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How to Invest in Stocks
Investment in stocks sounds very serious, and people usually tend to stay away from the unknown mysterious stock market, but the truth is that it is easier than it sounds. We already waste a lot of money on unnecessary things, so we might as well give it a shot with stocks, which at least have the potential to secure us a safe future. Stocks can increase your incomes significantly if you stick to your investment plan and follow the basic market rule. Have you noticed that all the wealthier people are the ones who make some side investments in the financial market? That could be you in several years so why not let your money work for you? For beginners, it is especially confusing who do not know where to start, so let us break down the steps that lead you to a successful investment career and how to make it pay off.
How Much Money Does It Take?
The first question relates of course to the money you are supposed to invest, and that is probably what scares beginners the most. Luckily, today there are different stocks, and not all of them require a small fortune to participate but allow you to start small with minor investments. Create an investment portfolio with exact amounts aimed at different investments. If you are a fund investor, then it would be reasonable to invest in fund stocks in particular when the time span is longer. You can invest even up to 80% in your retirement stock funds if you are a fund investor.
If you are an individual investor, you should stay around 10% of your portfolio when investing in individual stocks. This kind of investment is far riskier since they do not always travel up, but can also fluctuate tremendously. Fund investments have more diversification than individual stocks.
How much money it is in digits, depends on the prices of shares and your personal budget. But as we already said, if your incomes are moderate, then find stocks in your price category. If you still want to play in the big league even wiht a limited budget, you can buy portions of costly stocks like Facebook, Google, etc. You can do it over the so-called Loyal3 service where they charge no commission and let you trade or buy fractional stocks. Also, if your budget is limited, you can invest in low-cost ETFs which are bought at share prices which can be as low as $10, but the price is only that low for low side and climbs to $100 on the high end. In terms of the serious financial market, this is still quite affordable.
Still, free trading services are limited to some extent. Loyal3, for example, offer fee-free services and automatic investment plans, but they give you access to only 70 assets, and you might experience execution problems. Also, the choice of account types is fairly limited which may lack the necessary tools to achieve optimal results. But after all, it will cover most of your needs as a beginner, and once you made some money out of your ETFs, you can switch to individual stocks or mutual fund investments.
Where and in What Can You Invest?
Before you invest, please make sure to know the basics of investments. You need to know the difference between trading in stocks and trading in bonds, etc. you need to be familiar with terms such as ETF, mutual fund, individual stock, and others. Know your market well before it actually becomes your market. Stocks, bonds, derivatives, all of these are different markets, and if one makes you feel uncomfortable or seems too complicated, invest in the one you understand the best.
Do Not Forget the Fees
Every investment comes with fees, so be aware that a part of your profits will be allocated on different fees. For example, fund investing requires annual maintenance fees, as well as transaction fees for bought or sold stocks. Still, many mutual funds are offered without transaction costs, so it might be worth looking up those funds, whereby ETFs can be found with no fees at all. If there are no fee-free services and you trade individual stocks, you can expect each trade to cost you from around $5 to $10 in fees.
Advice to Beginners
Once you made an investment portfolio and once you allocated the amount of money for investing, just stick to your plan. Do not let your trading turn into gambling. You invest as you intended to and do not add more money in order to “win back” a loss if you should suffer one. No matter if you lose today, maybe you will win tomorrow, but you need to set a clear line between trading and gambling. Beginners often fall into this trap once they exhibit losses they panic and invest more they can afford which results in even more losses. You need to keep a cool head at all times and set trading times and never trade out of your schedule.
Keep your emotions under control! Beginners are usually surprised by the overwhelming emotions they experience when they start investing, but let me assure you that this is completely normal. At the end of the day, it is your money at stake, and you cannot be indifferent. Nevertheless, do not let your emotions ruin your trading schedule or your investment plan. You have to be very patient and very well-collected to carry out your trades as planned. It can happen that you lose for an entire week, but the thing about the market is that it can already brighten up next week.
Beating the Market is Mission Impossible
Be aware that you will not beat the market. You are there as a participant, and the desire to beat the market led to underperformance of many. Wait for the optimal time, when your stock is the right spot before you make any moves. The market will always be one step ahead of you, and that is a truth that you should accept right away.