How to invest in the stock market is a common question asked by individuals looking to make money with stocks.
There are a number of ways to invest in stocks, here are some common ways:
through a 401k plan or 403b plan,
an IRA account,
a brokerage account, also
a direct stock-purchase plan, or
dividend reinvestment plan (DRIP).
However, if you are looking for a proactive approach to investing in the stock market then a brokerage account is the ideal way to go. This guide concentrates on investing using a brokerage account. A word of caution, if you are going to invest your money in the stock market make sure you can handle the risk of losing all of it. Make sure it’s money you can do without
In fact, a lot of people start off that way, investing minimal money in buying shares and accumulating their investments over time. They do it through an automatic investment plan through their broker.
But if you are serious about making some decent returns with your money through investing in the stock market and you are able to take the risk, then $5,000 to $10,000 would be a good start. With this starting budget you can buy more stocks. You can also minimize your risk by diversifying your investments in mutual funds, individual stocks, REITs, ETFs etc. Having more money gives you more freedom and leverage.
There are two types of brokers, traditional brokers and discount brokers. Traditional brokers offer a hand-holding approach; they can be seen as money managers, they do research, give advice and buy stocks on your behalf following your instructions. Traditional brokers for their wide range of services tend to be pricey.
You then have discount brokers, who are just there to execute your trades, and charge you a small fee for doing so. Discount brokers are more tailored towards self-directed individuals who want to take an independent approach when it comes to their stock investments. Many discount brokers offer their services online, including well-known discount brokers Scottrade, E*TRADE and TDAmeritrade.
I remember it was six months after opening an online brokerage account that I made my first stock purchase. I read a lot of books and online materials on the subject, subscribed to many different publications; I immersed myself into the whole subject before I felt comfortable with the first trade.
I read the Wall Street Journal, subscribed to Investor’s Business Daily, I even coughed up the monthly fee for a subscription to Value Line (highly recommend it) and watched hours of CNBC and the antics of Jim Cramer. I also read a number of great books including, William O’ Neal’s, Making Money in Stocks, Peter Lynch’s, Learn to Earn, amongst many others.
My advice to any beginning investor would be not to begin trading until they have a thorough understanding of the different types of stocks available to them, fundamental analysis and technical analysis, how to use a stock's PE ratio, and how to read a company's balance sheet, and how to apply all that knowledge to picking the right stocks. There is a ton of information and lingo to read and understand before you should be comfortable with making a purchase. A lot of the risk in trading stocks can be minimized through pure education. So learn, learn and learn.
How to Invest in the stock market is a common question asked by many.
There are a number of ways to invest in the stock market; some common ways are through your employer and retirement accounts. However, if you have extra cash lying around and are looking for a proactive way of investing you can do it through a brokerage account. Do your research before you start investing, using reputable websites, books, broadcasts, newspapers and magazines. Remember the more educated you are on the subject of investing in stocks the less risky it gets.
There are a number of ways to invest in stocks, here are some common ways:
through a 401k plan or 403b plan,
an IRA account,
a brokerage account, also
a direct stock-purchase plan, or
dividend reinvestment plan (DRIP).
However, if you are looking for a proactive approach to investing in the stock market then a brokerage account is the ideal way to go. This guide concentrates on investing using a brokerage account. A word of caution, if you are going to invest your money in the stock market make sure you can handle the risk of losing all of it. Make sure it’s money you can do without
How much money will you need?
Having more money for investing in the stock market is a good thing. However, you don’t need a million dollars to begin your stock market investing journey. You can open an online brokerage account with as little as 500 dollars and start buying shares of different company stocks with as little as 50 dollars.In fact, a lot of people start off that way, investing minimal money in buying shares and accumulating their investments over time. They do it through an automatic investment plan through their broker.
But if you are serious about making some decent returns with your money through investing in the stock market and you are able to take the risk, then $5,000 to $10,000 would be a good start. With this starting budget you can buy more stocks. You can also minimize your risk by diversifying your investments in mutual funds, individual stocks, REITs, ETFs etc. Having more money gives you more freedom and leverage.
What will I need to begin investing?
Aside from money, to start investing in the stock market, you are going to need to open a brokerage account. A brokerage account allows you to buy stocks, mutual funds, bonds and other types of investments through a professional stock broker.There are two types of brokers, traditional brokers and discount brokers. Traditional brokers offer a hand-holding approach; they can be seen as money managers, they do research, give advice and buy stocks on your behalf following your instructions. Traditional brokers for their wide range of services tend to be pricey.
You then have discount brokers, who are just there to execute your trades, and charge you a small fee for doing so. Discount brokers are more tailored towards self-directed individuals who want to take an independent approach when it comes to their stock investments. Many discount brokers offer their services online, including well-known discount brokers Scottrade, E*TRADE and TDAmeritrade.
How to open a brokerage account
Now you know what the two types of brokerage accounts available to investors are, opening one is simple. If you are planning on investing in the markets by yourself then go online to one of the well-known discount brokers such as E*TRADE Financial, or TDAmeritrade and sign up for an account. You can do the same for traditional brokers like Merrill Lynch. Many traditional brokers offer online registration through their websites, in fact many offer both type of services, discount and full service brokerage accounts. Make sure to do your research before choosing your broker.Educate yourself before making your first stock purchase
Opening a brokerage account does not make you a stock investor.I remember it was six months after opening an online brokerage account that I made my first stock purchase. I read a lot of books and online materials on the subject, subscribed to many different publications; I immersed myself into the whole subject before I felt comfortable with the first trade.
I read the Wall Street Journal, subscribed to Investor’s Business Daily, I even coughed up the monthly fee for a subscription to Value Line (highly recommend it) and watched hours of CNBC and the antics of Jim Cramer. I also read a number of great books including, William O’ Neal’s, Making Money in Stocks, Peter Lynch’s, Learn to Earn, amongst many others.
My advice to any beginning investor would be not to begin trading until they have a thorough understanding of the different types of stocks available to them, fundamental analysis and technical analysis, how to use a stock's PE ratio, and how to read a company's balance sheet, and how to apply all that knowledge to picking the right stocks. There is a ton of information and lingo to read and understand before you should be comfortable with making a purchase. A lot of the risk in trading stocks can be minimized through pure education. So learn, learn and learn.
Play the stock market game
Before taking the dive you should be aware there are a number of online resources that will let you trade actual stocks with fake money. You can simulate the purchase of actual traded stocks on the markets as if you were doing it live, only the money is not real. It’s a great way to learn and also have fun. Many of these places do it for educational purposes and also competition amongst their members. After you’ve made a couple of trades and are comfortable with the whole process then you can start the real thing. One simulator I highly recommend is the one at Investopedia.How to Invest in the stock market is a common question asked by many.
There are a number of ways to invest in the stock market; some common ways are through your employer and retirement accounts. However, if you have extra cash lying around and are looking for a proactive way of investing you can do it through a brokerage account. Do your research before you start investing, using reputable websites, books, broadcasts, newspapers and magazines. Remember the more educated you are on the subject of investing in stocks the less risky it gets.
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