Beginners Guide to the Stock Market
What do you and a young Warren Buffett (we’re talking 6, 7-year-old) have got in common? Their interest in stock market and their wanderlust for the stock meccas like NYSE and NASDAQ. Well, if you aren’t interested in stock markets, sorry for bundling you in with Buffett but who does not want to get rich. In short, stock markets are today’s way forward for hopefuls like us to one day receive the coveted title of a ‘billionaire’.
Here’s the thing: investing in stocks is an excellent method of growing wealth passively. By passively, it is assumed that wealth is earned actively through renumeration from a job or engaging in business with other parties; passive essentially means ‘money making money for you’. What it means is, you invest money into a company, sit back and watch the profits grow. You don’t have to work for the money you earn on the wealth.
For starters, as the title might’ve suggested, becoming Buffett will take time. But you can dream, and you can use what gifts the 21st century holds for you: online investment accounts and trading applications like OlympTrade, MetaTrader and IQOptions.
You can use these apps to fine-tune your method and once you’re adept enough, you can jump in on the real action. As for the recession that seems to have the market in its hold, there’s no need to be discouraged; stocks are still a good investment even if the market is unstable and volatile; low downturn of stocks means more stocks that can be bought cheap.
So, investing in stocks is a task that should be done without any ado. Check out Let The Bull Run for more quality content on the financial trends of today. Here’s a guide for all the rookies out there to the stock market,
How you should Invest in Stocks
While there is no generalised way of how to approach the concept of investing in stocks for real, but there are a few ways you can smooth out the transition from a hopeful to a stock market player. Following are some of the ways you can tackle the entry part of the stock market,
· The Hands-On Approach
If you are the type of person to take matters in your own hands and work with a more hands-on approach, this method is for you and all the DIY types out there. Using applications like iOS’ Stocks and many other apps which display live information and price fluctuations of blue-chip stocks, you can get a basic idea o f how stocks work and then, can enlist a brokerage to help you navigate the uncharted waters.
· The Ghost-Investor
If you’re the kind of person to take the phrase ‘passive income’ literally and just sit back and let the dividends fill your account, there’s one for you too. People who like to ‘ghost-invest’ are prime examples of people and investors who utilise services of ‘robo-advisors’: these are automated services that provide a low-cost alternative to getting a brokerage firm on board and instead invest your money after analysing your specific goal, your potential stock options and your preferences. Don’t worry if you think it is a relatively newer phenomenon; nearly all major brokerage firms and investment houses provide such options for the ‘silent partner’.
Open an Investing Account
An investment account is one of the most basic things you need to start up on the stock exchange market. An investment account is the account where you maintain your portfolio and deposit any money you intend to set aside for investment. For the people who tend to be more hands-on with their investment, a brokerage account is the best way to start things off. For the ghost-investors, you can open a investment account through a robo-advisor or an application with an online account.
The primary misconception regarding stock markets is that you need to be on par with the Oracle of Omaha to make a move there. But the fact is, really anybody can get into it. It isn’t that much complex and mind-bending as it unfortunately comes across as. There are two basic options you can invest into. These are explained below.
Stock mutual funds or exchange-traded funds:
Mutual funds or exchange traded funds lets a person invest in a multitude of different stocks with a single payment or investment. There are many kinds of stock mutual funds, the most common being ETFs and index funds. A good example of this may be an S&P 500 fund, which replicates said index by purchasing the shares of a number of companies in it, thus diversifying a person’s portfolio. When a person invests in such a fund, he/ she technically owns a small part of said company he bought a share of. Its as simple as that.
There are people who get into stock trading after viewing the growth potential of a single company. Blue chip companies like Apple, Amazon or Microsoft are the prime target of such buyers, who intend to fill their portfolio with a singular company’s shares. It is a preferred method for newcomers to invest using this method, as it helps them understand the market and the dynamics of the stock exchange market. However, there are downsides; since you’re only after a single company’s stocks, building a diverse portfolio requires investment on a large scale.
The upside of stock mutual funds, which is the first type, is that they are inherently diversified, which lessens your risk of losing your money or your investment tanking.
New investors often have two questions in this step of the process:
How much money should you start off with?
The amount of money that you need to start off on your journey in the stock market depends on what kind of shares and companies you’re looking for. There are cheap stocks, which you can buy for a few dollars and earn a few cents off them, and there are blue chip stocks or high-value stocks, which come in at thousands of dollars apiece. These are the big fish; they pay as much as you invest and can return a handsome profit in no time. To simplify your start, you can initiate trading by buying ETFs.
How much should you invest in the stock market?
You can start off with a few shares and then grow your portfolio to include high-tier companies and blue-chip stocks. There’s no limit to what you can start with: a million or ten bucks, you can start off slow and then make your way to the top with careful selection and re-investment.