Quick Guide on How to Start Investing in Stocks
Investing has become crucial in today’s world because just working hard to earn money is not enough. You work hard to earn your money, but this income alone will not be sufficient to lead a lifestyle of comfort, and at the same time, achieve your goals and dreams. This is the topmost reason why investing in stocks is important. Keeping your money idle in bank accounts is a lost opportunity. You should invest your hard-earned money smartly, and reap attractive returns from it.
To build wealth over time, you will need to learn smart investing. Investing by employing financial vehicles with high potential growth allows you to grow your money at attractive rates of return. If you wish to be a successful investor, firstly, you will have to learn to hold on to the money that you earn through hard work. Once you have accomplished this, the next step for you is to learn to invest.
In the internet age of today, there are numerous resources from where you can learn everything about the investing world. Today there are numerous investment courses available online, which can assist you to initiate your investing journey. These investment courses explain the highs and lows of the stock market to beginners in detail and include webinars, market journals, video tutorials, and events & seminars.
To assist you in initiating your journey of investing in the stock market, we have devised a quick guide for you. So, without further ado, let us dive in.
Utilize Online Resources
Today there are a plethora of investment courses available on the internet. You need to conduct thorough research before choosing a course so that you can benefit from it. Some firms offer these investment courses via webinars, market journals, video tutorials, and events & seminars. These investment courses will help you understand the basics of the stock market, and teach you how to deal with the highs and lows of it.
Gaining knowledge via an investment course is very important in today’s world, as several fraudulent activities can harm you and your investment portfolio. Investment courses also teach you how to be vigilant of such fraudulent claims of unrealistic returns and at the same time reap moderate benefits from the stock market.
Open an Investing Account
Once you have thoroughly understood the concepts of the stock market you can then initiate your search for a brokerage or a Demat account. To invest in stocks, you will need to open an investing account with a broker. For this too, there are multiple options available today, and you can choose a brokerage firm that aligns with your goals and suits your requirements.
Understand the Difference Between Index Mutual Funds and Stocks
Index mutual funds are also known as exchange-traded funds. The holdings in these mutual funds track or match a market index such as the S&P 500. Market indices, such as the S&P 500 and the Dow Jones Industrial Average, have a predetermined weightage associated with all stocks. Index mutual funds try to reflect the same weightage given to stocks by the market indices and allocate the investors’ capital in approximately the same proportion. Index funds have gained popularity in recent years on account of the increasing awareness regarding passive income generation strategy.
Individual stocks, on the other hand, signify a single company. If you think that a company might do well in the future, you can buy a few stocks of the concerned company and sell them when you have acquired your desired results. However, experts do advise to build a diversified portfolio and avoid ‘putting all your eggs into one basket’. Diversifying your portfolio via individual stocks helps you to even out the rough waters of the stock market, wherein a few of your stocks perform well, and others do not do so good.
Set a budget for your stock investment
Beginners in the investing world often have a few questions on their mind: how much money do I require to begin investing in stocks and how much should I invest in stocks. The amount of capital you require to initiate your journey in the stock market depends on the stocks you wish to purchase. These stocks have varying prices ranging from a few thousand dollars to just a few dollars.
Coming to the 2nd question, as how much should you invest in the stock market. Experts advise that the younger you are the more you should invest in stock markets. This is advised because young people have a lot of time on hand to even out the highs and lows of the market. Old people or people nearing their retirement are advised to invest in fixed deposit schemes or mutual funds since these are some of the safest financial instruments in the market. Although the returns associated with these investments are also low.
Focus on Long-term Investing
The stock markets across the globe are highly volatile. However, if you look at these markets from a bird’s-eye view, you will notice that the general trajectory of the stock market is always upwards. Surely, there are erratic swings in the stock market, but when you invest for the long-term you need not bother about these swings. All you need to concern yourself with is picking up good stocks of companies that have high growth potential.
Finally, retail investors need to understand that no form of technology can withstand the age-old barriers in an individual’s investing journey — Greed and Fear. Vigilance on the part of retail investors is required, to fend off the attack by human emotions and if they want to succeed by venturing into the stock markets, over the long term.