Your Initial Setup Step by Step

By: Pete
Date posted: 11.23.2011 (11:12 am) | Write a Comment  (0 Comments)

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You might get the impression that building an ETF portfolio from scratch would end up being an incredibly complex task that could go on for months, require help from financial advisers, your bank and a ton of other people. I have to tell you to start that the process is much easier and smoother than you probably imagine. There are a few different steps that are required but once that happens, you will be ready to move on. Just a warning, this post is all about getting things ready, not trading. Again, we offer a complete step by step in our free mailing list.

Step #1-Open Trading Accounts With A Broker

We will get more detailed about these steps in the future but in terms of brokers, you can simply visit a broker such as:

TD Ameritrade
Schwabb
Quest Trade
Etc

Once you arrive on their website, you can follow a fairly simple step-by-step that will walk you through the account opening process. I prefer to prepare you, there will be a lot of different questions being asked, mostly about your finances and your trading experience but also the types of accounts that you want to open. I’d say that you will want to start with a retirement account (401K or RRSP for example) as well as a cash or margin account.You do not need more, you do not need access to derivatives (options or futures), etc.

This process can be done almost entirely online but you might have some forms to print out and send by mail because of the required signatures, etc. If that is the case, it is likely that you will also be asked banking information. The idea is to be able to do electronic transfers between your banking account and your brokerage account. Why?

Transfer Funds

There are no amounts too small or too large when you start trading but if possible, I would say that starting off with at least $5000 (a bit more if possible) is a great way to ensure that commission fees have a limited impact on your performance but also that you can diversify your holdings somewhat. Transferring the funds can usually be done through your brokerage account once the link between the two is done but obviously you might have more to do for the first one. Once that is done however, you will see how future transfers will be much smoother and easier… speaking of future transfers…

Setup An Automatic Transfer

No matter how you think you cannot afford it, I can tell you right now. The number 1 factor that will determine how much you end up with in a decade or two will not be your pick performance or even your asset allocation, it will be how much you are transferring every month. Start off small, with an amount that you know that you can afford to invest. The idea is to start small but increase that amount over time. How? Every time you get an increase in your cash flows, put a part of that increase into your automatic transfers. How do you setup the transfer? Simply talk to your broker and they will be more than happy to assist you in doing so.


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