Purchasing a stock of a company is the easy part. Consistently making money from the stock market is not an easy task. Most mutual funds under-perform the index, but that doesn't mean it's impossible. It will take some homework on your part, but with the right amount of information, tools, and research, great things can happen.
The stock market can be a risky place, so make sure you have your outstanding debts paid before you start putting money that you cannot afford to lose in risk. Do not start purchasing shares if you have credit card debt. The 8% that you make from the stock market doesn't compare to the 22% charge on your credit card. It is a large mistake that can cost you thousands of dollars and a mountain of stress.
Hit the Books
Before you can start buying shares in companies, you need to learn about the process of investing, volatility, investing methods, and diversification to name a few. The internet is a great place to learn, so dive in. A few great places to start are investopedia.com, fool.com, and cnbc.com. Be careful not to get caught up in others opinions, most are only advertising stocks that they want to buy or sell in the short future.
Find a reliable brokerage
Finding the right brokerage is an individual preference. Each has different pros and cons to decide, and can be compared on what you are looking for. You will be choosing between a discount or full-service brokerage. Getting into the differences between the two is another article entirely, as each provides numerous benefits. As for the platform, the stock market has been converting to online trading more and more, and online or discount brokerages are making a large footprint, which are worth taking a look at.
Are Individual Stocks For You?
Before you decide on buying individual companies, you need to assess your individual risk tolerance. This is an important step, and shows you what you can handle concerning risk. For example, small cap stocks have a substantially larger amount of volatility than blue-chip stocks, which provide large swings. Every individual is different concerning what they can handle. A great place to assess your risk tolerance is http://www.isi-su.com/new/risktol2.htm
Are You Ready?
If you are still wanting to purchase individual stocks after accomplishing the previous steps, it is time to create a list of companies that you would like to own. The stock market is about timing, and not all companies are ready to purchase at the same time. Your list allows you to be ready to purchase stocks in the companies that you want at the correct time. A great method to step into your wish list is a little at a time. This method is known as Dollar Cost Averaging, click on the link for more information.
A Few Tips Before You Start Buying Stock:
â–ª Avoid what you see and hear on television. Decide for yourself.
â–ª Choose a few stocks and pay attention to their behavior. Know them well.
â–ª Do not use market orders for anything! Limit orders only!
â–ª Be careful with margin. It is a risky leverage action that can ruin your portfolio.
â–ª Don't get caught up in the “New Strategy” or “Magic Pill” with investing. There is none.
â–ª Your Broker needs to be registered with the SEC.
â–ª Be careful if you decide to Day Trade. The odds are against you.
â–ª Don't ever assume that the stock market will react a certain way. Anything can and will happen, you can only be prepared for most circumstances.