Investing in the stock market is a very broad topic to say the least. Not only is it broad, but you can also find someone who will tell you almost anything you want to hear in regards to the stock market.
The problem behind that last statement is most people offering advice about investing in the stock market have no idea what your situation is or what your needs are. Couple that with the fact that many are overwhelmed when it comes to investing and it holds many back.
In light of that, we’re starting a series here on Sprout Wealth that is aimed helping you learn how to start investing in the stock market. We’ll be covering a number of different topics related to investing in stocks and narrowing the focus as we move forward in the next few months. That is all with the goal of helping you see that it doesn’t have to be difficult to start investing and is a great way to start making more money for yourself.
Investing in the Stock Market is Vital to Building Wealth
Before we get to how to start investing in the stock market, I do want to touch on the fact that investing in the market is vital to building wealth. It is part of the site’s name after all and I would be remiss not to mention that fact. 😉
Other than real estate, I’m hard pressed to think of other areas you can go into that’ll allow you to grow true wealth over time. That’s not to say that it can’t be done, just that it’s more difficult to find those opportunities which will allow you to build wealth over the long term.
With that in mind, before you do get started investing a key is to determine your investing goals. Are you wanting to:
- Save for retirement
- Save for college expenses
- Save for some other long term need
Determining those goals is going to help you immensely as you invest in the stock market over the long haul.
Many think they can’t invest in the market because they lack the education or experience. The simple fact is that shouldn’t be something that holds you back. Yes, investing in the stock market can be difficult but a little education can go a long way at easing that. Trust me, if I can do it then anyone can.
You may be thinking that getting education is great and all, but where can I get unbiased information? There are two great, and usually free sources for that: your 401(k) provider (assuming you have one) and most online brokerages. There are many investing books out there that provide great information for beginners, though I tend to recommend A Random Walk Down Wall Street or The Essays of Warren Buffett as they’re clear, actionable and easy to understand.
Find a Place to Invest
If you’re going to invest in stocks, then you obviously need a place to do that in. 🙂 The two best sources for beginning investors to invest is either through their 401(k) offered by their employer or an online broker.
With regards to your 401(k) plan, if you don’t know where to start then pick the lowest fee funds so you have more of your money working for you. Hopefully you also get a 401(k) match, which is nice because it’s free money…is there any better? 🙂
Outside of your 401(k), you can also select an online brokerage to invest with and tend to prefer Scottrade, or Motif Investing. Scottrade is a great option due to their sheer number of tools, though for those just starting to invest I lean towards the latter as you can start investing with as little as $250 with Motif Investing.
Beyond those two, there are a plenty of other brokerage options to choose from so make sure you find one that meets your needs…meaning one that doesn’t charge too much and has all the tools you want. You can also check out our TradeKing review as they require no minimum balance to open an account.
Determine What You’re Going to Invest in
Now that you’ve become somewhat comfortable with investing and have found a place to do your investing, you need to determine what you’ll invest in. Assuming you’re new to investing, then my suggestion is to keep it as simple as possible.
The easiest way, generally speaking, to do this is to invest in low-cost index funds. I’ll be doing a post on index funds in the future, but this essentially allows you to invest with the market as opposed to trying to beat it. Index funds, speaking plainly, are a basket of stocks that track a certain index or industry and can give you broad exposure to the stock market as a whole.
If that is too simple for you and you want to invest in individual stocks then my suggestion is to look at your daily habits. What do you use around the house? What is an item you use on a regular basis? They’re likely made by companies who’re in the stock market and usually pay somewhat nice dividends.
The last thing you want to do, especially if you’re a newer investor is to waste money on fools errands like trying to actively trade, time the market or investing in penny stocks. That’ll likely only cause you to lose money in a variety of ways and defeat the purpose of your longer term investing goals.
How did you get started investing in the stock market, or are you not doing so yet? Assuming you are, how are you using it to grow your wealth?
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