Stock Investing for Beginners
Investing in stocks can be the right way for you to acquire wealth over-time. With the technology that we have today, you don’t need to be a wall street wolf to become successful in stock investments. If you have a couple of hundred dollars to spare, then you’re already a step closer to stock investments. The problem is, not many people are knowledgeable about investing in stocks – and that’s precisely the reason why we’re writing this blog.
In this blog, we’ll be giving you all the basics that you need to understand and equip you with the right knowledge that can help jumpstart your journey in stock investments.
How to Invest in the Stock Market
In diving into the stock market, the first thing that you need to determine is whether you’re going to be a “regular trader” or you’re going to “buy stocks and forget about it.” The main difference is that the former is an active trader who continually monitors the market’s movement. At the same time, the latter is most likely passive, which invests in long-term gains. While these two investors are different, both need to have the same foundation in stock investments to get the most out of their money.
There are three main ways to start investing in stocks, including having an Online Broker, Robo-advisors, and investing through your employer. Each one has a unique proposition, and we’ve listed them down below.
One way that you can quickly dive into stock investment is through online brokers. There are two kinds of online brokers, including full-time and discount brokers. Full-time brokers are firms that offer a full suite of investment and financial advice. These brokers typically focus on high-end clients and charge a substantial amount of fees. Next is the discount brokers, which provides you with the tools and valuable materials to directly place your transactions.
If you want someone to make the investments on your behalf without paying hefty brokerage fees, then signing up for a Robo-advisor should be your choice. Robo-advisor is a service, which offers low-cost investment management. Essentially, the majority of big brokerage firms offer this kind of service, allowing you to invest your money based on your targets.
Investing through Your Employer
One of the most common ways to start investing is through your employer’s 401(k). This investing method is perfect for beginners who are not keen on managing their investments directly and would rather ride along with the employer’s investing methods. It’s a kind of investment wherein you make regular contributions without personally managing your contributions while focusing on long-term returns.
How Much Money Should You Invest In the Stock Market?
In investing in stocks, the common notion is that you need to have a lot of money. The good news is that that’s not the norm anymore. The internet made stock investments easier for anyone with a minimal capital layout – which is a great way to start trading with little to no risk, perfect for beginners like you.
Essentially, the amount of money that you need depends on the kind of stocks that you want to invest in and your chosen stockbroker. Suppose you choose to invest in funds, which is the preference of many financial advisors. In that case, you can allocate a considerable portion of your portfolio towards stock funds, which is perfect for long-term investment. For individual stocks, it’s best to minimize your investment portfolio for lower risks.
Best Stocks to Invest In for Beginners
There are different kinds of stocks that you can invest in – some are riskier than others and will work only with experienced traders. Don’t worry; some are beginner-friendly, perfect for those who want to invest in low-risk stocks.
Dividend stocks are part of business earning or profits which are shared with stockholders. Businesses that offer dividend stocks are typically the well-established ones that boast years of consistent profitability.
Shares of Large Companies
Big companies prove to be the safe choice for starters since they come with less risk and are usually more stable than startup companies. Plus, these companies already have a steady stream of income, so you won’t have to worry much about their operations and finances’ stability even in times of economic downturns.
Stocks of Profitable Companies
It’s highly recommended that beginners should only invest in low-risk companies. These are usually companies that are decades-old and have proven their profitability over the years. This will ensure that your investment will be safe since these companies have survived operations for a long time regardless of market changes.
ETFs or exchange-traded funds are a collection of securities attributed to indexes and are traded like stocks. ETFs naturally fluctuate depending on the index it’s tied to. ETFs include various kinds of securities, including stocks, commodities, and bonds. If you’re looking for bundle investments, then ETFs should be your top choice since it comes with combined securities paired with low expense ratios and fewer broker commissions – better than purchasing stocks individually.
The average return for ETFs is 7% per year, after inflation. The good news is that even though this rate varies every year, you can be sure to end up with high returns over time if you buy and hold your funds.
How to Diversify and Reduce Risks
In managing your portfolio, the best way to deal with it is by checking it a few times a year to ensure that it’s still in line with your wealth portfolio goal. It’s normal for the market to be erratic and fluctuating, so there’s no reason for you to fret about each market movement every day.
Like in every investment, the key is to diversify your stock portfolio. For instance, if you’re not keen on facing high-risk investments, then the wise choice would be to place your money on fixed-income investments and blue-chip stocks. It would also be wise to invest in different industry sectors to protect your investments.
Best Companies to Invest in
By now, Amazon has already established itself worldwide, that I don’t even feel the need to explain why it’s an excellent choice to invest in Amazon stocks. Amazon also surpassed its revenue estimate of $4.5 billion with reported earnings of $7.22 billion for the last quarter of 2020 and $21.33 billion for the year, an 84.1% increase over 2019. Hence, if you invest in Amazon, you can be sure that your investment is protected since we’re not seeing any downturns in Amazon’s revenue-generating potential anytime soon.
IT is the most indestructible industry today. So, if you’re looking to diversify your assets in the IT industry, why not go for Microsoft, a timeless brand that’s still growing every day. Since the beginning of computers, Microsoft has been a household brand and is still a household choice to date. In the last quarter of 2020 alone, the company enjoyed a 50% revenue growth, which shows that it’s a stable company, perfect for investors.
Aside from Microsoft, this tech giant is also the right choice in stock investments. Apple products are almost everywhere – with iPhone, air pods, MacBook, and iPads continuously dominating the gadgets scene; you can be sure that Apple is the right investment choice. You just need to be prepared for the price point.
Procter & Gamble
If you’re looking for a manufacturing company to invest in, then P&G should be at the top of your list. While this company is not the sexiest one to invest in, it offers you excellent security and protection being a consumer-staple company. Meaning, since it offers evergreen products, its revenue is not governed by external factors like seasonal changes. Even the pandemic did not affect the dividends of P&G as it was able to maintain its dividends. Furthermore, due to its products’ nature, people will always buy them regardless of how the economy performs.
How to Sell Your Stocks
Once you’ve successfully expanded your portfolio, you need to understand how you can quickly sell stocks. The majority of investors buy when the stock market is rising and sell when it’s dropping. However, there’s more to it than just that; a knowledgeable investor adapts a strategy that’s designed to get maximum returns. My advice is to monitor the market’s major indices like the Dow Jones Industrial Average, S&P 500, and the Nasdaq.
In times of market crashes, there’s no need for you to panic since these are inevitable. The good news is that these crashes typically don’t last very long, and it has been proven historically that the market will eventually climb back up. Besides, losing your money unexpectedly may be a bad thing, but when you just hold on to them, they can provide you with an even more significant return.
Investing in stocks is great for beginners who would like to expand their wealth portfolio. However, in the beginning, regular trading might not be the best choice for you since this requires a significant amount of training.
While stock investment proves to be one of the best forms of investment, it’s not entirely straightforward since it takes time and a lot of effort if you want to grow your wealth exponentially. The good news is that there are simple tools that you can use to make your life easier. Plus, there are rules that you need to follow all the time, like diversifying your portfolio and knowing the perfect timing on when to sell and buy stocks.
What do you think of this article? Are you ready to start investing in stocks?
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