Tips for starting to invest in stocks
Are you fresh out of college and looking for ways to expand your investment portfolio? Investing in stocks is one way that many people choose to build their wealth. While it’s true that the stock market can sometimes be volatile, it is important to note that there are safe ways to invest. Understanding how the market works, starting small, and knowing your limits can help you to make smart investments that will grow in wealth over time and give you the next egg you’ll need as you age. Knowledge is the key.
1. Learn About the S&P 500 Index Funds
Investing in the first thing that somebody suggests to you is likely to have you trying to learn how to get out of a timeshare. Take time to learn about your options before sinking any of your money into an investment strategy. One of the best things that you can do is to learn about S&P 500 index funds.
As a new investor, your goal is to grow your assets, and the S&P 500 index is an excellent place to start. In fact, it has an average annual return rate of 10% and has for nearly 100 years. The index teaches new investors the best way to take advantage of top stocks at low prices. However, it should still be noted that stocks are volatile, so do not invest large sums right out of the box. Stockbrokers like E*Trade, Ally Invest, and Ameritrade can help people start investing with no minimum investment amount and low fees. E*Trade and Ameritrade also provide virtual trading.
One thing to remember is that S&P 500 index funds do fluctuate and the average is over nearly 100 years. If you lose 20% one year, don’t panic and sell everything. There’s a good chance that the following year could give you big gains.
2. Start With Fractional Stock Shares
Avoid full stock shares or ETFs until you are sure how well investing works for you. Instead, focus on purchasing fractional shares. Purchasing fractionals allow you to get a hands-on look at the investing process without putting too many of your monetary eggs in one basket. For example, if you can’t afford $500 for an entire share of a company, you can spend $20 or $50 for a portion of it. This way, you can still grow your investments, albeit at a slower pace. Keep in mind, though, that not all investment apps or brokers allow you to purchase fractions of shares. Research potential investors first to avoid a situation that leaves you spending more than you wanted to.
3. Check Out Automated Investment Platforms
Using automated investment platforms or those with robo advisors is essential for helping you to learn what you need to know about trading stocks without paying exorbitant fees to brokers. Robo advisors help you with every step of the investment process, including setting up your portfolio, managing it, reinvesting dividends, rebalancing as needed, and even teaching you about tax strategies.
Robo advisors are also a good choice if you’d like an automated account to save for retirement or for bigger investments down the line. Many of the applications that provide automated advisors have low minimums, manage up to a certain amount of money free of charge, and provide plenty of customization options. Spend time researching the various apps available to you to determine which one is most likely to meet your needs.
4. Plan For the Future
When you first start to see your wealth grow, it can be tempting to buy big-ticket items you wouldn’t purchase with your day job’s earnings. While it’s okay to treat yourself from time to time, it’s important that you think about the future as well. Do you have student debt or do you want to purchase a house or have children? And you have a retirement plan? Solid investments can help you along with each of these goals and allow you the secure future that you and your potential family members deserve.
Conclusion
Always research your options before giving money to any broker or online app for investing. Being diligent helps to ensure you make solid investments that can help you grow your wealth over time.
