In these uncertain times many people are wondering how to go about saving money, and making money off of their savings. The stock market is still an excellent long-term solution for making money, but it can be daunting and scary to get into the investment game. Where do you start? How do you understand the ins and outs of the market? Here are some tips and tricks for first-time investors.
Understanding the Basics
The first thing you need to understand is what exactly a stock is. A stock is a small portion of ownership in a company. When a company wants to raise money for funding, they divide up parts of the company into shares of stock, which are sold on the open market.
If a company offers 100 shares of stock, and you buy 5 shares, you then own 5% of the company’s interests.
Do Your Homework
When you are ready to get into investment, the first thing you should do is your homework. Read books, do research, and even take classes about investing if you can. The more you know, the better your decisions in the market will be.
Find a Broker
Next, you’ll want to find a broker to help you purchase stocks. Brokers will have information and understanding that goes deeper than what you have, and can help you narrow down your choices as well as making wise decisions.
There are two types of brokers: full-service brokers, who will guide you through the entire process and offer in-depth advice and financial planning, and discount brokers, who cost significantly less, but leave much of the legwork and decision-making to you.
Be careful about how fast and large you invest at first. Don’t rush to buy massive shares in so-called “hot stocks”; these are a trap for new investors and will very rarely offer much return on your investment. Remember that the market is a long-term investment, not a quick cash solution.
Have a Budget and Strategy
Know at the outset how much you’re going to invest, and stick to it. When you buy stocks you are tying up money in your future, and you won’t make money—and can even lose money—if you end up selling it too soon. Have a strategy to invest x dollars every y months, and stick to that strategy, adjusting only when you know you can afford it.
These basic rules will get you started when it comes time to buy your first stock. In the end, the biggest advice anyone can give you is, be prepared and be careful, and you will find a great opportunity for long-term financial gain.