Investing in stocks is much easier now than it was a few years back. If you are a beginner and have no clue how to invest in stocks, then this article will certainly help you.
If you are wondering how to start investing in the stock market for beginners, then after reading this article, you will be ready for your first investment in the stock market. To enter the world of trading, all you need is a brokerage account.
Investing in stocks for beginners
Investing in stocks means buying a small share of the company’s ownership. This small share is known as the stock. When the company’s performance is good, the price of its share will increase. Hence, the share you bought will also become more valuable. Therefore, other investors might be interested in buying those share from you at a higher price. If you sell your share at a higher price, you make a profit from the stock market.
Investing money in the stock market is one of the best ways to make passive income. If you keep your money in banks, you will get a very low-interest rate on your money. However, by investing your money in the stock market, you can get 10-15 per cent returns annually.
If you are a beginner and want to know how to invest in stocks, all you need is a trading account, also known as a brokerage account and a Demat account.
Some countries like U.S. and U.K. do not distinguish between a trading account and a Demat account. When you open your brokerage account, your broker holds the share for you. However, if you are from a country like India, you need an additional Demat account where you can store your shares.
How to invest in stocks in four steps
- Learn how to become an investor
- Decide why you want to buy stocks
- Open a brokerage account
- Invest In Stocks
1. How to become an investor
To become a pro-level investor, you need proper knowledge about the stock market. But there are stocks for beginners, also, that are cheap and you can start investing on. But before investing, let’s look at some of the points that guide you on how to invest and how to select stock.
2. Decide why you want to buy stocks
- Set your goals. You need to have a goal for which you are investing, like buying a house, a car or planning for a world tour. You may also make it a disciplinary habit of saving. Not having a purpose but still investing in stock is also a good thing for you. But, do not mix or change your goals in between your investments. Also, avoid checking your stocks several times a day.
- Make your budget before buying stock. Decide how much money you need to invest. A good investor saves around 10-20 per cent of monthly income and puts that money into an investment. Although the income may increase with time, the saving must be 10-20 per cent. Saving consistently over time will help you become financially free.
- Use the portfolio diversification approach. You might have heard of the phrase, “don’t put all eggs in one basket”. It means you should not put all your money into buying a stock of a single company. Because, if something misfortunate happens with the company you will end up losing all your money. Instead, put your money into buying stocks from different companies. This is known as Portfolio Diversification. And therefore, you must invest your savings in different stocks, so if one company goes down, the other will balance it out.
- Do not invest in quick and short term money. Instead, invest in the long term. A smart investor knows the power of long term investments and how compounding interest works.
3. Here Are 4 Steps – How To Open A Brokerage Account Easily
Before opening a brokerage account you must consider the following points.
- Ensure the safety and security of the account
- Check for the brokerage and annual charges
- Investing should be easy and convenient
Let’s see these 4 steps you need to follow to open a brokerage account.
- Choose the brokerage account that is best for you. Select a brokerage account by considering the above-mentioned points. If you are from the U.S. then, Vanguard, Charles Schwab and Fidelity are some of the recommended platforms where you can open your brokerage account.
However, if you are from India, you can go with Upstox, Zerodha and Groww to open your trading account.
These trading accounts charge a very low to no fee when it comes to buying index firms.
- After selecting the brokerage account, you need to create your account by filling in all the details required. If you are from the U.S. and you successfully created your account, then you are ready to invest.
If you are from India, your Demat account will be automatically be opened by your broker.
- Once you have completed setting your account, you need to add funds to your account. There are a lot of options through which you can transfer money in your brokerage account. It is a very simple and easy process.
- Now, go to the stock section and select the stock you want to invest in. By clicking on the stock, all the details of the company like share price, charts, highs and lows, overall rating, company’s performance will open before you. Invest in stocks that are best for you.
4. Awesome 3 Tips – How To Invest In Stocks for beginners
If you are a beginner and do not have any idea about the stocks market, moving average, then also you can find some good stocks for beginners. Don’t let lack of knowledge set you aside from investing. You can read some good books about the stock market. Here are different types of investments you can put your money in.
- Mutual Funds is the best and the easiest way to invest your money. If you don’t have much knowledge or want to invest, then simply invest in mutual funds. When you select mutual funds for investing, an expert invests your money on behalf of you in the best mutual funds. It grants more return over time.
- If you have a little knowledge about stocks and want to pick your own stocks, then you should start trading. You can always invest in some of the big companies at the starting. Also, avoid investing in penny stocks. There are a lot of articles suggesting penny stock investments. Do your own research before investing your money.
- Besides investing in stocks, you can also invest in gold and silver coins. Portfolio diversification is one of the most important things you can do in trading.
As gold and silver are precious metals, they are rare, malleable and exhibit unique chemical properties. Gold and silver coins have been used as currency for thousands of years all around the globe. Therefore, investing in gold and silver has very limited to no credit risks. No inflation or currency devaluation can hamper the purchasing power of these metals.
How to invest in gold and silver coins
If you want to invest in gold and silver, then here is a list how to buy gold and silver for investment:
- You can invest in gold and silver by purchasing physical gold and silver coins and bars. It is one of the easiest and safest ways to invest in gold and silver. However, it gets complicated when it comes to storing it in a safe place.
- In the modern world, you can also invest in gold and silver through exchange-traded funds or ETFs. The advantage of investing in gold and silver through ETFs is that it allows you to hustle-free buying and selling just by your brokerage account.
- You can also invest in mining and royalty/streaming companies. A royalty is simply a contract between the company and the person who owns the royalty. When you invest in a gold or silver mine, the company entitles the royalty holder to receive a certain percentage of revenue from the mine for the entire life of the mine. It can be done in two ways:
- Net Smelter Return (NSR): It is the net revenue that the owner of the mining company has to give to the royalty holder. It means the smelter has to give a certain per cent of revenue to the royalty holder.
- Net Profits Interest (NSI): Here, the royalty owner receives shares of gross revenue.
Streaming is similar to royalty. In royalty, the royalty holder receives a certain per cent of the revenue.
Streaming gives the right to purchase a certain per cent production directly from the mining company. For example, royalty gets you 2% interest on mine, but streaming gives you 10% of the gold to purchase from the mine. A price is fixed per ounce, which is generally 30% of the price of gold for that day. These tips will help you invest in gold in the stock market.
You can start investing with a small amount of money. But do your research before investing in any stock. Always diversify your investments and, this is how to invest in the stock market.
There is no legal age to invest in stocks. A minor can invest in stocks, but most brokerage companies do not permit you to open a brokerage account if you are under 18 years.
You can buy bonds from an online broker, exchange-traded funds and directly from the U.S. government website. But you must be at least 18 years of age.
Short term investments are those that are done for a specific reason and for a certain time period. An investment is considered short term if it is done for less than three years. Best short-term investments are investments made in saving accounts, Short-term corporate bond funds, Money market accounts, government bond funds, certificates of deposit and Treasurys.
New investors are more attracted to penny stocks as they are cheap. The price of a penny stock ranges from $0.2 to $2. To buy a penny stock, you must do your own research and verify the authenticity of the penny stock. Penny stocks grow over a long period of time.