If you’ve ever wanted to grow your money but have been confused by the world of stocks you are not alone. The concept of investing can seem complex as if it’s reserved for those who are already wealthy or for financial whiz kids. But the reality is, anyone can learn to invest in stocks, even if they only have a few dollars to start with and not much in the way of background knowledge.
This step-by-step guide for beginners will help you get started investing in the stock market without losing your shirt or going over your head with jargon and too much data. Let’s make your journey toward smarter money choices easier.
What Is an investment in Stock?
When you invest in stocks, you’re buying a small piece of ownership in the company. If the company does well over the long term, your stock may rise in value. Some companies also give you a fraction of their profits as a payment, dividends.
Consider this: You’re putting your money to work and are supporting companies you think will grow. In exchange, you benefit from their success.
Why Should They Even Think About Stock Investing?
There are many good reasons to learn how to invest in stocks:
Beat inflation: If you keep your money in a savings account, it loses value over time due to inflation. Stocks can help grow it.
If the company does well over time, your stock may be worth more. Some will also pay you a small piece of their profits dividends.
Think about it this way: You are putting your money to work by investing it in businesses you think will grow. And as you participate in their success, they do the same for you.
Why should a beginner invest in stocks?
Developing the skill of how to invest in stocks comes with a host of benefits:
Beat inflation: If your money just idles in a savings account, it will lose value over time. Stocks can help grow it.
Build long-term wealth: The stock market has historically earned higher returns than most other investment types.
Reach money goals: Whether it’s buying a home, saving for retirement or traveling the world, investing can help you get there.
Step 1: There’s Nothing to Fear It’s Just the Stock Market
A few key terms to know before investing include:
Stock: A slice of ownership in a company.
Portfolio: The stocks you (and any other in-round investor) own.
Broker: A platform or firm that allows you to buy and sell stocks.
Dividend: A sum of money that a company pays to its shareholders from its profits.
Market order: Purchasing a stock at its most recent price.
Limit order: When you choose a certain price to buy or sell a stock.
You needn’t memorize everything just become familiar with the essentials.
Step 2: Pick a trustworthy brokerage account
You can’t buy stock directly from a company you need a brokerage account. Thankfully, opening one can be both easy and cheap. There are some great beginner-friendly platforms to consider:
· Robinhood
· Fidelity
· Charles Schwab
· Weibull
· SoFi Invest
All of these platforms allow you to buy fractional shares; you don’t have to have hundreds of dollars to begin.
Pro Tip: Find a platform that has no commission fees and an easy-to-navigate mobile app.
Step 3: Define Your Investment Objectives
Ask yourself:
Why am I investing?
Your aim will determine your strategy. For example:
If you are saving for retirement (20 years or more into the future), you can afford to take greater risks.
If you are saving for a car in two years, you may want safer, short-term investments.
Also determine how much you can invest on a regular basis. Even $20 per month is a good beginning.
Step 4: Choose the Right Stocks (Or Funds)
Now for the fun part: deciding what to invest in.
Here are a couple of options that are good for beginners:
Individual Stocks
If you are having faith in a company (like Apple, Tesla or Amazon), you can invest in it directly. But this also comes with more risk and homework.
ETFs (Exchange-Traded Funds)
ETFs are baskets of many stocks. Instead of wagering on a single company, you are betting on hundreds at once. A great option for beginners.
SPY (tracks the S&P 500)
VOO (another S&P 500 ETF)
QQQ (follows tech companies such as Google and Microsoft)
Index Funds
Similar to ETFs, although often more tax efficient for long-term investing in retirement accounts. They are low cost and provide stable returns.
Keep it simple: A mix of ETFs and a handful of individual stocks is an ideal blend for most beginners.
Diversify Your Collections
Don’t be too heavily weighted in a single stock. It’s risky.
Rather, diversify among sectors such as:
· Tech
· Healthcare
· Energy
· Consumer goods
That way, if one industry tanks, your whole portfolio doesn’t go down with it.
Step 6: Be consistent and patient in the long run
A lot of newbies are scared they will make a mistake in timing the market. But guess what? Even the pros can’t do that. The key is consistency:
· Contribute on a monthly or per-pay-period basis.
· Do not panic in bear markets.
· Stick to your plan.
And, of course, the stock market goes up and down. What counts is sticking around long enough to ride the growth.
Step 7: Monitor Your Investments and Continue to Learn
Keep Track of Your Gains and Losses Use your brokerage app or something like Google Sheets to monitor your gains and losses. Definitely notice the value of your stocks, but don’t fixate on day-to-day changes
Also, keep learning! Follow money blogs, YouTube channels, or podcasts such as:
· “The Motley Fool
· “Investing With Rose”
· “Graham Stephan”
And the more you learn, the more confident you’ll b
Final Thought
You’ll quickly see that learning how to invest in stocks is not nearly as scary as you thought, and with a little patience, a cool head and a steady hand, you’ll be well on your way to your goals. All you need is a little know-how and discipline to start securing your financial future. You don’t have to be an expert in finance. You just need to get started