Getting Started in the Stock Market
When we think of investing, we often think of the stock market. It’s typically a very frequent topic on all news outlets, and there are even entire programs and networks dedicated to tracking the various indices around the world, and to provide viewers an analysis of what it all means.
If you want to step into this particular area of investment, there are some things you need to make sure you understand before you decide to get started. Good information in the days before you invest will lead you to better outcomes when your money has been committed.
Introduction
Investing in the stock market can be a lucrative way to grow your wealth over time. However, it can be intimidating for beginners who are unfamiliar with the terminology, process, and risks involved. With the right knowledge and tools, you can navigate the stock market and make informed investment decisions that lead to long-term financial success.
In this article, we will delve into the details of how to get started in the stock market, including:
- Deciding on your investments
- Accessing what to buy
- Ensuring you are diversified
- Finding the best information sources
- Picking the right tools
We will also provide 5 smart investment tips for beginners to help you get started on your journey to financial success.
Deciding on Your Investments
Before you start investing in the stock market, you need to decide what particular investments you want to utilize. This includes determining which stocks are right for you and which ones you should avoid. The answers to these questions are different for every investor. Some may prefer a more steady, sustained growth with few drops in value, while others are aggressive and are willing to take risks.
Other investors like to invest in companies that further an environmental or social agenda that they support.
To make informed investment decisions, you need to take inventory of what is important to you in all those areas, and then make your choices accordingly. One helpful way to do this is to create a personal investment plan. This plan should take into account your financial goals, risk tolerance, and time horizon. It should also outline your investment strategy and asset allocation.
Accessing What to Buy
Once you have decided on your investments, you need to be able to assess before you buy and track after you buy. It’s not enough to wade through a constant ticker on a cable network. You need a way to watch your portfolio with help from a personalized tool so that you can focus 100% of your attention on finding out whether you should increase, decrease, or stay steady on your commitment to each of your holdings.
One popular tool for tracking your investments is a stock screener. This is a program or website that allows you to filter stocks based on various criteria such as market capitalization, industry, dividend yield, and price-to-earnings ratio. This can help you find stocks that fit your investment criteria and avoid ones that don’t.
Another important tool is a stock charting program. This allows you to analyze the historical performance of a stock and identify trends and patterns. This can help you make informed decisions about when to buy or sell a stock.
Ensuring You Are Diversified
Speaking of your holdings, you’ll want to diversify. You should never have your investments concentrated in a single stock or even a single sector. After all, if one electronics retailer struggles in a bad economy, the rest will probably struggle too. If you’re all-in with electronics, that’s bad news.
Think also of the future of the stocks you hold. Imagine if you had been a stockholder in a company that builds horse-drawn carriages back when Henry Ford began to market his cars. Would your investments have been safe if that was the only stock you held, or would you have been wise to grab some shares of Ford when they came available?
Of course, the answer is that you need to diversify. Individual stocks will have highs and lows, but if you have a mix of stocks, you will always have something doing well. That is critical as you get closer to the day that you’ll need to start withdrawing your investments for retirement.
One way to diversify your portfolio is through mutual funds or exchange-traded funds (ETFs). These are investment vehicles that pool money from multiple investors and invest in a diversified mix of stocks, bonds, or other assets.
How to Decide On Your Investments
First of all, decide what particular investments you want to utilize. Which stocks are right for you? Which ones should you avoid? The answers to these questions are different for every investor. Some may prefer a more steady, sustained growth with few drops in value, while others are aggressive and are willing to take risks.
Other investors like to invest in companies that further an environmental or social agenda that they support. Take inventory of what is important to you in all those areas, and then make your choices.
Accessing What To Buy
Next, you need to be able to assess before you buy and track after you buy. It’s not enough to wade through a constant ticker on a cable network. You need a way to watch your portfolio with help from a personalized tool like Stock Earnings so that you can focus 100% of your attention on finding out whether you should increase, decrease, or stay steady on your commitment to each of your holdings.
Ensure You Are Diversified
Speaking of your holdings, you’ll want to diversify. You should never have your investments concentrated in a single stock or even a single sector. After all, if one electronics retailer struggles in a bad economy, the rest will probably struggle too. If you’re all-in with electronics, that’s bad news.
Think also of the future of the stocks you hold. Imagine if you had been a stockholder in a company that builds horse-drawn carriages back when Henry Ford began to market his cars. Would your investments have been safe if that was the only stock you held, or would you have been wise to grab some shares of Ford when they came available?
Of course, the answer is that you need to diversify. Individual stocks will have highs and lows, but if you have a mix of stocks, you will always have something doing well. That is critical as you get closer to the day that you’ll need to start withdrawing your investments for retirement.
Where to Find The Best Information
Think about your information sources next. Remember that you want input from somebody who doesn’t get paid depending on your actions. That way, they will provide you with objective information instead of trying to steer you toward something that benefits them while not necessarily doing you any good.
