Nowadays you can hardly watch the news or read the newspaper without
seeing something about the stock market, investing or Wall Street. This
sparked the interest of many people who became interested in investing
and the stock market. However, there is a lot of confusion about how to
become a stock market investor. This article will explain the basics
about investing and how you can become a stock market investor.
There
are a few important steps you should consider doing before you start
beginning investing. These steps will minimize your risks of making bad
investment decisions or having financial difficulties in the future.
Set goals
Ask
yourself why you want to become a stock market investor and determine
your goals. Investing to raise money for your child's education, your
retirement or to make enough money to buy a yacht are different reasons
and will usually need diverse investment strategies, products and the
amount of money you will be investing.
Don't settle for less but
make sure you set realistic goals. Planning to marry, having children or
buying a house can affect your goals and should be taken in account. If
you have a mortgage to pay it will become considerably more difficult
to set aside money to invest.
Nonetheless, it is never too late to
start saving money for investment purposes. Even a small amount of
money can accumulate into a fortune over time.
Research your investment options
After
establishing your goals you should research what the best type of
investment would be for your goal and situation. If you are living with
your parents and hardly have any expenses you can take more risky type
of investments than someone who has a family to take care of or a
mortgage to pay. Three common types of investments are:
Stocks -
By purchasing stocks you receive a partial ownership in a company which
pays you a percentage of their profits (dividend). On the other hand, if
that company doesn't perform well, the value of your stocks decline and
can leave you with a loss.
Bonds - By purchasing bonds you offer a
loan to a company or the government which in turn pays you interest on
that loan. This type of investment is safer than stocks but usually
bring much lower profits.
Mutual funds - In this type of
investment you grant a group of professional investors your money. These
people invest for several people at once and pay out dividend to the
members of the fund. This can be safer than purchasing stocks yourself
if you don't have much awareness of the stock market. The downside of
this type of investment is that the fund managers also receive a portion
of the amount you invested in the fund.
Get help from a professional
After
setting goals and researching your options you should prepare to carry
out your investment strategy. Working with an (online) broker or
brokerage firm can help you to accomplish this. But before choosing a
broker you have to consider which one is the most capable for your
goals.
If you are confident in your abilities and know exactly
what you want, you may prefer an online firm that enables you to invest
how and whenever you want to. If you are uncertain in picking stocks and
could use more assistance you could look for an experienced brokerage
firm that helps you with investing.
