![]() Stop there - yes of course you want to make money with stocks, even if you are just learning about stock market investing! The question is how and when this money will be earned and how much risk will be taken to earn it. STEP 3: Investing goals and type of investment account NOTE: This isn’t a binary choice- you can invest in mutual funds, have a financial advisor and do you own DIY stock investing. If this is not something you’re completely committed to you - try reading our blogs: Active vs Passive investing & Do I need a financial advisor? These explain the pros and cons of investing through investment funds managed by professionals such as advisory or brokerage services and hiring a professional to give investment advice help choose your stock market investments. This article is intended for those who want to invest for themselves. ![]() So roughly speaking, 20% can go towards investing in stocks and other 80% can go into a savings account or relatively safe investments like bonds. The 80:20 rule suggests aiming to preserve 80% of your wealth, while actively trying to grow the other 20%. Never invest money that you will need soon to cover expenses! How much should you invest in stocks first time? Write down the value of your savings and the extra money available to invest each month or each quarter (income - expenses) and decide how much you will put into the stock market. Remember, stock prices fluctuate-they go up when there are less sellers than buyers The very first consideration for new investors is how much to save vs invest. It’s the question of how much of your wealth you will put into stocks, bonds, savings accounts etc. The fancy name for this is ‘asset allocation’. Here are the steps you must take to invest in stocks: STEP 1: Arrange your funds We will get to the process of picking stocks in just a moment but don’t rush through the other important steps towards deploying your investor funds - without those your chance of investing success is greatly reduced. The way to address this individual stocks risk is through diversification, which we discuss more of below under portfolio construction. If you invest in of a company that goes bust, your stocks will be worth zero. On the whole, established companies tend to grow and the stock market rises over time, but individual companies can lose value and even go bankrupt. It’s very important to understand that investing in stocks is riskier than keeping your money in a savings account or government bonds. ![]() buy low and sell high ! Is investing in stocks risky? The idea is that by then, a growing economy and strong business which is growing its sales and profits will mean the stocks are worth more than when you bought them. The traditional investing approach is to “buy and hold” stocks over the long term in time for important life events like paying for your children’s education and retirement. Like it or not, the reality is that owning shares goes hand-in-hand with growing wealth. This compares with buying a private businesses where your intent might be to take over the day-today operations of the company to help it grow and earn more profits.Īs the charts below show, in recent years more of the wealthiest people own stocks and at the same time their share of all wealth has been growing. Stocks tend to be the pillar of most investing portfolios because of their ease of access and because ownership requires no active involvement in the running of the business. The reason for taking ownership is that you believe the company will grow in value and the price of the stocks you own will rise over time. Owning a stock means you are a part of the company. Back to basics of stocks What is a stock? If your investing portfolio is setup right, you will not need to change it often and can simply keep investing into it over time. Investing is all about growing wealth for the long term and requires much less active involvement. Day traders will even go short stocks in a bet that the share price will go lower. This typically involves extended-hours trading. It’s important to make the distinction between these two very different approaches to the stock market.ĭay trading takes a very active approach by buying stocks on a regular basis to capture short term moves in the stock price with good market timing using either the latest news or by using technical analysis of price charts. BUT it is not to be taken lightly, the confidence to invest properly only comes from knowledge about what you’re doing- so take the time to make sure you’re comfortable.įor those just getting started with investing, we recommend to first read our guide on How to start investing in 5 simple steps. Investing in stocks is not as hard as it sounds - it just requires some understanding of the basic principles to get started. This simple guide takes you through the simple steps you must take to invest in stocks. It’s time to lift the veil on investing in stocks.
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