Investing today is much less complicated. We can track earnings and values right from a smartphone or a computer, and we can get rapid-fire information about the market and the world economy to help guide us to good decisions.
Pick The Right Tools
With all these tools at your disposal, you can really make a strong financial future for yourself with investments in the stock market. It’s important to use a diversified base of stocks and to track them carefully, getting help from objective sources when you need it. If you’ll follow these simple steps, you’ll be well on your way to a positive and profitable investing experience that will help build wealth for your future.
Do you want to be a millionaire one day?
Well, investing is one of the surest ways to achieve your goal. Indeed, with a 10% annual return, you could turn a $5 a day investment into $2.3 million (if you keep it up over 5 decades).
That, right there, shows you the power of investing. Master the process, commit to the endeavor, and all of your financial dreams can come true. Yet that’s easier said than done with no investing tips for beginners behind you!
Getting started in this world can feel off-limits when you don’t know the first thing about it. Investing seems daunting and risky, making the idea of committing hard-earned cash into it off-putting in the process.
Thankfully, a few beginners’ tips should make a mighty difference. Are you thinking about investing your money and want some advice on where to begin? Let us help!
Keep reading to discover 5 smart investment tips for beginners.
1. Start Sooner Rather Than Later
Now’s not the time to sit on the fence about investing. Why? Because the longer you wait to get involved, the less money you stand to make.
It all comes down to compound interest. This incredible phenomenon is the number 1 reason that investing money makes financial sense; it’s also why starting ASAP is so lucrative.
Essentially, compound interest is the snowball effect that takes place on your investments.
Imagine that you invest $1000 and get an annual return of 10%. You’d make $100 and walk away with $1100 at the end of the year, right? Well, after the second year (assuming the return stayed constant), you’d make $110 and have $1210.
As you can see, the rate of the increase goes up each year. In other words, it compounds. The sooner you start investing, the more time compound interest has to work in your favor!
Start early, make more money; start late, and you’ll have to invest far more aggressively in order to see the same returns.
2. Practice Self-Control
Forget confusing stock market terminology for a second. Blue-chip stocks, the alpha stock market, initial public offerings, and short-selling can all come later.
Want to know the real secret to successful investing? Self-Control. Without it, you’re never going to make this game work.
We say that because the market’s unpredictable and the economy’s prone to crashing! You’ll see the value of your investment portfolio take a nosedive every time it happens.
In those moments, self-control is critical. All too many people (even experienced investors) jump into damage limitation mode and pull their money out of the market so they don’t lose any more of it.
In so doing, though, they miss the market recovery that inevitably comes afterward.
Had they left their money alone, they’d have seen its value skyrocket to new heights. But they didn’t! Their emotions got the better of them, they took their money out too soon, and their net worth went down as a result.
3. Be Patient
Closely related to self-control is patience. It’s another vital quality to work on if you’re going to see your investments grow.
Recall the statistic in the introduction once more.
In that example, the daily investment of $5 became $2.3 million…but over 50 years! If you took the money out beforehand or stopped investing those $5 each day, then you wouldn’t get the same almighty outcome.
That’s the value of patience. It’s the only way that compound interest can work its magic. You have to be consistent in your investments and in it for the long haul. Only then will you weather the market fluctuations that are sure to come and enjoy a positive return overall.
4. Understand Diversification
Diversification is another crucial investing principle to understand before you get started. It’s the key to damage limitation.
Remember, the market’s an unpredictable place! But one thing’s for certain: sooner or later, something’s going to go wrong and you’re going to lose money.
The economy might crash, a company might go bust, consumer interests could change, and so on. Honestly, there’s no limit to the number of factors that could reduce the value of an investment.
Imagine investing in one single stock or company. If that crashes, then it takes all of your money down with it! Conversely, spreading your investments out (aka diversifying) reduces the damage if any single one of them suffers.
To put it another way, always have your eggs in multiple baskets!
5. Get Your Hands on Some Cash
Contrary to popular belief, investing isn’t only for rich people! As our example in the intro showed, you can end up with a small fortune by investing just a few dollars each day.
Nevertheless, there’s no denying the fact you need some money in your pocket to get started.
If you’re strapped for cash right now, then it’s time to start saving. As always, you can do this by reducing your expenditure or increasing your income. Our advice?
In the bid to start ASAP, begin by cutting your expenses and saving up.
Do whatever it takes to get your hands on the cash you need. Cancel pointless subscriptions, cook for yourself, downgrade your phone plan, and so on. With a bit of sacrifice, it shouldn’t take long to get your initial investment capital together.
With that done, the real fun can begin!
Remember These Top Investing Tips for Beginners
Learning how to invest (and then doing it!) is an incredible way to earn your financial freedom. Through consistency and the magic of compound interest, you can watch your net worth increase exponentially as time goes by. Done right, you can generate massive wealth with relative ease.
