If you find yourself with some disposable income, you might be curious as to what to do with it. Do you save money or invest it? Saving money and investing money are two separate things, so it is important to understand the difference before you put your money into one of the areas.
Saving money means that you put so much of your money away into a bank account, each week, month, year, however frequent or infrequent as you like.
This money that is sat in the account is earning interest over time. You have the security that the money that you have put into a savings account will have guaranteed returns.
Whereas with investing, it is a gamble that you take in which you risk the money that you could potentially lose or earn big. Investing in stocks allows you the opportunity to potentially earn more from your money if you are willing to take the risk.
You can either purchase investments or you can put your money into something in the hopes of making a profitable return.
When done well, investing in stock can be an effective way to earn long-term wealth for yourself. It is qualities such as this why the stock market welcomes new investors regularly.
If you are on the fence about investing some of your money in stocks, here are just a few things to keep into consideration as you begin to navigate the world of stocks.
Understanding The Types Of Stocks
What you may not have realized when looking to invest in stocks, is that there are different types of stocks available.
Each type has various qualities that require a slightly different financial plan.
As such, understanding what is available will allow you to gain an understanding of what to expect and how to plan accordingly.
Knowing When To Start
If you are wanting to try your hand at stocks, it is best to have more than enough money saved in your savings account to keep you covered.
The money that you decide to invest should be your disposable income, money that you do not need that can be used for perks such as stocks.
The stock market is notoriously unpredictable and whilst it looks set to rise in the years to come, there is no certainty that it will experience a significant drop in the short term.
Open An Investment Account For Your Stocks
Reading about the stock market, understanding the terms and ways to invest will only get you so far if you do not have a way to buy stocks.
To be able to buy stocks, you will need to open a specialized type of account, which is a brokerage account. Opening a brokerage account will allow you to purchase and sell stocks, as well as mutual funds and bonds to name but a few.
Taxable investment accounts are another name for brokerage accounts. The reason they are referred to as taxable investment accounts is to help people easily differentiate them from other tax-advantaged retirement accounts.
When looking to open a brokerage account, you can look into online brokers, discount brokers, and full-service brokers as places to go to start your adventure in the stocks market.
Take Your Time By Starting Small
One of the biggest misconceptions about investing in stocks is that you must put in large sums for your first investment.
Investing your money is a gamble, whilst putting in a vast quantity could potentially reward you with an even greater profit, it could lead you to an even greater loss.
At an initial glance, the price of stocks might seem like a considerable amount, you can invest in stocks for under $20, which is a great starting point for trying your hand in the stock market.
Understand Why Stock Prices Fluctuate
Buyers and sellers in the stock market can be corporations, governments, and individuals. The price of stocks will vary depending on if there are more buyers and sellers and vice versa.
For example, if there are more buyers than sellers, the prices of stock will go up. Whereas if there are more sellers than buyers, the price of the stock will go down.
When a company is performing well, investors will want to own the stock which then increases the price of the stock. If the company is underperforming, investors will want to sell their stock, which consequently decreases the value of the stock.
Knowing When To Sell
Knowing when to buy stocks and when to sell them are both equally important. It is a common tactic by investors to buy stocks when the stock market is on the rise.
When the market is on the decline, that is when they sell. However, other investors will follow a strategy they have created which is based on their financial needs.
Hold On And Wait For Results
One of the most likely ways to make money when investing in the stock market is by buying shares of great businesses in the market currently.
Buying these shares at reasonable prices, then keep a hold of them for as long as the business you have invested in is doing well. Alternatively, you can sell your shares in stocks if you find yourself in need of the money.
However, keeping hold of the stocks for such a long time, means you will experience the unpredictability of the market. Most of all, over time you will produce great investment returns #, which is why many people get into buying and selling stocks.
There’s No Rush
Understanding all the terms and how to invest in stocks is a timely process, so have patience in yourself when you are learning about it. Before you know it, you will be making investments, taking the risk, and hopefully making some incredible profits.
Take the time to do additional research into what resources are available, such as the various brokers available or any stock-trading apps that you could download.
Before you start, know what your financial goals are and what exactly it is you want to achieve. Keep your risk tolerance in check, and do not be afraid to walk away.
The stock market is not going anywhere any time soon, so you are always able to jump back in at another time and create a storm in the market.