As with many things in life, knowing how to start investing in the stock market may seem out of reach. Many people assume that it is far too complex to manage on their own, and resort to lack-luster, safe investments, or worse, doing nothing at all.
Everyone has heard the wild tales of the amazing gains and equally amazing losses that can be had when investing in the stock market. Far less glamorous, however, is the one true path to lasting prosperity and wealth – a balanced buy-and-hold strategy.
No matter what your wealth building goals are, you can build and manage a portfolio yourself in just a few hours a week. In just a few simple steps, you can be investing in the market, and on your way to wealth and a comfortable nest egg.
Shopping For A Brokerage
Finding the right brokerage is crucial to meeting your investment objectives, and realizing gains in the market. If you feel like the personal service and expertise of a full-service broker is right for you, there are many options for you to chose from.
Keep in mind that along with this expertise also comes a high price tag. Commissions and fees can quickly eat into profits, especially if you are starting with a smaller deposit. Online brokerages often have excellent tools and research options to help you make your own investment decisions.
Online brokerages often have low or no minimum account balances, and many charge commissions that are less than $10. Many also offer special promotions and incentives for opening an account, so check into those offers carefully.
Deciding On A Budget
Once you have decided on a brokerage and opened an account, you will be asked to make a deposit. It is important to set an investing budget and stick with it. Set up an automatic deposit into your money market account directly from your bank account.
By automating the process, you are taking the work out of transferring money, and therefore allowing inertia to work in your favor. If you plan on utilizing dollar cost averaging in your investment plan, then it may also be wise to set up an automatic investment plan as well.
These steps offer insurance against forgetfulness, and attempted market timing; both roadblocks to financial success. By spreading your investments out over time, you are using averages to your advantage and not trying to spot market lows or highs.
Choosing Your investments
When deciding on potential investments, you need to do extensive research before committing any capital. Finding companies that fit within your risk-tolerance level, budget, and overall investment scheme is the most important aspect to investing.
If you best friend swore up and down that a penny stock was a “sure thing”, but you are a conservative investor, that stock’s volatility could quickly become a nightmare. If you crave more risk, and your portfolio is packed with steady-as-she-goes blue chips, you run the risk of becoming bored and abandoning the endeavor in favor of something more exciting.
Establishing a plan, sticking with it and staying on top of your portfolio are the keys to lasting financial wealth.