How To Start Investing In The Stock Market

When you first start looking into investing it may seem to be very complicated, with a lot of different things to be learned. If you have never dealt with the stock market before the terminology alone can be overwhelming – bull market, bear market, calls, puts, it never seems to end.

So where exactly does a beginning investor start? The best place to begin is by deciding if direct investing in the stock market is right for you. Certain people are simply not suited for investing in the stock market, and there is nothing wrong with that.

There are a variety of other investment options you can explore that will give you a return on your investment as well as exposure to the market, while minimizing risk, such as bank savings accounts, CDs and mutual funds.

How To Start Investing In The Stock Market: Questions You Should Ask

To figure out if you are well suited for investing in the market you should begin by asking yourself some basic questions. The main question you should be asking yourself is if you have the time to devote to research and the maintenance of your portfolio.

Investing in the market involves a considerable time commitment, and it is only by devoting time to your portfolio that you can be a successful investor.

What is your level of risk-tolerance? It is perfectly fine to be cautious with your investments as long as your portfolio reflects your conservative investing style. If you are OK with taking on large amounts of risk, that is fine too, but be sure you are prepared for the volatility that comes with this style of investing.

You also need to consider the time-frame you are working with for investing. When investing in the stock market, the general rule is that the longer you expect to be in the market, the better. Time affords you the luxury of riding out the inevitable ups and downs of the market, and historically proves to be the best way to profit in the market.

Educate Yourself In The Fundamentals

There is no substitute for knowledge when investing in the stock market. In if you are using the help of a financial professional or stockbroker, you still need to know the basics of investing. Remember that no-one cares about your money like you do, so you need to be knowledgeable about the fundamentals.

Keep up with the markets, but do not worry about the day-to-day ups and downs. The internet has a wealth of information on the market as well as industry and sector news. Observe consumer trends and sentiment and how it relates to stock prices. Start by researching companies and industries that you are familiar with, as they will be easier to understand, and less intimidating.

The more information you have available, the better prepared you will be to successfully manage your investments. This education should be an ongoing process, as there is always more for you to learn.

Look Way Into The Future

By starting small, taking a long-term view, and utilizing dollar cost averaging to mitigate risk, you can better position yourself to withstand market volatility.

Using dollar cost averaging – buying stocks a little at a time at various price points over a set time frame- you eliminate the main cause of losing money in the market: failed market timing. Many investors falsely believe that they can accurately time the market.

Since the market responds to tomorrow’s news, this strategy becomes impossible. By spreading out your investments over time, you can avoid buying at the top, and utilize the market’s historic long-term gains.

It is important to thoroughly research every potential investment before committing any capital to decide if it fits into your investment objectives.

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