments.

Here are some key characteristics of retail investors:

An investor is typically a non-professional individual who buys and sells securities or funds through traditional or online brokerage firms.

Retail investors, also known as individual investors, usually invest their own money in their personal accounts.

They may invest actively, making their own trades, or hire a professional, such as a financial planner or advisor, to oversee the investment decision-making process.

Retail investors typically execute trades in smaller amounts, often in the hundreds or thousands of dollars, compared to institutional investors who can move millions of dollars with every trade.

The Securities and Exchange Commission (SEC) protects retail investors by enforcing securities laws and providing online education for investors.

Retail investors can choose to invest in various securities, such as stocks, bonds, exchange-traded funds (ETFs), and mutual funds, depending on their investment goals and risk tolerance.

Investors may have to pay investment commissions and fees to make trades, especially when working with a professional, which can be relatively high due to the smaller trade amounts.

Understanding investor basics can be a daunting task, especially for those new to the world of investing. A retail investor, also known as an individual investor, is a non-professional investor who buys and sells securities or funds that contain a basket of securities such as mutual funds and exchange traded funds (ETFs).

Retail investors typically buy and sell trades in the equity and bond markets, and they tend to invest much smaller amounts than large institutional investors. They can now access alternative investment classes like private equity and hedge funds, but they may have to pay higher fees or commissions for their trades.

The Securities and Exchange Commission (SEC) is charged with protecting retail investors to ensure the markets function in a fair and orderly manner. It provides education and enforces regulations to ensure people remain confident and comfortable investing in the markets.

Retail investors have a significant impact on market sentiment, which represents the overall tone in the financial markets. Predictors of investor sentiment include mutual fund flows, the first-day performance of IPOs, and survey data from the American Association of Individual Investors.

Here are some key differences between retail and institutional investors:

Retail investors may choose to invest in various securities depending on their investment goals and risk tolerance. For example, an investor looking for long-term growth may decide to invest in stocks, while an investor looking for steady income may choose to invest in bonds.

Investment fees can be a significant expense for individual investors. Online trades at Schwab are commission-free, but automated phone trades cost $5, and broker-assisted trades cost $25.

For mutual fund transactions, the fees vary depending on the type of trade. Online and automated phone trades have no service charge, but broker-assisted trades cost $25 per trade. Some funds also charge sales and/or redemption fees, which can be found in the prospectus.

Here's a breakdown of the fees for mutual fund transactions:

It's essential to note that some funds have higher transaction fees, and trades below $100 in principal are exempt from the transaction fee.

Commissions and fees can add up quickly when investing, but understanding what you're paying for can help you make informed decisions.

Online trades through Schwab are commission-free for NMS securities, but you'll pay $6.95 per trade for equity new issues. Automated phone trades incur a $5 commission, while broker-assisted trades cost $25.

If you're trading mutual funds, you'll pay $0 for online and automated phone trades, but $25 per trade for broker-assisted trades. Some funds may also charge sales and redemption fees, so be sure to read the prospectus.

Commissions and fees vary depending on the type of trade and the exchange it's placed on. For example, trades placed on the U.S. over-the-counter (OTC) market incur a $50 foreign transaction fee, while trades placed directly on a foreign exchange can cost the greater of $100 or 0.75% of principal.

Here's a breakdown of some common commissions and fees:

Options, futures, and forex trades also come with their own set of commissions and fees. Online options trades incur a $0 base commission plus $0.65 per-contract fee, while broker-assisted trades cost $25 plus $0.65 per-contract fee.

It's worth noting that some fees can be waived under certain circumstances. For example, households with over $1 million in household balances can get free online domestic wire transfers and overnight delivery fees for Schwab-issued checks.

As an individual investor, it's essential to understand the various types of investments available to you. Stocks, for example, are a popular choice, offering a potential for long-term growth and regular income through dividends.

Investing in stocks can be done through various means, such as buying individual shares or through a mutual fund or exchange-traded fund (ETF).

