Getting started investing in stocks can be stressful. Depending on how much money you have to invest and how much time you have until you need to access your dividends and gains, you may not have much risk tolerance. Knowing how much risk you can manage will go a long way toward setting up an investing plan that works well for you.
Follow the Money
There are many in the world of business that receive stock options as part of their salary. When those folks choose to sell, getting information on insider selling can give you a lot of data on the future health of the company. Don’t make assumptions; there are many in the business world that are of an age to retire. Additionally, recent world events have many people considering getting away from the world of work. The company may be quite healthy and have excellent leaders on deck.
Set Up a Brokerage Account
One of the first things you should do when getting started investing in stocks is to set up a brokerage account. These setups can be quite simple. If you’re interested in buying specific stocks and studying a particular industry, consider also putting some of your investing dollars into index funds.
Index funds are a slice of a stock index, such as the Dow Jones or the S&P 500. You can also buy ETFs, or exchange-traded funds, in particular industries. Buying these funds give you a more stable investing base that has a better chance of providing you with steady gains over time. With this base established, you can be more confident in putting other dollars into investments that are a bit more volatile.
Make Sure You Can Buy Fractional Shares
Buying fractional shares is a great step when getting started investing in stocks. As of September 2021, Google (Alphabet) stocks are nearly $3,000 each. One Amazon stock is nearly $3,500. Most of us starting out in our investment process don’t have that kind of cash. If you can buy fractional shares, you can start buying slivers of some of the biggest players in the market.
The regulations around fractional shares are always changing. To make sure that you are able to invest in the big gainers on the market, set up your brokerage account with a company that has a deep bench with the ability to track these regulatory changes and give you access to these bigger stocks. Small stocks can be profitable but may not be as reliable as the bigger names.
Timing the Market
Knowing how to time the market is another important step in getting started investing in stocks. This means figuring out the best times to buy/sell shares, as well as learning how to bet against a stock. There are a lot of folks who have put in a great deal of study on the best way to time the market. It’s not easy, no matter your skillset. As an amateur, your chance for success is not great. If you work in a particular industry and have a deep knowledge of new products and emerging trends, you can feel more confident in trying to invest in companies that are in a good position to grab more market share and increase their worth.
Build a Healthy Mix
When you are getting started investing in stocks, you should work towards building a healthy mix. Working to capture stocks before a company’s value skyrockets can be volatile. You may lose money on some of these investments. If you can pair these investments with more stable investments, such as index funds, you face less of the pain of a boom and bust cycle.
If you think of your index funds as your buy-and-hold choices and choose to trade other investments more quickly, be ready for some fees. Speedy buying and selling can be profitable, but it will cost more. However, if your brokerage account includes both the chance to buy small stocks and fractional shares, your chance to get bigger dividends and earn more will make these fees less of a drag on your investment dollars.
You can buy stocks without some sort of a brokerage account. You may find a “wild west” out there in terms of who you sign up with. Strive to make your stock investments with a robust organization that has some depth of service. A great trade that will provide you with amazing yields will not work at all if your brokerage doesn’t have the computing power to support you in speedy trades.