For those of you who are rather new to the scene of stock markets, funds and ETFs, one of the very first obstacles you should get ready to overcome is deciding which stocks to invest in. There are several different methods of investing in stocks, and some may represent you better than others. Information is power, and having some basic knowledge on each of these methods will get you started on the right foot.
The Smartest Way Of Investing In Stocks
Stock investing depends on your personality, expectations, financial goals and motivations pushing you to opt for this rather risky money-making solution. If you would like for someone else to manage the process for you, at least at first, you may want to look into the so-called robo-advisor alternative. This is a special service that provides affordable solutions for stock investment. The majority of large brokerage companies offer this service. Basically, someone else will invest your money on your behalf in an attempt to reach your goals. All you need to do is read a few reviews on the most popular robo-adviser services and make your pick.
If, on the contrary, you are looking forward to getting your hands dirty and really putting some elbow grease on, you should get ready for a few obstacles along the road. It is all a matter of personal choice and preference, experience in the financial market, time availability and interests. No matter what path you may choose to walk on, you will need to first…
Open Your Own Investing Account
This is the very first step you will need to take on your stock investment journey. Selecting the right investment account is a little more difficult than you might imagine. Focus on a brokerage account you can open online in order to make fast and affordable stock, bond, mutual funds or ETF purchases. You could also opt for some more complex investment options, including Forex, or aim for some safer cash solutions in the form of cash management accounts. You will ultimately need to decide upon the most suitable solution that will work best for you. Consult with a broker if you are having trouble understanding what each of these investments means.
A broker will assist you with opening an IRA or an individual retirement account. Keep in mind it is possible to open a taxable brokerage account in case you are already putting retirement money aside.
Here are the main types of broker accounts you can currently open online:
Online brokerage accounts, which are investment accounts with online brokerage services that enable you to buy and trade investments by yourself, via their online trading sites.
Full-service brokerage accounts, which are accounts that feature investment management from human investment advisors or robo-advisors. They are a more affordable alternative to human managers who can handle your investments and they rely on computers to select and manage your investments on your behalf. They will, however, respect your desires and follow your goals while doing so.
Individual retirement accounts, which are tax-advantaged types of accounts, including the classic IRA or Roth. They place certain restrictions concerning the time and method you can use to withdraw your invested money. This is not characteristic of brokerage investment accounts. You are not advised to invest money you know you will need to use within the following 5 years. There are various solutions for short-term investments you could make, including money market accounts with interest rates of 1.5% or more.
Select A Reliable Account Manager
Once you will have selected a convenient investment account, it is time to look into a few account providers. The good news is that the majority of today’s brokers do no ask for minimum investments or any extra fees to get started. Search for brokers who charge small trade commissions for trading stocks, or zero transaction fees for ETFs. It all depends on the options you plan on investing in.
Get Acquainted With Stock Options
Stock mutual funds enable beginner traders to buy small amounts of various stocks during a unique transaction. You could choose ETFs and become the owners of small pieces of different companies. The more funds you can reunite in your portfolio, the more diversified it will be. Given the great diversity of these stocks, your risks will also automatically decrease, just like using diversified home security solutions should lower the risk of home break-ins. Knowing a locksmith service available at night should, for example, help you get out of home lockout situations faster and with fewer risks involved.
Individual stocks, on the other hand, allow you to focus on a certain company and buy one or several shares for it. Building a more diversified portfolio using individual stocks might be more time-consuming, and you will also need to prepare yourself to dig deeper in your pocket. Making just one smart pick could bring you a nice reward, even though the chances of getting rich with just one individual stock are not the best.