Investing in stocks is one of the best ways to grow your money. For long-term investors, stocks are a good investment even in times when the market is weakening as declining market conditions mean many stocks are being sold.
One of the best ways for a ‘beginner’ to start investing in the stock market is to put money in an online investment account and then can be used to buy stocks or mutual funds. With many brokerage account options, you can start investing at a price per share.
In this article, the author will share 6 ways to invest in stocks for ‘beginners’:
1. Decide How You Want To Invest In The Stock Market
There are several ways to invest. Choose the method that best suits the way you want to invest and choose the stocks you want to invest.
A. “I want to choose stocks and invest in stock funds on my own” - Keep reading as this article elaborates on things investors need to know including how to choose the right account for your portfolio and how to compare stock investments.
B. “I want an expert to manage the investment process for me”-You may be a suitable candidate for a ‘robo-advisor’ which is a service that offers low cost investment management. Almost all major brokerage firms offer this service. ‘Robo-advisor’ will invest your money according to the goals set by an investor.
Once you have decided, you are ready to start investing.
2. Select Investment Account
There are two types of accounts that you can choose from, namely brokerage accounts and ‘robo-advisor’ accounts. Both accounts allow you to open an account with a low amount of money.
An online brokerage account may offer the fastest and cheapest way for you to buy stocks, funds and various other investments. You need to evaluate a broker based on factors such as costs (trading commissions, account fees), investment options (find a commission-free exchange-traded fund or ETF) and research as well as investor tools.
‘Robo-advisors’ offer stock investment benefits but do not require you to do anything to select individual investments. The ‘robo-advisor’ service provides complete investment management. These service firms will ask about your investment goals and invest for you based on your preferred portfolio.
Each ‘robo-advisor’ has its own service charge but most firms will charge around 0.25% of your account balance.
3. Learn the Difference Between Investing In Stocks and Funds
Stock investing is not necessarily complicated. For most people, stock market investing means choosing between the following two types of investments:
Mutual funds or ETFs. Mutual funds allow you to buy a small number of different shares in one transaction. Index funds and ETFs are a type of mutual fund that can track market indices. When you invest in a fund, you also own a small portion of the interest in the company.
You can put several funds together to build a diversified portfolio. Mutual funds are also known as mutual equity funds.
Individual stocks. If you are interested in a company, you can buy a single stock or several stocks as a way to set your foot in the stock trading arena. Building a diverse portfolio from many individual stocks is not impossible but requires significant investment.
The advantage of mutual funds is that they can be diversified, which can reduce your risk. For most investors especially those who invest their retirement savings, a portfolio consisting of mutual funds is the most obvious option.
4. Set a Budget For Your Stock Investment
New investors often have these two questions when it comes to investment capital:
a. How much money do I need to start investing in stocks?
The amount of money you need to buy individual shares depends on how expensive those shares are.
If you want a mutual fund and have a small budget, an ETF may be your choice. ETFs are traded like stocks which means you buy them at the stock price.
b. How much money should you invest in stocks?
If you invest through funds, you can allocate a large portion of your portfolio to stock funds, especially if you have long -term plans.
A 30 -year -old individual who invests for retirement age may have 80% of his or her portfolio in stock funds while partly in bond funds.
5. Focus For The Long Term
Stock investing is fraught with complicated strategies and approaches yet some of the most successful investors will learn more knowledge than just following the basics of stock trading. This generally means using funds for the bulk of your portfolio.
For example, Warren Buffett previously said the S&P 500 index fund is the best investment most Americans can make and choose individual stocks if you are confident in the growth of a company involved for the long term.
The best way to do this after you start investing in stocks or mutual funds is to look at the progress of your investment. Unless you want to succeed in ‘day trading’, avoid seeing your stock movements frequently on a daily basis.
6. Manage your Stock Portfolio
You need to check stocks and other investments for a certain period of time.
If you follow the steps above to buy mutual funds and individual stocks, you will certainly need to review your portfolio several times over the course of a year to ensure your stocks are still moving in line with your investment goals.
A few things need to be considered. If you are approaching retirement, you may want to shift some of your stock investments to more conservative low -income investments.
If your portfolio is too much in one sector or industry, consider buying stocks or funds in another sector to build diversification in your portfolio.
