How To Start Investing In the Stock Market
First step. Start with small amounts of money. Start as low as $25 per month, or a couple hundred a month. If $25 is too much, start with $10 and buy half-shares. Whatever you do, don’t plop down your nest egg and put it all on the line. Start small. Take baby steps.
Second step. Do not use a full-service broker. Go with a web-based direct purchase broker. These are outfits like Scottrade and Etrade. You’re paying a low fixed price per trade. The fees are much less than you would pay a full-service broker and it’s easy. If you get stuck, they offer quick, personal customer service. Full-service brokers are rarely needed. The only time I would advise using one is if you had major assets to protect and a huge net-worth.
Third step. Research. Use services such as Morning Star to perform analytical research on stocks of interest. Check ratings, past performance. On top of that, read articles about the firm. See how they’re doing, how well the industry as a whole is doing. Even though you’re investing small amounts of money it’s important to treat the investment as if you were investing thousands. Do your research. Invest wisely.
With all the companies to choose from, it can be maddening to make a decision. A friend of mine made a good suggestion for the new investor. It’s what he did when he started his stock market investing. Invest in home town companies, companies you read more about, companies you know about. Most of us read the local daily paper and watch local news. We get a different perspective into local companies and stocks than people living in different states and countries. You might catch word of an acquisition, or another factor that could change stock price, before a guy half-way around the world does. By no means is this necessary. Localizing investment range might cut down on anxiety in the new investor. It might not. It’s just one guy’s tactic and he did really well with it. He then went onto investing into U.S. stocks and is now even experimenting with world markets.
Best of all have fun. Be patient. And stick to a plan. Invest a little every month and you should see your stock market holdings grow.
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Tags: Investing, Market, Start, Stock
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