Investing in stocks for the first time is a learning process. You have to acquire the terminology and the market knowledge and get to know which risks are worth taking for the optimal return.
If you are new to the stock market, the focus should always be on learning and growth. This is a quick guide for beginners on how to best understand what the stock market can offer and how to navigate this world successfully.
1. Set a Goal
What do you want to gain from investing your money in stocks? For some people, it is seen as a future capital investment, acquiring assets for retirement for example.
For others, investing in stocks is a more immediate monetary gain that drives the motivation. Before you put your money into the market, decide what you want to achieve by doing so.
Only then will you be able to see a clear path to achieving that goal and fulfilling the criteria with smart moves along the way when investing in stocks.
2. Fix the Budget
Budgets are a necessary part of daily life, but when it comes to buying and trading stocks it is essential to have a figure in mind and not play outside of your boundaries.
Being strict with what you can afford lessens the chance of becoming broke or having to deal with obsolete assets. Take a deep look at your financial profile and potential trajectory and focus on where growth could happen and how many safety blankets you could put in place should things go wrong.
The point at the beginning when investing in stocks is to not lose money before it has had a chance to take off. So not gambling too much is the key here. Whereas some people like to risk it all, this is not a particularly engaging strategy and leaves you exposed to ruin in the stock market.
3. Decide Your Capacity for Risk
The stock market is filled with risk. There is every chance that purchasing a claim on stock will flop and, therefore, investments will be redundant. Conversely, there is plenty of opportunity for finances to flourish and grow exponentially beyond projection.
How you deal with risk and what you have to gamble on will be the two determining factors on the number of stakes that are ultimately put down.
4. Research, Research, Research
Before releasing funds anywhere, it is apt to know what the asset entails. Beginners are safer exploring the more stable stock options such as those offered by established corporations, known as blue chip stocks.
Check out these examples of blue chip stocks for a guide on where to look, how to find them, and an overview of how the market might chop and change accordingly. There are, in fact, multiple types of stock options alongside the blue-chip variety that would suit a novice portfolio.
- Small-cap stocks
- Income stocks
- Growth stocks
- Preferred stocks
It is better to stick to options like this at the start, so as to avoid exerting yourself on the risk front. International stocks, for example, are one to avoid until you truly understand how to mitigate and delegate funds congruently.
5. Choose Your Method of Acquisition
After you have brushed up on intel, it is time to factor in your method of acquisition. There are two acknowledged routes for stock purchasing that would complement a beginner profile.
- Choosing your own stocks and investing personal funds.
- Engaging with a broker service to help with management aspects of the process.
The route you take determines your expected success or failure.
Investing In Stocks: Quick Guide for Beginners
Beginners need to really understand what they are potentially getting into when investing in stocks before they start navigating the market:
- Set a goal.
- Fix the budget.
- Decide your capacity for risk.
- Research, research, research.
- Choose your method of acquisition.
For beginners to start investing in stocks, there has to be an intimate development of knowledge in the core areas and a clarity of focus in terms of budgeting and capacity for assessing or adapting to risk.
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I am Adeyemi Adetilewa, a media consultant, entrepreneur, husband, and father. Founder and Editor-In-Chief of Ideas Plus Business Magazine, online business resources for entrepreneurs. I help brands share unique and impactful stories through the use of public relations, advertising, and online marketing. My work has been featured on the Huffington Post, Thrive Global, Addicted2Success, Hackernoon, The Good Men Project, and other publications.