Beginner Stock Market Investing
Beginner stock market investing is best approached with an understanding of how the stock market works and how it can help you to meet your personal financial objectives. While stock market investing can seem confusing to a person who is not yet familiar with stock market jargon, the basic concept is simple and many of the fundamental strategies stock market investors practice can be understood and implemented very quickly.
Why Invest in the Stock Market?
When an investor purchases a share of stock in a company, they are taking ownership of a piece of that company. Shareholders have the right to vote at annual shareholder meetings and often enjoy a share of company profits through dividends (though newer companies often reinvest that money in order to grow the company). Investors purchase shares in a company with the hope that the value of those shares will rise over time as the prospects for the company improve. While CDs, government bonds, and other financial instruments may be safer investments, stock investors rake the risk that the value of the stock will go down after they buy it. So while there are no guarantees that a stock will increase in value over time, the S&P 500 returned a compounded average of over 13% between the years 1978 and 2004. By comparison, real estate returned just over 8% on average during that time.
Start by Defining Your Goals and Risk Tolerance
The first step for a beginner stock investor is to understand what it is they want to accomplish through investing. Longer-term goals and those goals that will require greater amounts of capital (e.g. retirement) may call for an aggressive stock investing strategy. Those who are nearing retirement might instead seek an “income stock” investing strategy by investing in companies that are well-establish and pay regular dividends.
Pick a Strategy and “Paper Trade”
There are a number of stock investing strategies that beginners might choose from. Pick a strategy that is in line with your defined investment objectives and start by “paper trading” in a virtual account before actually risking any money. Over time, you will develop an approach to stock market investing that makes sense for you.
______________________________________________________________
The above information is educational and should not be interpreted as financial advice. For advice that is specific to your circumstances, you should consult a financial or tax advisor.
« What is Pre-Market Stock Trading? | Home | Mutual Fund Cost Basis Calculator »
Leave a Comment
You must be logged in to post a comment.