Learning how to invest in stocks may sound quite familiar already. However, the dilemma lies on where to acquire all the information you need. A few wise alternatives are to do research, seek professional advice, and attend seminars. Also, reading the article below can give you the basics and help you learn how to start buying stocks for beginners. Here are tips to get you started.
How to Invest In Stocks | 3 Tips to Help You
1. Know Your Options
The stock market has a diverse range of industries which investors can choose from.
Two types of stock investment:
- Individual stocks – you can buy a few shares of single or multiple companies.
- Exchange-traded funds (ETFs) – also known as “equity index funds.” When investing in ETFs, you get to buy small shares of several different stocks in one transaction.
There are lesser complexities involved in stocks compared to other investments. This is because of their diversity. If you purchase the right stocks, you get to earn more.
After knowing your options, identify which will best suit your preferences and needs. You may conduct your research to learn about the basics, restrictions and the requirements you will need in order to get started. If you have the inclination to seek professional advice, you may also do so.
2. Assess Your Budget
You want to invest but do not know how much money you need to shell out to get started. First off, you can determine how much you are willing to invest and what your budget is.
Generally, the amount you need to invest depends on which stocks you want to purchase. You can choose to start small by investing in less popular companies. However, it doesn’t usually guarantee an above average earning. If you want to invest in companies you know (which are usually pricey) but have a limited budget, you can buy stocks through FolioFirst.
You can also invest in funds. If you have a limited budget, you can invest in ETFs. These can range from $10 to $100. If your budget is a little bit flexible, mutual funds and index funds are good options too. These are usually priced at $1,000 or more.
Investing in stocks also entails costs. Apart from your budget, it is better to have more to make way for fees you have to pay for the following:
- opening your investment account
- transaction fees
- trading fee (at least $10 per trade*)
- mutual fund fees
*Note: A trade is an order in purchasing and selling shares of one company.
3. Diversify Your Portfolio
Any investment has its own complexities, even stocks. One way to reduce them is through portfolio diversification. This means investing in different stocks.
Listen to the popular saying, “don’t put all of your eggs in one basket.” This is also applicable in trading stocks. You may choose not to invest most of your money in just a single stock. However, diversifying your portfolio might mean you need to shell out more. If you have a limited budget, you can start by investing in no more than three companies. From there, use your earnings to invest in your fourth (or more) company.
You can invest in stocks even if you have a limited amount of money to begin with. You just have to know the basics, restrictions, and understand the concept of trading stocks. It will also help to conduct due diligence and seek professional advice to learn more about how to invest in stocks.
Are there other tips you can share about how to invest in stocks? You may share your comments in the comments section below!
Editor’s Note: This post was originally published in September 2017 and has been updated for quality and relevancy.