Stock markets can be a great way of getting your money to work for you. However, the market is very unpredictable. Getting started can feel intimidating and overwhelming for beginners, but once you get the hang of it, you’ll realize the benefits are worth the headache.
Here’s how to get started:
1. Determine How Much You Want To Invest
Deciding how much money you have to invest in stocks is one of the most critical decisions every investor must make. Why is that? For starters, the stock markets are very volatile, which means the value of your investment could shrink within days. This could put you in a terrible financial situation if you invested with the wrong money.
Which is the wrong money? You should always invest with money that you won’t be needing for the next five or so years. Stocks are a long-term game, so don’t invest with the tuition that is due in a few months.
You should also avoid using your emergency fund for investment.
2. Figure Out A Good Investment Approach
Once you have your investment kit in place, sit down and come up with a great investment strategy. This is where you need to ask yourself critical questions like what stocks to pick. This is not a problem for seasoned investors, but beginners are likely to have a harder time navigating the market. That’s why options like money market funds are ideal for newbies.
In a money market fund, an experienced investor shall pick the stocks for you, so your inexperience with the market won’t matter. Additionally, MMFs allow starting investors to have diversified portfolios without spending too much.
Another great way of being a passive investor is through Robo Advisors. These are brokerages like titan invest that invest on your behalf. The advisors will carry out the market research for you and develop an effective strategy to build a portfolio that’s in line with your investment goals.
Passively managed funds are without a doubt a great option for beginners with limited knowledge or time to spend learning the stock markets. However, if you can learn the markets and are willing to do the intensive research involved, active investment can give you decent returns quickly.
3. Open Your Investment Account And Get Started
You need a brokerage account to trade stocks. Luckily, there are dozens of brokerages on the market, and opening an account usually takes a few clicks. However, finding good brokerages is the most challenging part.
This is what you need to consider when looking for a brokerage:
a. Costs And Fees
You must know the exact fees and commission to expect from the brokerage. This is especially important if you have a limited budget and don’t want most of your earnings to disappear in fees.
Some of the common types of fees charged are:
- Account opening – It’s a one-off payment, but it’s important to calculate the impact it’ll have on your investment kitty.
- Minimum deposit – Investment accounts may also have minimum deposit amounts. Money market funds are known for charging high deposits.
- Account maintenance – A few brokerages charge monthly or annual account maintenance fees. Others will waive the fee under certain conditions, e.g. if you maintain a given balance in your account.
- Withdrawal fees – These are charged whenever you want to make a withdrawal from your account. Some brokerages may also limit your withdrawal if it drops your account balance below a set minimum.
You should know that commissions can change depending on the securities you are trading. Therefore, consider the different commission rates from the brokers if you are planning to venture into other options besides stocks.
b. Tools And Features
As a beginner, it’s best to work with a brokerage that supports your learning process. This means getting an account with educational resources that can help you understand how to analyze the market and trade the stocks you want. Find a broker with a demo account and practice with dummy funds before getting into live trading.
Intermediate and advanced traders should focus on the analysis tools on the platform. Go through all the tools and determine whether they are what you want before opening your account.
In addition to the features, check the responsiveness of the platform, ease of navigation, trading hours, etc.
c. Ease Of Transacting
How easy is it to deposit and withdraw funds? Check how you can fund your account and how long it takes for the money to settle. You also inquire about withdrawing procedures and how long it takes for the funds to reflect on your bank account.
d. Customer Service
Customer support is essential regardless of your skill level. As a beginner, make sure you can reach the customer support team with ease in case you are experiencing difficulties finding or using certain features. Advanced investors should be able to get technical assistance as quickly as possible to avoid costly inconveniences.
Learning how to trade stocks is an ongoing process that demands patience, resilience, and continuous practice. It won’t be easy, but you can definitely get good at it with time. Countless investors have done it before, so there’s really no reason why you shouldn’t.