6 Stock Tips For Beginners
From using an unreliable platform to choosing loser shares, investing in the stock market can be challenging for first-time investors.
Undoubtedly, with the right investment strategy, you can build an additional income stream, strengthen your finances, boost your retirement savings, and create the ultimate financial safety net for you and your family.
However, the world of stock investing isn’t free of risks or pitfalls.
The tips below can help you enjoy a more stress-free investing experience – and maximize your gains!
1. Determine Your Risk Tolerance and Investment Goals
The share of Americans investing in the stock market has consistently risen over the past year.
Thanks to the availability of user-friendly brokerage accounts and trading platforms.
But while millions of people today invest in the stock market, no two investors have the same needs, goals, and risk tolerance.
This awareness will guide you in choosing the best approach to stock investing for your needs.
Some of the options to consider include the following:
- Individually handpicking each stock by yourself
- Working with an expert financial advisor, investment manager, or brokerage firm
- Using Robo-advisors
- Signing up for a 401k with your employer
Pro tip – Alongside the level of risk, be sure to understand how much hands-on work and knowledge of each option’s industry requires!
2. Open an Investment Account That Suits Your Financial Goals
Once you know the best approach for your needs, it’s time to open your investment account.
While user-friendly investing platforms have made this step far easier than it used to be just a few years ago, not all options are created equal.
A good financial advisor will help you determine the type of brokerage account best suits your needs. However, some of the most common options include the following:
- Standard brokerage account (also known as a taxable brokerage account or non-retirement account)
- Individual retirement account (IRA)
- Roth IRA and other specialized IRAs such as SEP and SIMPLE IRAs)
- 401k plans
- Education savings account (i.e., 529 savings plan)
Once you have chosen an investment account type, move on to finding a trading platform or app that allows you to open a secure and affordable account.
Double-check the fees charged on your investments to avoid unpleasant surprises!
3. Consider Buying ETFs Instead of Individual Stocks
Researching and handpicking each stock to invest in can be a time- and labour-consuming task – especially if you have limited knowledge of an industry, sector, or the market as a whole!
That is why, instead of investing in a single company, you might consider finding an online investment app that allows you to invest in ETFs (Exchange Traded Funds) and other mutual funds such as Index funds.
This investment option allows you to buy fractions of shares of multiple companies in a single transaction, thus minimizing risk and diversifying your portfolio.
4. Set a Budget and Only Invest What You Are Comfortable Losing
When starting your investing journey, you’ll need to be clear on the money you should not invest.
These assets include emergency funds, college funds, and savings accumulated for specific reasons, such as vacations and down payments – and they represent the ultimate safety net for your financial stability!
So, what is your investable money if these assets should be left in your savings account?
How much you’ll invest in stock will depend on factors such as your financial situation, risk tolerance, goals, and age.
However, expert advisors recommend investing 10-15% of your annual income, especially if you want to build an individual retirement account.
5. Keep Your Portfolio Diversified and Continue Investing!
Stocks are certainly a popular investment option – but they are not the only ones.
Indeed, as you get older, you might have less time to ride through the ups and downs of the stock market.
In this case, you might consider other investment options suitable for all ages, including real estate, high-yield savings accounts, and cryptocurrency.
This strategy allows you to diversify your portfolio, minimize risk, and maximize gains. Don’t forget to continue investing in building wealth over time – and stay invested during a bear market!
6. Partner With a Specialized Advisor To Better Understand the Market
It can all feel overwhelming if you are just getting started in the world of stock investing.
That is where partnering with a specialized advisor can help you keep your portfolio diversified, understand the market, valuable access insights into rising and established companies, and avoid high-volatility stocks.
Consider working with an advisor for the first and most important investment you’ll make!