Investing in stock markets is one of the greatest sources of wealth. Research has shown that almost all the richest men in the world have at some point of their lives invested their money in the stock markets. But majority of the people continue living in poverty because they do not know how to start investing in stock markets. Others have no idea of how much money would be required. At the same time, others fear the perceived risk involved in the stock markets. Knowing how and what you need to invest in stock markets can be all you need. In this article, I will provide you with the guide and requirements on investing in stock markets.
Decide the type of stock investor you want to be
Many people joining the stock market have their own different reasons for doing so. And whichever reason is making you join the stock market, you will always find a place for you. The different types of stock investors are the active investors, passive investors, speculators and retirement investors. You can join any of them which suits your needs best.
Choose the investment type
There are basically two investment types in the stock markets: the stocks and the stock mutual funds. Stock mutual funds, also referred to as the exchange-traded funds or simply equity, will allow you to be able to purchased various stocks in one transaction. You can then use the funds to buy stocks of more than one company. This allows you to own small shares of each of the company that you have bought its stock. As a matter of fact, it is always good to purchase stocks from more than one company to diversify your portfolio. Diversifying your portfolio is important since it can help reduce the risks involved in investing in stock markets.
Even though diversifying your investment is the best option, there are those who prefer to invest in one company. Buying individual stocks gives you a foothold on a company’s shares, and can give you the power to contribute to the general management of the company.
Consider your resources
The amount of money that you need to purchase stocks is strictly dependent on the price of the shares. There are those high value stocks that will actually require a huge amount of money to buy. But even then, you can still get these stocks through a broker who offers fractional shares. Also, the price if mutual funds are usually high. Getting them can be more expensive especially if you do not have enough money. But you can purchase ETFs instead which go for the same price as the stocks.
Investing in funds is always the best option. This means, you should consider allocating a considerable amount of money for the stock funds. This is especially if you are investing for a long-term. Also, your age can be a factor to consider when investing. If you are a youth and investing for retirement, you can concentrate more on stock funds.
Get an account to start investing in stock markets
If you are working, there are chances that your employer has a 401(k) retirement plan of which you are already a member. But if you are not in such a plan, or you are dissatisfied with it, you can get the help of a broker to open one. A broker can help you open an individual retirement account which is popularly referred to as the IRA. You can also open a brokerage account which is usually for those who already have their own retirement plans. Opening an account should not be expensive as there are many brokers who charge very little fees with low minimum deposits. Also, you can choose those brokers that offer a list of commission-free ETF or no-transaction fee mutual funds. This way, you will not be required to spend every time you want to buy or sell your stock.
It is not enough to just land on any broker. You need to carry out proper research so that you can get the best broker in the stock market. First, you need to get a list of brokers that you want to transact with. Ones you have the list, you need to carry out a proper comparison so that only the best gets to work for you. When carrying out the comparison, there are a number of things that must be considered. These factors to consider before settling on anyone are as discussed below:
The trading platform
There are many platforms on which brokers operate. All these platforms are unique with their own benefits. You need to ensure that the broker is trading on the platform that best suits your interest. Getting the services of a broker trading on a different platform other than the one you want can be risky.
Experience of the broker
Good brokers are those that have been in the stock markets business long enough. This means that they have enough knowledge on what exactly happens in the stock markets. Such a broker will be able to advise you on the best time to sell and buy your stocks. The experience of a broker can be determined by looking at his clients’ portfolio as well as the number of years he has been operating.
There are many resources that can help you get to know the kind of broker you need to start investing in stock markets. Spare your time and read through the data provided by various firms as well as the stock exchange markets. Also, you can ask your friends who have been investing in stock markets long enough.
With all the above, you are now ready to invest your money and make more money from the investment options you selected.