6-Step Guide to Investing in Stocks
Investing in stocks is not as daunting as everyone thinks it is – all you really need is an online brokerage account and you can get started. Here’s a quick 6-step guide to investing in stocks.
Step 1: Decide How You Would Like to Invest in Stocks
There are multiple ways of approaching stock investing. You can either choose the stocks and make your investments yourself, you can get a professional to manage the process for you, or you can start investing in your company’s 401(k). Pick an option that works for you.
Step 2: Choose an Investment Account
To invest in stocks, you will need to open an investment account. For those who want to invest in stocks hands-on, this will mean opening a brokerage account. For those who would like some help, you can open your account through a robo-advisor.
Step 3: Understand the Difference Between Funds and Stocks
If you decide to opt for the DIY investment route, you will need to first understand the difference between mutual funds and stocks. Mutual funds allow you to purchase multiple small pieces of several different stocks in one transaction. In comparison, if you are interested in investing in a specific company, buying individual stocks is the way to go. Keep in mind that to build a diversified portfolio with stocks alone, you’ll need to make a significant investment.
Step 4: Set a Budget for Yourself
It’s important to not invest the money you need to pay your bills into stocks. Instead, consider only investing a portion of your paycheck that you don’t have any immediate use for.
Step 5: Focus on The Long-Term
The best thing to do after you open an investment account is to stay invested. Don’t be persuaded to sell your stocks because of market movements. It may be hard to not check your stocks from time to time, but it’s necessary to stop compulsively checking how your stocks are performing every day – for the sake of your mental health!
Step 6: Manage Your Portfolio
While checking your portfolio every day will do you no good, there are certain times you should check how your stocks are doing. For instance, say, you are approaching your retirement, you want to move some of your high-risk investments to more conservative ones.