A Beginner’s Guide to Investing in the Stock Market

If you take a look at the vast majority of today’s wealthiest people earned their fortune by investing in the stock market. And in fact, knowing which stocks to buy now has proven that investing in stocks is one of the top ways for a person to build wealth over the long run. Sounds good so far, right? If you know what you are doing, you can make good money on the market, but if you lack even the most basic knowledge of how the markets work, you stand to lose your investment.

There Are Two Types of Stock

Stocks typically form the base of any investment portfolio, because they have a proven track record of outperforming most other types of investment. Before you try to determine which stocks to buy now, you first need to know a little about each type.

  • Common Stocks – Allows the investor to share in the company’s profits through dividends and guaranteed voting rights.
  • Preferred Stocks – A more significant claim on the company’s equity, less volatile stocks, less potential for profitability, fixed dividends at regular intervals.

What Exactly Is an Investment Portfolio?

Each time you listen to your broker tell you which stocks to buy now, you are adding to your “investment portfolio,” which is a collection of the stocks you own. You can add other investments to your investment portfolio such as mutual funds, bonds, real estate, and exchange-traded funds (ETFs). Basically, anything you invest in with an expectation of a financial return becomes part of your portfolio.

What’s Your Investment Style?

While there are more ways to invest in the stock market than there are cards in a deck, most investors tend to fall under one of two main categories:

  • Technical Traders – Use charts and trends to help them make what they think is an informed decision.
  • Fundamental Traders – Make use of what’s known as fundamental analysis to help them find “undervalued” companies worth investing in.

How Do You Invest in Stocks?

There are various methods of investing in the markets:

You can educate yourself on the markets, follow the trends, learning how to determine best which stocks to buy now and which of them to sell.

You can work with an investment broker whose job it is to handle your investments. Successful brokers have years of experience in following the trends, understanding the ebb and flow of the markets, all of which helps them make their decisions.

You can use a “robo-advisor,” which is a digital platform or team of advisors using an automated platform to handle your investments with a minimum of human intervention.

Choosing the Right Form of Investment

When it comes to being a beginning investor, there are many different forms of investment, but here are three of the main ones you need to be aware of:

  • Stocks – Buying shares in a company’s stocks gives you part ownership of the company and may or may not be profitable.
  • ETFs – Better known as stock mutual funds let you invest in different baskets of securities, allowing you to add to the diversity of your portfolio.
  • Mutual Funds – With mutual funds, different investors pool their funds to make it possible to invest in specific industries.

Do You Need a Lot of Cash to Invest?

Most people labor under the mistaken idea that it takes a lot of money to become a successful investor. However, thanks to changes in the investment market as a whole and access to digital trading platforms, you can start down the path to riches for as little as $5.

The rest involves finding a broker you can trust or doing your homework to find an automated platform you feel comfortable using. Once you open your account, you will be ready to start trading and realizing your goal.

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