As inflation rises, we are all looking for ways to maximise our money and invest in the stock market to get higher returns than our average savings account. Investing in stocks is one of the most effective ways to build long-term wealth, but it can be pretty daunting for those who don’t know where to start.
What are stocks?
If explained, stocks are a slice of ownership or a share in a company. When you invest in stocks or purchase that share, you can yield returns if it’s successful.
Now to the main question, how do you know what company to put your money into?
There’s a lot to know before you get started investing in stocks. When looking to start investing in the stock market, you first look for a company you like and think it will do better in the future. This decision will determine the future of your money, so choose wisely by spending time reading how the company has done in the past, and what success in the future is before buying the shares you can afford.
How much money should you put in?
A question runs through every beginner’s mind: how much money is required to start investing in stocks? Well, there is no honest answer to this question because the amount of money needed depends on the price of the share you want to buy.
When investing in the stock market, your primary focus should be on long-term investing. The long-term refers to a decade or two, not six months. For long-term investing, day-to-day ups and downs are not worrying signs because an excellent long-term investment will always give a good average of the increased price of that share unless that company whose shares you bought utterly shuts down.
Steps to investing in stocks
Here are simple steps to start investing
Step 1 – Determine your financial goals
Review your financial situation and determine your debt, your after-tax income, and your expected retirement goal date. Then comes the investing goals questions you need to figure out, like if you want to invest short or long-term or if you have any loans or down payments to pay. This will affect how much to invest.
Step 2 – Determine your budget
Determine your budget, like your expenses, after-tax income, debt, net worth, and how much risk you feel comfortable taking on. Make sure you can afford your budget and that it helps you reach your financial goals.
Step 3 – Create a brokerage account
The first step to investing in the stock market is setting up a brokerage account. A brokerage account is a charge used to buy and sell stock market share market, bonds, and mutual funds. Setting up a brokerage account is easy as it only requires visiting a brokerage firm and asking them to open your account.
Moreover, transferring money to a brokerage account is easy as you can quickly transfer money from your bank account.
Furthermore, you can also get started by utilising your employer-sponsored 401(k). Go ahead and talk to your employer, and they will match part of your contributions.
Step 4 – Manage your portfolio
Good investing in the stock market requires portfolio management. There will be fluctuations, but be firm about your decision, and don’t panic. Keep a follow-up with your portfolio, knowing when to buy, sell, or sell more. Know your investment goals and stick to your plan.
The last thing to remember as an investor in the stock market is the commission and fee. The brokerage firm also needs to make money, which is why they charge fees when buying or selling shares. Some brokerages charge more fees, some settle for less, and some charge more commissions, whereas others settle for less depending on how often you trade.
Lastly, investing in stocks may seem simple, but finding out which company’s shares you will buy is a complex decision, and it requires studies and analysis of how a company will do in the future. So, you may be able to sell the shares at a much higher price than what you bought them for.
