6 easy steps to begin investing
A simplified guide to buying stocks for the first time
- You do not have to be a professional to build wealth through investing in stocks.
- Your goals and priorities should determine the stocks you choose.
- You should reevaluate your portfolio regularly to make sure it lines up with your goals.
When you decide to begin investing, it can be both exciting and challenging. If you are a first-time investor, you might wonder how to get started. With all of the brokerage firms trying to gain your attention and business, it might feel more comfortable to let go of the goal instead of trying to figure it all out. Instead, commit to your goal and take it one step at a time. This guide walks you through the process to help you get started.
Learn the terms
You do not have to be a professional, just have a basic understanding. Study some of the most common terms of buying stocks, so that you can make more educated decisions. For instance, knowing the difference between stocks and bonds or stocks and mutual stocks will give you a little clarity.
Decide how you want to invest
You can either buy stocks yourself or hire a professional to do it for you. You may automatically think that you need to hire someone because you are a first-time investor. It is completely up to you, but know this before you do: buying stocks is not as hard as it may seem.
It is possible to do it yourself, though it may take some trial and error. If you are completely uncomfortable now, you might start by hiring someone else and then move into doing it yourself at a later time.
“The best investment you can make is an investment in yourself…The more you learn, the more you’ll earn.” -Warren Buffett
Set your budget and goals
It is important to know how much you can afford to invest, and what your goals for buying stocks are. There are risky stocks, and there are much safer stocks. You should choose between the two depending on the length of time you have before you hope to cash out, and how much risk you can afford.
For instance, imagine that you are investing in stock with the intention of cashing out at retirement. If you start in your thirties or younger, you can invest in safer stocks with gradual yet attractive profits. If you are only ten years from retiring, you might choose to invest in a riskier stock with a higher rate of return in a short period.
This will depend, though, on how much risk you can handle. Investing all that you have for retirement into one risky stock is not a wise move. In this case, you will want to split your money into a few different investments, at least some of which are safer.
Choose your priorities
While this is not a necessity, buying stocks from companies you believe in and admire is often the best route to go. This is because you are investing in something that you probably know a good deal about, such as sustainable energy. Knowledge about a company, organization, or project can usually help you make wiser decisions.
Open your account and start purchasing
You have the option of walking into an investment company and opening an account, but there are simpler options. You might also consider an online brokerage account or a robo-advisor account.
With an online brokerage account, you are more hands-on in picking your stocks. Most do offer customer support, though, should you have trouble. With a robo-advisor, you answer some questions, and it will build a portfolio for you to invest in. You deposit the money; the system invests it for you.
Reevaluate on a regular basis
Do not become complacent. Set aside times to reevaluate your goals and your approach. You might start with a robo-advisor, and later choose to switch to an online brokerage account. Likewise, you might decide that picking your stocks is not something you want to continue doing.
As you get closer to retirement, you might choose to move your investment funds into safer options. It is a good idea to consider reevaluating every six months or so, in addition to when you experience any life changes.
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