Newcomers to the stock market may not know that there are a wealth of trading options out there which you can use to build up your portfolio of assets. I spent much of my early investing years obsessing over companies annual reports and then buying stocks in bulk when I discovered an undervalued company. For this to work properly you have to use as few trades as you can. If you don't you will incur a brokerage charge for each buy or sell transaction. I got into the habit of making a few transactions a week and it wasn't long before I was paying out just as much in brokerage fees as I was to buy actual stocks.

That's when I discovered the power of mutual funds and index trackers and that online options trading comes in many forms. A mutual fund is basically a professionally managed stock portfolio which you buy into. The mutual fund manager decides the best way to invest your money. The index tracker is much simpler as it buys up stocks from the entire index. You don't get charged for each purchase so it's fine to set up a standing charge each month where you invest the same amount. If the the stock price is going through a good phase then you will get less for your money but the value of your existing holdings will go up. If the stock market is going through a poor phase then you will pick up more stocks for your money. You have a much higher chance of success because there's less risk involved with your investment.

So what's the downside to using index trackers and mutual funds? Well growth tends to be slow and steady. You don't get the same sort of excitement levels you do if your magical stock pick suddenly doubles in price! I also think there is a bit of an ego thing attached where you don't get to rant and rave about how great your stocks are doing. If you can deal with this then what's stopping you from investing in a few different mutual funds? I love the idea of having my stock portfolio in auto pilot!

Although you don't pay for each transaction you do have to pay an annual management fee. Make sure you investigate this before you sign up for a mutual fund as it may affect your profit margin. The cost you pay will ultimately affect the value of your returns from the fund. If you're interested in finding out more about stocks for beginners then mutual funds are a great place to start.