Beginners Guide to entering the Stock Market

3 minutes

Learning to invest can seem intimidating, but it doesn’t have to be. Here are a couple tips to get you more comfortable in entering the stock market world.

First off, you will need an account set up online to have full access to buying and selling. Set up an appointment with your local bank branch, where they will set up all the necessary accounts.

Each time you buy or sell, or per transaction, there is a fee between $5 and $10. You can manage your stocks by yourself, and pay these low fees per transaction or entrust your money to a broker, who will manage your stocks for you.

This option will have extra fees but usually guarantees you an investment increase. You can look for brokers that have arrangements to offer mutual funds or exchange-traded funds at no commission, as these investments can be the best way to get your investments started.

Low-Risk Options

To keep it as safe as possible, consider exchange-traded funds (ETF). This type of investment will split your money into many different stocks. Even if you only have a little to invest, every dollar is diversified into different stocks.

You will have to pay for this service, however, you are very likely to make money, and not likely to lose money as you will only lose a small percentage if one stock is to plummet. Think of the well-known quote “Diversify, diversify, diversify”.

Some recommended brokers are Schwab U.S. Broad Market, iShares Core S&P Total U.S. Stock Market, and Vanguard Total World Stock. Each invests about a dozen billion, so your money will be automatically diversified into hundreds of different stocks.

If you want to venture into individual stock purchases, as well as take the safe route, invest in stocks of companies that supply everyday products. Even if the economy crashes people will still buy food, toilet paper, and medical supplies.

Chances are that you won’t see huge gains in a bull market (a rising market), but you also won’t lose on someone else’s bet during a bear market (a downturn in the economy).

Whether you have a broker or are self-managing, you want your portfolio to be diversified. Diversifying your portfolio means you have multiple, different types of investments. Along with a diversity of stocks, this can include almost anything like bonds, 401(k)’s, real estate, and more.

Stick with What You Know

While reading this list, keep in mind your personal interests and knowledge. It’s recommended to invest in the stock of something you would use or purchase, so ponder the phrase “Put your money where your mouth is”.

The infamous Warren Buffett is a well-known Coca-Cola stock owner. He drinks Coca-Cola, likes the product, and advertises it by having the beverage with him for meetings and public events.

Buffett’s investments in the Coca-Cola stock now equate to 400,000,000 shares, which is worth over $16 billion.

So, following Buffett’s advice, if you know nothing about mining, then mining stocks are probably not a good investment option for you. Mining stocks are often versatile and won’t be recommended for beginners, so another example is Facebook.

If you don’t have a Facebook account and are not a big social media user such as Instagram and Snapchat than just skip the stock, even if others are interested. If you are a Facebook user and active on social media, look into the stock and study the value based on your evaluations.

This example can be cross-referenced for any stock consideration.

Buy Low Sell High

If it were easy, everyone would buy low and sell high. We may want to buy low and sell high, but that goes against our instinct because natural human bias leads people to buy high and sell low. So when a stock is falling, we panic and dump it.

When a stock is rising, we buy it with a hopeful click. As beginners, we are not experts at realizing when something is high or low “enough.” Therefore, when stocks are falling, we panic and sell because there is no knowing how far prices will go.

A huge part of smart investing is psychological, so to avoid some mental roadblocks you can sell day of or hold long-term.

The prior is called day trading, and many individual investors have found a lot of success with this. It is time-consuming however and demands your full attention, as the stocks may move at any time during the market day.

The idea is to buy in during a dip and sell during a spike, even if its increase is a couple cents. If you do this enough time, or with enough stocks, those cents and small dollar increases add up quickly and your money is out of the market by day-end.

This is when your transaction fee amount comes into play because you don’t want to pay a $9 transaction fee when you are selling $20 worth of stock.

The other side of the spectrum to get out of the psychological warfare of buying high and selling high is to buy and hold long term. This requires patience, and usually multiple years to see a solid increase.

This is best to do with money that you don’t plan on touching. It can lead to a loss of money if you decide you need the money and need to pull out at an inopportune moment.

Hopefully, this article will make it a little easier at the beginning and good luck! As Warren Buffett once said: “investing is simple, but not easy.”

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