7 Helpful Tips When Investing in Stocks for Beginners
In this economy, it is wise that as early as now, you start investing in stocks so you can be financially secure in the future. Do you want to secure college tuition fees for your kids? Do you want to save for your own home? Do you want to have a good retirement plan? If you answered ‘yes’ to any of these questions, then you’ll want to start investing! Engaging yourself in the stock market is one of the safest ways to earn cash – as long as you’re willing to wait. This simple guide on investing in stocks for beginners will give you the jumpstart you need to do.
There are many reasons why you should start investing in the stock market, but the common denominator for everyone is to gain extra income. Keep in mind that investing is a time-bound process; it cannot be rushed and you need to have a lot of patience. Investing is time-sensitive. Therefore, your time is money. You do not want to waste it by making rash decisions that will impact your overall goal. Here are seven tips to guide you before delving into the world of investing:
It would not be possible for you to achieve any goals without proper planning. For example, if your goal is to become a doctor, then your plan to go through med school and pass your exams. Even just attending one semester in med school requires a lot of planning. You set schedules on what to study, plan the agenda for the day, and sometimes even arrange your sleeping hours.
We can apply planning to many things in life, and it is most especially vital in investing stocks because it allows you to see a direct path to what you want to achieve in the long run. With that said, you have to set a long-term goal.
Before you pave the road, though, you have to answer the following questions:
- Why did you consider investing in the stock market?
- When are you planning to encash your stocks?
- What are you saving for specifically?
Answering these questions will help you give an idea on what you should invest in since you already have a timeframe. To help you set up, you can look for a financial calculator that will give you a more solid outline for your plan. If you’re an absolute newbie and all the terms muddle you, here’s a glossary of investment terms by J.P. Morgan Asset Management.
The next step is to get started. Yes, the sooner you start investing, the better your yield will be in the future. There are companies which accept investments for as low as $50. On the other hand, some organizations have no account minimum or trade fees like E*TRADE Financial and Ameritrade. You should open a brokerage account after deciding which company suits your financial plans and budget.
Decide Your Medium
You have the option to start investing by opening an account yourself, hire a financial manager to take care of your finances for you, or hire a Robo-advisor.
A Robo-advisor is an application that picks out the investments for you and creates a diversified portfolio. You input your target allocation and how much you can invest, and the Robo-advisor will be the one to make changes to your investments. They collect your current financial information and personal projected goals through a survey and then analyze the data to either offer investment advice or start investing your money for you. As a beginner, it may be a good idea to hire a Robo-advisor for people with small accounts and limited investment experience.
Avoid Big Mistakes
Risk management is always a big thing in investment. You don’t want to “go big or go home” when it comes to your finances. While it is a good idea to take a plunge, you need to calculate if what you’re investing in will be profitable in the long run or not. A safe investment is the 401(k), which is usually sponsored by your employer. The 401(k) lets you set aside a part of your paycheck. One of the benefits of 401(k) is even if you change jobs, you’ll still be able to move your account under a different employer. There are also many big companies you can invest in, like Walt Disney Co. or Johnson & Johnson, that have growing shares yearly.
Since you’re a starter, you want to play it safe for now. Perhaps when you get a better idea and hold on things, you can expand and take more significant leaps.
Even if you’re investing and you have the expectation of getting something in the future, it’s still advisable to keep a separate piggy bank for rainy days. That way, you won’t have to prematurely encash your stocks and waste your time, energy, and effort in one fell swoop. A plus to this is when you have extra money, you can always add more to your stocks and grow your investments.
As the famous quote by Andrew Carnegie goes, “The safest investment strategy is to put all your eggs in one basket and watch the basket.”
Does this apply to a beginner like you? Certainly not. As someone who is just starting, it’s a good idea to diversify your investments as a way to avoid mistakes and reducing risk. If in case something happens to one company that you have stocks in, at least you’ll have a bunch of backups ready. If in case you can only afford to invest in one company, you can apply tip number five (SAVE UP) and put stocks into a different one.
Take into account the fact that there will be times where you have losses. However, when first buying a stock, you already should have expected that that company will do well enough not to cause any worry to its investors. Always be logical and think about what your next steps should be. If you see that the predictions of the stocks in the company that you invested in will go down, make sure that you have the necessary preparations when it hits.
In summary, with today’s technological era, there are many ways for you to start investing even at only $50. There are so many online platforms and even banks and companies to start investing in. With the thousands upon thousands of opportunities at your fingertips (and keyboard), don’t hesitate to keep reading up and learning as much as you can. On that note, there’s a Beginner’s Investment Course for you to take advantage of so you can get started right away! Rest assured, investing will get easier as you keep at it. Five to ten years from now, your future self will thank you for it.