For many people, investing in the stock market is an intimidating proposition. It is well-known that you can lose money in the market, so committing a significant portion of your personal assets to this venture may make you more than a little nervous.
While it is true that you need to be careful when stepping into the world of stocks, complete avoidance of the market is unwise. Making smart and balanced decisions are the best route to take when it comes to investing in the stock market.
The following list contains four simple ways that you can use to get involved in the stock market as a total beginner.
Start Small
This is the most important point, and it should be an obvious one. If you are just getting started in the market and you don?t exactly know what you are doing just yet, start small – regardless of the amount.
Open a brokerage account?with the minimum that is required to get started, and purchase your first couple of stocks mostly as an educational experience. In time, you will get more and more comfortable with how the market works, and you will feel more confident in your investments. Many online brokerages, such as Motif Investing, allow you to start with as little as $250 or less.
Read, Read, Read
There are countless books available [easyazon_link keywords=”investing books” locale=”US” nw=”y” tag=”wisedollar-20″]on the topic of stock market investing[/easyazon_link], so pick out a couple of them and start reading.
It is important to remember that no one ?owns? the markets, and no one has mastered the task of picking winners ? so you don?t want to take the advice of any one book like gospel. Instead, take bits and pieces of advice from a variety of books until you develop your own investment strategy that you are comfortable using.
Invest What You Can Lose
At first, you are only going to want to dedicate a small amount of your money to the market, so decide on this number by thinking about how much you could afford to lose without affecting your lifestyle. Obviously you don?t want to lose the money, but it is smart to think about investing in terms of the worst-case scenario.
Knowing that you will be fine financially even if your account goes to zero is a comforting feeling while you are learning the ropes of investing in the market.
Play it Safe
Buying traditional stocks is only one way that you can get involved with the market. You can also invest through your 401(k), mutual funds?or a variety of other investment vehicles.
No investment is 100% guaranteed to provide you with a return, and all investments, even those beyond the stock market, should be considered a risk. However, you can take the least-risky options at first to build up a base portfolio before moving on to more advanced methods that provide a higher opportunity for a big return (if you wish).
Instead of thinking of the stock market as a lottery ticket that could make you rich, it is wise to think of it as a long-term strategy to grow your wealth. Making safe and conservative decisions over a long period of time is likely to offer the best results.
Have you ever invested in the stock market? How did you get started investing in the stock market? What is one thing that held you back from investing in the stock market?
Photo courtesy of: FirmBee
Wise Dollar
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Good tips John! Reading some good books really helps. That book by Alex Frey is helpful and highly recommended, I learned so much about investing.