There are multiple factors that must be considered before any investing can take place. Once an individual determines which investment vehicle he wishes to utilize and which strategy he plans to follow, he will then need to settle on a method of financing the transaction. Although this may seem like a straightforward decision, there are actually two main alternatives from which to choose.

The most popular method of purchasing stock is through cash transactions. This is typically accomplished through a check or an automatic deduction from a checking account. This method can be carried out in a number of different ways. Some people choose to invest a set amount of money at regular intervals. This technique is often referred to as dollar cost averaging. Some companies will allow investors to establish mutual fund accounts (typically in the form of an IRA) with no minimum investment, as long as money is contributed on a regular basis. These are referred to as . drip funds. because the required amounts are typically very modest. Other investors prefer to make irregular investments. This generally occurs for one of two reasons. 1) They are attempting to time the market in order to maximize profits. 2) The level of investing varies depending on the person. s economic condition.

An alternative method that some investors use to obtain stock is through buying on margins. This method requires that an individual have an established account with a licensed stock broker. Instead of purchasing the stock with cash, a person borrows money from his broker to complete the transaction. This allows an individual to increase his total amount of holdings. The idea is for an individual to make enough money in order to pay back the broker and be left with a profit. However, this opportunity comes with considerable risks. If at any time a person. s level of margins climb to above 50% (this is the typical figure) of the value of his holdings then the broker institutes what is known as a margin call. At this point the individual must pay back enough money to regain the proper ratio. Margin calls often take place if a stock (or stocks) within an investor. s portfolio takes a dip. This movement can decrease the value of the portfolio which in turn could raise the margined level to above 50%. If an investor is unable to meet the margin call then typically the broker will sell the stock to cover the cost.