Guest Post by Andrew Altman from Slick Bucks
You work hard for your money, and you understandably want to see your money work hard for you in return. By properly investing your funds, you can watch the value of your portfolio grow substantially over the years. The stock market is one of the primary investment vehicles that investors choose to use.
You may be well aware that there are risks for financial loss when investing in the stock market, and you may be wondering how you can minimize these risks while maximizing your return.
Choose the Right Brokerage and Stock Account
The first step to take when you are getting started investing in stocks is to choose the right brokerage to work with and to open your account. Many investors will work with an online brokerage service that offers advanced research options and financial tools.
Some, however, prefer to work with a live broker and to receive personalized assistance. As a beginner the easiest way to go is with an online brokerage – this is an investing service that essentially enables you to invest automatically via an online platform.
When opening your account, pay attention to the fee structure. The fees can dramatically eat away at your profits, so find an account with a fee structure that is most advantageous for how you plan to buy and sell stocks.
Consider How You Will Make Your Investment Purchases
When opening your account, you will typically need to make an initial purchase. However, you also likely want to continue to contribute to this account.
Some accounts have an automated system, such as a “sharebuilder program,” that will regularly draft money from a linked checking account and that will buy shares that you have pre-selected. In other instances, you will have to manually transfer money and manually make your purchases.
Think About Stocks in Trusted, Established Companies
Your next task to get started investing in stocks is to choose the stocks that you want to purchase. It is wise to diversify your stock portfolio, and this means spreading your purchases out across multiple stocks and across multiple sectors. Some people will purchase stocks in lesser-known or newer companies because of the chance to catch a low-priced stock before it skyrockets.
However, this is typically a riskier investment method. If you are interested in a safer investment choice, consider blue chip stocks. These are stocks for larger, trusted and established companies. Many may pay a great dividend. You can use your live broker’s knowledgeable assistance or your online research to compare data on these stocks before you finalize your purchase plans.
Consider Mutual Funds or Index Funds
Another way to invest in stocks without having to take such a hands-on approach with your investments is to put your money in mutual funds or index funds. These funds are professionally managed, and they pool together money from a group of investors. The fund manager handles buying and selling stocks within the fund. Mutual funds may include a mix of stocks from different sectors, but index funds focus on a specific sector or type of stock.
The fees and performance of these funds can vary, so carefully research the options before making a buying decision. Most people will hold onto funds for a longer period of time rather than buy and sell their fund shares regularly.
Monitor Your Portfolio’s Performance Regularly
After you have invested in stocks, mutual funds or both, your primary task will be to monitor your portfolio’s performance. Each investor has a different strategy in mind for completing this task. Some will monitor their portfolio’s activity on a daily or even hourly basis.
Others may only check their balances a few times a month or less. Longer-term investors who have made comfortable investment decisions may fall into the latter category. If you find that a stock or fund is not performing well, you can consider selling it.
However, when you sell for a loss, you lock in that loss. You, therefore, eliminate the possibility of the asset’s value rebounding for a gain. Selling should be done with care.
Investing in stocks may sound complicated and stressful at first glance. However, after you set up an account and complete a few transactions, you will see that managing your stock account is not much different than managing any other financial account you own.
Take time to explore the options carefully, and use the Internet for research as needed. Through education and diligence, you can grow a substantial investment portfolio.
Andrew shares more practical advice for managing your money cleverly at Slick Bucks.