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Hi all! Today we have a guest post from Andrew Altman. Andrew is the editor-in-chief of an informational website SlickBucks.com. SlickBucks aims to help beginner investors and traders by reviewing financial products and brokerages, sharing advice and tips and publishing helpful guides for new investors and help them to get the kind of financial wealth they desire.
There are many people who have an interest in investing in stocks and mutual funds but lack the experience. There are a variety of aspects involved that could be very confusing to a beginning investor. So, before beginning, it’s important to first lay some groundwork and provide you with a basic foundation.
The first question to ask yourself is:
1. Do you already have knowledge about the stock market but just haven’t made any investments? Or,
2. Do you lack investment experience and lack knowledge about the stock market as well?
If the latter applies to you, then you would be considered more of a complete beginner whereby you would need to gain an understanding of some basic investment fundamentals as well as some principles about how to invest in stocks and mutual funds.
First of all, we’ve got to help you gain some basic knowledge about the investment industry. Then will delve into the best way to go about investing in the stock market.
The stock market is a platform where publicly traded companies sell stocks by issuing shares initially through an initial public offering (IPO) to raise funds needed to grow their business.
The stocks sold represents part ownership in the company and during this phase, the company gets to keep the money that has been raised. However, the shares of stock can later be traded on exchange platforms such as the New York Stock Exchange.
Although the public companies themselves only receive funds from the initial public offerings, stock trading and investing continue to take place on a daily basis. This process of buying and selling shares causes the price-per-share to go up or down.
You can choose to trade stocks or invest in stocks. Although the terms investing and trading are often used interchangeably, each of them is two completely different investment methods designed to generate profits. Both of these methods are explained in more detail below.
Investing in the stock market: Investing in stocks take place when investors set financial goals to gradually build wealth overtime. The strategy involved with this method includes buying and holding stocks while building a stock portfolio containing multiple stocks and investment instruments.
Stock Trading: Stock trading is typically a short-term investment method that lasts for as little as few hours and for as long as a few weeks.
So, one of the first things that you as a new investor need to do is to make some choices about your financial future. You need to decide on whether or not you want to invest and hold money that can strategically grow over time, or become what some referred to as a day trader where you capitalize on small profits on a short-term basis.
Please keep in mind that it’s not uncommon to do both.
There is a wide array of investment vehicles available that new investors should learn about before making an investment. They include annuities, CDs, money market accounts, retirement funds, stocks, mutual funds and more.
For example, when investing in stocks you own a portion of the company that you are investing in. The value of that stock could either rise or fall based on the performance of the company or on other factors such as market trends.
When investing in mutual funds, you are purchasing a collection of various securities such as stocks, bonds or other types of investment vehicles.
Once you set some financial goals, (such as having an additional source of income during retirement or paying for your child’s college tuition) you need to know how much money you can afford to invest initially, along with when and what type of a return you want on your investment.
Beginning investors need to determine what their tolerance level is for risk, which will determine what type of investments you should make.
For example, those who are more adverse to risk may consider more conservative investments, whereas others can consider more volatile stocks. This will allow your savings to grow somewhat faster but while risking losing more money.
As a beginner investor (and even prior to making your first investment) it’s important to keep abreast of the financial industry by staying plugged into the latest financial news while learning as many investment terms as you can.
New investors also need to make decisions about the best platform to use when making investments, including:
• A Financial Advisor or Planner: Financial Advisors are responsible for maintaining knowledge about the financial market, overseeing your investments and making sure you reach your long-term goals by making the proper advisements.
• A Robo Advisor: A Robo Advisor is an online wealth management company that eliminates the need for human financial planners. Although you’ll save money on fees, you will not receive personal advice.
• Self Management: Managing your own investments. You’ll be solely responsible for making the best investment decisions possible to reaching your long and short term financial goals. To start investing in stocks right way you may consider handy investing apps that are known for simplifying the investment process.
As a beginning investor, the greatest takeaway that we can provide is that you obtain as much financial investment knowledge as possible, set some financial goals and plan accordingly to minimize risk.