A fund is a type of investment vehicle designed to pool money from multiple investors to invest in a variety of assets.

Retail funds, for instance, are designed with individual investors in mind and often have low or no minimum balance requirement.

They trade on the open market, making it easy to buy and sell shares.

Retail funds typically charge large management fees, which can eat into your returns.

Mutual funds and exchange-traded funds are examples of retail funds that offer investment opportunities to individual investors.

Institutional investors, on the other hand, often have access to lower-cost funds with smaller management fees.

Foreign stock transactions can be a bit tricky, but don't worry, I've got the lowdown.

You'll need to pay a $50 foreign transaction fee for trades placed on the U.S. over-the-counter (OTC) market, whether you're doing it online, using an automated phone system, or getting broker-assisted.

If you're placing trades directly on a foreign exchange, online and automated phone options aren't available.

Broker-assisted trades, on the other hand, come with a fee - the greater of $100 or 0.75% of the principal amount, with no maximum.

Here are the fees in a nutshell:

Non-U.S. ETFs can be traded broker-assisted, but you'll need to contact the Global Services team for that.

Fixed income investments can be a great way to earn regular income from your investments. You can buy bonds, which are essentially loans you make to a company or government, and earn interest on them.

Schwab, a well-known investment firm, offers fixed income investments with varying fees and markups. As a principal, they may charge a markup that reflects the bid-ask spread, which is not subject to a minimum or maximum.

If you're buying a new issue, such as a Certificate of Deposit, you won't pay a commission, but a selling concession might be included in the offering price. This means you'll pay more for the bond than its face value.

Here are some examples of fixed income investments and their associated fees:

It's worth noting that large block transactions can be eligible for special handling and/or pricing, so it's best to call Schwab for more information.

The retail investment market in the US is significant, with 58% of households reporting investment in public markets. Forty-three million U.S. households hold a retirement or brokerage account.

Retail investors often invest in companies they're familiar with, such as larger "blue chip" companies. This is partly because they're more comfortable investing in what they know.

The number of households that own stocks has risen since the 2008 financial crisis, with 70% of upper-middle-income families owning stocks in 2019.

Foreign stock trades can be a bit more complicated than domestic trades, especially when it comes to fees.

If you're trading foreign stocks on the U.S. over-the-counter (OTC) market, you'll face a $50 foreign transaction fee for online trades, which is the same fee you'll pay for automated phone trades.

Broker-assisted trades on the OTC market come with a higher fee of $75, which includes a $25 fee plus the $50 foreign transaction fee.

You can't place trades directly on a foreign exchange online or through automated phone services.

If you do need to place a broker-assisted trade on a foreign exchange, be prepared for a fee that's the greater of $100 or 0.75% of the principal amount, with no maximum.

For non-U.S. ETFs, you'll need to contact the Global Services team to place a broker-assisted trade, which comes with a $50 transaction fee.

The U.S. retail investment market is significant in size and scope, with an estimated 58% of households reporting investment in public markets. This market has been growing, with 43 million U.S. households holding a retirement or brokerage account as of 2018.

Retail investors often invest in familiar companies, such as large "blue chip" companies, and have become increasingly interested in ETFs for instant diversification. ETFs contain shares in many companies, offering a diversified portfolio through a minimal amount of funds.

According to the Federal Reserve's survey of consumer finances, 70% of upper-middle-income families owned stocks in 2019, indicating a rise in stock ownership since the 2008 financial crisis. This shift is largely due to the availability of more financial information, investment education, and trading tools.

Mobile trading has enabled investors to actively manage their portfolios from their smartphones or other mobile devices, making it easier to stay on top of investments. Many online brokers now offer no or low minimum investment or minimum deposit amounts, ranging from zero to a few hundred dollars.

The growth of the U.S. retail investment market has been driven partly by the increasing availability of investment products and services, as well as the increasing use of technology in the financial industry. This has made it easier for retail investors to access and trade securities.