Unfortunately, though, the vast majority of people never give it a shot. They might feel intimidated by the task, worried about the prospect of losing money, and/or unsure where to begin. Know the struggle?
Well, we hope this post has helped! Keeping the investing tips for beginners in mind should get you one step closer to kick-starting the process. Read more articles like this one by browsing the ‘Invest Your Money’ section of the website now.
Will we see a major market pullback? Is the sub-prime auto loan bubble about to burst? What if NAFTA and trade wars don’t pan out?
High volatility is the main character in the markets today… is it time to invest?
There’s money to be made playing both market directions. Despite crashes, the markets go up. Those investing for the long-term, without emotionally reacting to the (what seems like) daily swings, will see through their market concerns.
Of course, you’ll want a diversified portfolio to provide thriving investments.
Don’t know where to start with your portfolio? Consider the following:
ETFs
ETFs, short for exchange-traded funds, is a collection of stocks providing investors with broad access to companies. These are traded on exchanges the same as stocks. ETFs are a safe investment because it has built-in diversification.
Commonly suggested ETFs include:
- iShares Russel 3000 ETF
- Fidelity MSCI Financials ETF
- iShares Core MSCI Intl Dev Mkts ETF
You’ll find ETFs divided into different sectors, too, if you have a preference (like technology).
Currencies
Currency investments are some of the easiest to explore especially with many options for buying currency online. The general idea is to invest in currencies hoping the value increases. For example, for every $1 USD, you’d have 1.30CAD. Currencies increase/decrease by small percentages providing good returns without major swings.
Currencies to explore include:
- Iraqi Dinar
- European Euro
- Swiss Franc
- South African Rand
Trading strategies with currency often involve politics such as trade wars and positional changes. Join a forex exchange and diversify a part of your portfolio with currencies.
Bonds
Bonds are an agreement between two parties in which the issuer is paid a percentage/interest over the terms. These are common in most retirement portfolios because they remain stable during an economic downturn. Of course, bonds aren’t perfect as they do have the potential to default. Or, yields increase while you’re stuck in current terms (possibly for years/decades to come).
Bonds worth noting include:
- Voya Securitized Credit P (VSCFX)
- Metropolitan West Floating (MWFRX)
- Pimco Fixed Income Shares C (FXICX)
- First Eagle High Yield I (FEHIX)
Bonds vary by interest and bring a penalty when cashed-out early. So, it’s important to consider the long time frame of the investment compared to other strategies giving liquid options.
Startups
You hear about the latest IPOs and their explosive earnings upon market listing. Getting into these early IPOs is a real challenge — far outside the skillsets of most beginner investors – since it A) requires massive capital, and B) knowing the right people. But, there are ways to get your investment in on the ground floor if you’re savvy.
There are a few ways to get in when it’s good:
- Approach the business owners and offer capital directly (with a contract of course)
- Follow startup news and when they’re listed on major exchange platforms to buy the moment they’re available
- Use crowdfunding-type sites like SeedInvest, Microventures, or WeFunder
Just remember to do extra due diligence when researching and investing in startups. Many of the companies you’ll find available to seed may yet to have made a profit — so, know what you’re getting in for when handing over funds.
Stocks
Warren Buffet, investor extraordinaire, recommends holding a 90/10 portfolio of stocks and bonds. This provides you with the greatest exposure to the markets while building stable growth by including bonds. Stocks are incredibly easy to invest in with modern platforms from Fidelity, ETrade, and Robinhood.
How could you start exploring stocks?
- Pick a handful of companies you love and have shown promising growth (based on earnings reports and charts)
- Use index funds for big exposure to the markets like Vanguard Mega Cap ETF, Vanguard Large-Cap ETF, or Vanguard S&P 500 ETF
The trick to making money with stocks is simple: buy and hold.
This means weathering the storms (if possible) during downturns. And, keeping the money in as long as you can. Why? Because the historical stock market return is about 7%-8%.
Property (or REITs)
Want to get your hands dirty? Consider rental/income property. This not only creates incredible assets in your portfolio but also a monthly stream of income you can use to reinvest in other investment ideas.
What type of property?
- Small family homes
- Tiny homes
- Storage facilities
- Land (close to future developments)
There’s more to it than what you’ve seen on HGTV. But, it’s possible to earn sizable income from property with enough research, planning, and working with the right contractors. Else, consider REITs — these are realty investment trusts paying regular dividends without the hassle of dealing with tenants and property tasks.
The Longer, The Better. Start Today.
Time in the market is more important than trying to time the market. The earlier you start investing the more your money can grow. Don’t be afraid to explore different investment ideas if it helps reaffirm your understanding. Time is on your side if you start early, so get things going and build that portfolio!