Starting your stock investments can be intimidating. There is so much that seems to go into it: rates of increase, declines, crashes…the list goes on.
For a first time investor, you might not even know where to start. And this is your hard-earned money we’re talking about! You don’t want to risk putting your money into something that you could potentially lose.
But stock investing doesn’t have to be terrifying. Here are three tips that’ll help you navigate stock investing like a pro.
Set a budget
Know how much you are willing to spend. Rule of thumb: don’t put in more than you can afford to lose. Set an amount and stick with it.
As your financial situations change and your confidence in maneuvering the stock market grows, then you can up the ante. Until then, stick with a fixed budget and avoid straying from it.
At this point you may ask, “What amount should I set?” To answer this question, you’ll have to decide on how you want to invest. Individual share prices can range anywhere from a few dollars to thousands of dollars.
If you’re on a smaller budget, consider exchange-traded funds (ETFs). Exchange-traded funds trade like a stock while owning fractions of many stocks, which means you can get them for a decent price, usually less than $100. This keeps your investment cost low.
Another option, if you have some money set aside, is to own mutual funds. A mutual fund is a professionally managed investment fund that pools money from multiple investors.
Investing in a mutual fund usually starts at a higher cost per share (think $1,000). These can be very personalized, since mutual funds offer growth or safety options, depending on whether you are investing money for the long term or the short term.
Once you’ve chosen how to invest your money and have settled on your budget, you can move onto the next step: research.
Buy what you know
Pick out companies that you’re interested in on a personal level, and then do research. Like the coolest pair of new sneakers? Enjoy the way that food delivery app has come to your rescue for late night dinners? Consider looking at the company stock. There’s no harm in investing in something that you like.
Once you’ve created a short list of companies you’d like to look into, set aside some time and look at each company. Figure out what their tickers (an abbreviated used to identify publicly traded shares of a particular stock or stock market) are.
Read the company’s financial history. Look at earnings and profit charts that can show you the company is doing over time. Has the stock, over time, been steadily going up? That might be a good sign.
Time to invest
Now that you’ve settled on a few good companies, sit down and invest. A lot of the time, starting is the hardest part. But remember, you have a budget, and you’ve done your research. Now it’s time to commit to action.
Buy stocks within your budget, through whatever method best benefits you as an individual. You find it easiest to do using a national brokerage such as Fidelity, Schwab or Vanguard. More advanced investors might prefer sites offered by E-Trade, Interactive Brokers or TD Ameritrade.
Then, remember this golden rule: that with stocks, time is your friend. While there are such things as daily trades, fretting over your stocks day in and day out will neither help your stocks nor your mental health.
Set a time to check in, maybe every few days or once a week. Maybe every three months. And don’t panic if you’re stock drops in price! Most of the stock loss comes from when stocks drop because people panic and sell, causing them to lose money.
Use patience — a lot of the time, since markets are steadily going upward, the stock you just bought will recover.
Now remember as you go forward, set a budget, do you research and invest. As you grow more familiar with stocks and investments, you’ll become not just become more confident, but more knowledgeable as well.
Growth isn’t just for finances, after all.