The answers for any beginner learning how to invest in stocks and bonds.
When you ask people about investments, stocks are often the first thing that comes to mind. But most people don’t have an idea of how to invest in stocks or bonds.
Even though stocks are considered as one of the true ways for making a ton of money, they are also one of the riskiest of all types of investments.
But that hasn’t stopped people from investing in the stock market, and probably never will.
However, the more you know, the more your money will grow.
And that’s what this guide is all about. It shows you all you need to know about how to invest in stocks without losing your shirt.
Here are the simple steps you need to take…
1) Invest in Wisdom First
Investing in knowledge should always be prioritized.
If this is your first time attempting to invest in stocks, you need to have enough knowledge about it.
You can’t just open an investment account, put your money in it, and expect that you will earn your target profit.
That’s not how easy things work with stock investing. A lot of people fail in this area because they do things impulsively.
You can only make it work if you are equipped with sufficient information to play in the stock market.
There are plethora of ways to invest in knowledge.
One of the more effective ways is to start your journey by reading a few books about how to invest in stocks or any investment for that matter.
A good number of authors offer their books at an affordable price. You should be able to choose from different authors for more references and perspectives.
Having books on hand is a good strategy to learn as you can read them over and over again if you want.
Apart from books, you can watch videos on Youtube about how to invest in stocks and other investments.
There are different kinds of informational videos you can watch online.
For example, there are videos that are meant for newbies and those that are good for experienced investors and traders.
It’s easy to find the right video material by doing a simple search on one of the video platforms.
You should not forget about the seminars and meetings you can attend. A lot of experienced investors are holding short events to share their experiences and teach useful strategies to other investors.
Don’t miss out on those events in your area.
2) How Will You Invest in Stocks or Bonds?
Once you have established a good foundation of knowledge, the next step is asking yourself how you would like to invest in stocks or bonds.
There are two main ways for you to invest: first is doing it yourself and second is hiring someone to do it for you.
DIY or do-it-yourself investing is a common option for investors.
With this method, you are free to choose whatever stocks or funds you want to invest in.
You do the investing yourself, which is a good choice if you want to manage your money and have hands-on experience in investing.
This article is actually for those who want to do DIY investing. Read on to learn more about the next steps.
The second method is hiring someone to do the investing for you.
Investing in stocks is great but this is not for people who know nothing about stocks. If you are not willing to invest in your knowledge, you have the option to get an advisor to process everything for you.
A low fee for investment management is required. This service is offered by most brokerage firms and you can avail of them virtually.
This is where you should decide the way you want to invest in stocks so you can proceed with the next steps.
3) Open an Account with a Broker or Advisor
An investment account is required for you to invest in stocks and similar assets. Like most investors, you have to establish your account and deposit funds so you can begin buying stocks.
If you are planning to do the DIY option, you need to open a brokerage account. Opening an account is made easy since everything can be completed online.
A virtual brokerage account is considered the most affordable and fastest track to buy stocks and funds.
You have two options when creating a brokerage account. You can either pick an individual retirement account or taxable brokerage account.
If DIY is not an option for you to invest in stocks at this moment, opening an account with an advisor or fund manager is the next thing best to do. You have to find the right fund manager if you want your money to grow.
This option allows you to earn money passively.
There is no need to do the legwork or pick the investments where you want to put your money. Your fund manager chooses the portfolios for you based on your investing goals.
This makes it a great way to invest in stocks when you don’t want to do all of the research and work yourself.
Answering questions related to your investment goals is part of the process, which is why you need to be honest as to how you want your money to grow. Additionally, most fund managers charge 0.25% of your account balance.
4) Stocks Compared to Mutual Funds
The stock market offers two common investments: stocks and stock mutual funds.
Learning how these two investments differ is a mandatory step, especially for those who are choosing to invest without a fund manager. You need to know the difference between the two so you can diversify your money.
Stocks are direct investments in a specific company. You can either purchase a single share or invest in stocks at scale.
With enough amount, you can buy stocks from different companies. This is a way to diversify your investments, however, you need a significant amount to do this.
Stocks mutual funds, on the other hand, are known as exchange-traded funds. When you invest in this mutual fund, you will own small portions of different stocks in one transaction.
It’s like a consolidated stock purchase but you are actually investing in mutual funds. Different funds are available for diversification. Just choose the right ones if you want to earn more.
5) Determine how much you are willing to invest
Now that you are almost done with the whole process, it’s time to determine how much you are willing to invest in stocks.
Newbies commonly ask how much money is needed to start investing and how much should they invest. To answer the first question, it all depends on the price of the shares of a company.
The share prices can be as low as a few dollars and as high as a few thousand dollars. Also, there are online brokers that require a minimum amount to open an account, let’s say $1,000 to start.
There are some with $0 account minimum.
If your chosen broker requires you to deposit a certain amount to start investing, that’s your starting budget.
Let’s take, for instance, you have $1,000 in your account already, how much of this should you invest in stocks and other investments?
If you are planning to invest for the long-term, you need to allocate at least 80% of your money in stock funds.
This is a good percentage if your goal is to have a retirement fund at the end of your investing years. The remaining 10-20% can be put in bond funds. It’s really up to you how you can divide your money.
Just don’t forget to diversify, consider your investing goals, and take into account the kind of investor you are.
6) Start your investing journey.
The last step is starting your investing journey. The stock market is the most volatile. Stocks are the riskiest. If you don’t have a plan for how to invest in stocks smartly, you could lose everything rather fast.
But, if you do it properly, a big reward awaits you, maybe 200% of your total account balance.
A lot of strategies and methodologies exist so you can do well.
However, believe it or not, most successful stock investors stick with the most basic.
What you can learn from the famous Warren Buffet is that buying individual stocks only works if you have a strong belief that the company can grow in the long haul.
Else, you should invest in low-cost S&P index funds for a greater profit. Before you buy an individual stock, doing background research about the company helps a lot.
The financial performance and vision of the company you are going to buy will contribute to your decision to make the purchase or not.
If you are new to investing, educating yourself about everything the company is currently doing and plans on doing in the future is of the utmost importance.
It’s paramount that you stay updated on the company’s current strategies. This is one way you can invest in stocks without losing all your money in record time.
The process might seem easy to follow but as a beginner, you will face a lot of challenges that will help you become a successful and experienced investor someday.
Setbacks should not hinder you from starting your investing journey.
There’s a lot to be hopeful for as you learn how to invest in stocks and bonds.
You don’t need a lot of experience to start.
You just need a minimum amount of investment and commitment.
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