Where to Start: Getting started is probably the most difficult part of any new adventure. It's is even more difficult when your life savings are on the line. First and foremost, you need to have a vision of your financial future and where you want to be financially in 20, 30 or even 40 years from now. This may sound irrelevant in the beginning, but you need to know the destination before you start any journey and financial and investment planning is an important journey of your life.

Once you have figured out the destination, next step is to plan the trip. That's where your financial planning and investment knowledge will make all the difference. You need to get a clear picture of you current financial situation before you can start any kind of planning. Take a complete inventory of your assets and investments and figure out what should be your top priority. You may have a 401k or IRA account that you never paid much attention to. Review your existing retirement account to se what kind of investment you have in there. If you are invested in mutual funds, get information on the funds and their asset allocations. Once you know their risk exposure and investment strategy, review it closely to see if it matches with your long term goals. If it doesn't, that's the first place to start making changes so that your current investment portfolio reflects your long term investment planning.

If you don't have life insurance or disability insurance, it's time to get one. You want to protect you family in case you're no longer there. You also want to create an emergency fund for at least 3 months expenses, if you don't have one already. College saving account should also be on your agenda if you have children and you plan to help out with their college education.

Understanding Investment Options: Once you have a clear picture of your current financial assets and investment, it's time to educate yourself. Learn about different investment options such as stocks, bonds, mutual funds, real estate investments, money market funds etc. Each investment option has different risk tolerance and you need to have a very clear understanding on risk involved with investing. Remember, investing is not like saving where you put some money in a bank account and earn interest with your principal insured by FDIC. Saving provides funds for emergencies and for making specific purchases in the relatively near future. Safety of the principal and liquidity of the funds are important aspects of savings dollars. Because of these characteristics, savings dollars generally yield a low rate of return and do not maintain purchasing power. Certain investment options such as stocks, futures and mutual funds have higher returns than your regular saving account. However, your risk exposure is lot higher than saving account.

Historically, stocks have had the highest average annual investment return of all types of investments, especially over long time periods of 10 years or more. The average annual rates of return for major investment asset classes from 1925-2004, according to the Chicago investment research firm, Ibbotson Associates, were: 10.4% large company stocks; 12.7% small company stocks, 5.4% government bonds, 3.7% Treasury Bills, and 3.0% inflation. This should give you a good idea that stocks on longer term would provide a better return but you should also understand and apply diversification concepts to minimize your risk. You also need to select a risk level based on the timeframe you need that money. If you're fairly close to retirement, your primary focus should be assets protection while a young person should focus on areas with aggressive growth and return.

Opening Your Investment Account: This is a very exciting steps for most people who have never invested in financial market on their own. This step also signifies that you're serious about your financial future and willing to do whatever it takes to secure your future. You would have to come up with your initial investment as well as the plan to save money every month to keep adding to your investment account. If you just can't find money for investment on a monthly basis, check to see if you could invest your tax return every year or even bonus from your job. Once you have figured out funds and funding sources, next step is to open your trading account.

The easiest option is to open an online account with a discount broker. There are plenty of discount brokers out there in the market and you can compare their services and charges online. You have to be very careful when you make your selection. Online brokers offer different rates based on your trading and size of your account. You should also pay close attention to trading charges for stocks, mutual funds and future contracts. Also take a note of any maintenance fees that a broker may charge. If you cant really decide between two brokers, pick up the phone and check out their customer service. After all you would be dealing with them so it makes sense to measure the quality of service.

Find out deposit/withdrawal options for your funds. There are broker out there who would charge you $20 for sending you a check so make sure you are aware of the procedure. Almost all discount brokers offer online financial education but if you need "hand holding", select a broker that offers free financial advice over the phone with a real person. Also find out what services they offer for your trading account to make it easier for you to report you gains/losses at tax time.

Making Your First Investment: Once you have your account set up and funded, you're ready to make serious financial decisions on your own. At this point, you need to have a clear understanding of the commission structure that your broker uses. Once you are ready to trade, you need to make sure you are investing in a security that matches your long time goal that you set in step. For example, if you're investment window is 20-year, there is no reason to put all your money in money market funds. If you're planning to invest in stocks, make sure you understand the reason behind each trade. There will be plenty of online forums and newsletters telling you to purchase certain stocks and you might be tempted by the astronomical return they promised, but you have to stay close to your own goal. Speculative trading has no future in long term and you'll pay heavy price for not sticking to your strategy.

Research the stock you're interested in, take a look at the chart and historic prices. Past performance is no indication of future but it should give you some general idea. If you like a stock but it is under performing its peers, you should investigate before you put your money. There might be some good reasons that you may have overlooked. Bottom line is to stay focused and plan your trades carefully.

Once you have entered a position, you should already have a plan how to handle it. Set certain targets for profit as well as loss. If your stock is performing well, stay with the position and use stop order to maximize your profit. Too many people close a position too soon and miss out the big gain because they fear that market would drop. Don't let your emotions control your investment behavior. If a trade goes against you, cut your losses early and move on. Set a rule to close a position if your stock has dropped more than 10% from your purchase price.

Asset Allocation and Diversification: Once you have a proper investment strategy in place, next step is to continue to perfect it. Make sure you continue to monitor your holding and market conditions and make adjustment based on the outlook. Get rid of any under performing stocks even if you have a firm believe that they would torn around. Important thing to remember is that market doesn't operate based on your belief or hope, it operates based on the market forces, so respect the market and make changes.

Adjust your portfolio on a regular basis to have a proper mix of investment options and asset allocation. Diversification is another aspect of a successful investment strategy so make sure you diversify your portfolio. There is no reason to invest all your money in equities even in the best of market conditions. there is always an unknown factor and you should always play safe. Too much excitement and optimism can easily destroy your financial future.

Always fear that any loss could become bigger and hope that any gain you have would become lesser and plan accordingly. If you have quickly make 20 to 50% on a trade, make sure you put stop loss order to lock at least 15% of this gain. Too many time we let big gain slips away in the hope of a bigger gain. Don't let that happened to you. If you need help with your diversification and asset allocation, talk to experts and even paid financial advice is worth every penny because in the end it can make or break your portfolio.