Everyone is searching for an easy and quick way to happiness and riches. It’s now like human nature to always look for the hidden key that leads suddenly to the rainbow end or only winning lottery ticket.
Perhaps, the key is investing in stocks. It’s one of the simplest ways that one can build wealth in the long-term.
History indicates that most, if not all, the wealthiest folks started with shares in the stock markets.
But how do you start?
The beginning can indeed be humble, but given time and patience and make the right moves, then it’s inevitable that you’ll make decent profits.
Investing in stocks may not be as easy as most folks could be thinking, especially for beginners.
However, there’re tips if followed to the dot even a novice investor can make it in the stock market.
Ways to Invest in Stocks
There’re four main ways that you can use to invest in the stocks, and they include;
- Investing with a 401k plan, or via 403B plan in case you work with a non-profit organization
- Investing via brokerage accounts
- Investing via TOTH IRA, SEP IRA, conventional IRA, or Simple IRA accounts
- Invest with direct purchase plan for the stocks or through dividend reinvestment plans
The Assets you can Own while Investing
Common Stocks – investing in common stocks automatically qualifies you for an ownership stake in the “real” operating business.
Besides, you get as well a share of the net earnings as well as the final dividends.
Money Markets – it’s a liquid investment designed to safeguard personal purchasing power.
It’s equivalent to cash and available in 2 variants; money market funds and money market accounts.
Real Estate Investment Trust – this is a designation ensuring no taxation incurred at the company level when more than 90% of earnings are paid directly to stockholders. The assets are invested usually in various real estate properties.
Preferred Stock – the stock pays higher dividends but has a limited upside.
Bonds – a bond is the asset you get when lending money to municipalities, businesses, countries, and new institutions.
They are available in the form of municipal bonds, corporate bonds, and savings bonds.
Step By Step Guide to Investing in Stocks
By now, you’ve already had the idea of how the stocks function and what you can invest. As a beginner, here is what you need to do to be successful in investing in stocks.
Establish your Investment Style
There are a plethora of ways you can decide to approach stock investing. The manner you choose to invest in is your decision.
You can choose to be a DIY type whereby you decide to pick stocks as well as the stock funds by yourself. Alternatively, you can decide to hire someone to manage the whole process for you.
Understand the Difference between Stocks and Mutual Funds
For most folks, stock market investing is all about choosing between the two investment types; stock and mutual funds.
Stock mutual funds (exchange-traded funds) are those that let you purchase the small pieces of several various stocks in one transaction.
For instance, ETFs and index funds are mutual funds that help track an index. Therefore, investing in a fund lets you own small pieces of each of the companies.
Individual stocks are relevant when you want to buy a single share or more of one company. However, they require a bit more investment than mutual funds.
Set a Budget
For any beginner, the question in the head is either how much is needed to start investing in the stock or how much one should invest in stocks.
Therefore, the best way is to research various shares and get informed about the price range for multiple stocks. If you decide on mutual funds, an ETF is the best option.
Open an Account
To invest in the stocks, you’ll definitely require an investment account. For hands-on types, brokerage accounts are an option, while those needing a little help, an account via a Robo-advisor, are the best alternative.
When choosing the brokerage accounts, you should ensure that you evaluate them precisely according to factors such as the investment selection, cost, and tools available for investor research.
Nevertheless, as a beginner, you should always ensure that the decisions you make are proper and informed.
Also, invest in business instead of the stocks and be disciplined in every approach you make. At the end of the day, you’ll be smiling with the profits.