Is it time to start investing in stocks? What kinds of stocks should I invest in? How can I protect my stock investments? These are all great questions, and this article will give you the answers you need to start making money with your stock investment dollars. Keep reading if you want to learn more about 8 great ways to invest in stocks!
What is stock investment?
Stock investment is a little different from other investments. Whereas you might put money into real estate, collectibles, or mutual funds, investing in stocks is slightly different. The world's stock markets are populated by millions of individual companies that each trade their stock on exchanges and marketplaces around the world. Although you can find some bargains among micro-cap stocks and penny stocks, if you’re new to stock market investing it’s best to stick with publicly traded companies that have been around for awhile and likely won't fail without warning. These established companies tend to offer more stability than start-ups or undervalued companies.
1) Choose a stock broker
Once you’ve got a general idea of how you want to invest, it’s time to figure out how you’re going to buy stock. If you don’t have any experience or contacts in investing, there are two broad ways of doing so: commission-based brokers and fee-only financial planners/advisors. Commission-based brokers charge a set percentage of each trade and offer personalized investment advice; on average, these brokers are best for first-time investors with accounts under $100,000. Fee-only planners/advisors charge a flat fee on an annual basis for ongoing assistance; on average, these planners/advisors are better for experienced investors with larger portfolios who understand their personal risk tolerance and goals.
2) Decide what type of stocks you want to invest in
You can invest in any number of stocks and mutual funds, but keep your investment goals in mind. You want to determine what your risk profile is going into it, says Quincy Krosby, a market strategist at Prudential Financial. If you're someone who can afford more volatility, then maybe there's an aggressive strategy that makes sense for you. If you have limited funds and are trying to grow them over time, then a more conservative approach might be better. Before choosing a particular stock or fund, consider your age and how much time you have until retirement or until an expected life event like buying a house or having kids. What stage of life are you currently in? What kind of investor do you want to be—aggressive or conservative?
3) Decide on your portfolio
There are two main ways to invest in stocks: long-term and short-term. Long-term investing is great for those who want to invest regularly over time and don’t mind taking on a certain amount of risk. This type of investing involves diversifying your portfolio (which we’ll get into more later) across multiple asset classes, such as US stocks, foreign stocks, real estate investment trusts (REITs), and corporate bonds. Short-term investing is better for those looking for higher returns but not wanting to tie up their money for long periods of time.
4) Open an account with your broker
Before you jump into investing, it’s important to open an account with a broker and make sure you have enough money set aside for investments. Your broker can help you choose appropriate stocks or funds based on your goals and risk tolerance. Once you’ve decided what kinds of investments are right for you, start putting your money where your mouth is. The sooner you invest after opening your account, the sooner you can start reaping potential profits.
5) Pick the best stocks for beginners
While there are certainly several ways you can invest in stocks, picking individual stocks is not one of them. Stock investing is much more complex than simply choosing a few companies and buying shares. The risks of doing so are extremely high, making it difficult for beginners to play that game. There’s no easy path to follow when it comes to stock investing; however, some companies (such as dividend-paying blue chips) offer slightly less risk than others. If you want to invest for yourself but want a little help on your journey, consider some of these alternatives
6) Monitor your investments regularly
If you want to invest in stocks, it’s important to monitor your investments regularly. You don’t want to spend too much time on day-to-day fluctuations of your portfolio, but you also don’t want big changes going unnoticed. Consider setting up automatic notifications for when a stock drops below a certain price or rises above another. Tracking an investment’s performance periodically can help you avoid situations where you suddenly realize that you haven’t been paying attention and are far more invested than intended. In other words, keep up with your investments so that they stay on autopilot, freeing up your time and mental energy for other things (like blogging).
7) Do more research regarding the investments
Since investing is a risky endeavor, it’s important to do some research before plunking down your money. The market is constantly changing, so only invest if you have time and a good feel for how things work. With that said, here are 8 ways you can invest in stock
8) Stay consistent and patient with your investments
Time is important when it comes to investing; although you may want your money now, waiting will generally get you more money later. If you look at a dollar that’s invested at 7% interest over 30 years, it will grow into $6.60—just five dollars short of twice its original value! As long as you stay consistent and patient with your investments, any ups and downs along the way won’t matter when you step back and compare returns after a number of years. And if things don’t work out? There are dozens of different ways to invest, so it’s not like there isn’t another road for your capital elsewhere.