Are you thinking about getting into investing and specifically about investing in the stock market? It’s never been easier, thanks to the internet, for the average person to do so, but easier doesn’t mean easy, and you’ll still need to get up to speed on the world of stocks. Fortunately, the internet has made this a lot less difficult as well.
How Much Involvement?
The first thing you’ll need to do is decide how hands-on you want to be. Maybe you enjoy working with numbers, and you have a lot of time to devote to learning about the stock market or the different companies you might invest in. Maybe you want to spend the least amount of time possible on your investments. Perhaps you’re somewhere in between. Fortunately, investing can accommodate approaches all along this continuum. A roboadvisor can allow you to be as hands-off as you wish to be. If you want to go all-in and buy individual stocks, you’ll need to learn your way around the market.
Getting Up to Speed
One of the best ways to learn about stocks and the market is by jumping in and doing. However, that’s a pretty expensive way to learn. Fortunately, there are online trading platforms that offer you the chance to practice without using real money. A paper trading simulator is a great way to learn about buying and selling and to test various strategies. In order to get the most out of a simulator, you should closely follow the approach that you would in actual investing. That means that before you get started, you should think about what that strategy will be.
Considerations For Your Investment Strategy
First, you should find out how much you should invest. This should not be money that you need, at least not in the next several years. The cash that is in your emergency fund should not go into investing, nor should your child’s college education fund, your savings toward a down payment on a home, or any other money that you’re putting away toward a shorter-term goal. Next, you should consider your age, your goals, and your risk tolerance.
Conventional wisdom says that the younger you are, the riskier investment strategy you can afford to be because you have more years ahead of you to make up for any losses. However, if your finances are already in decent shape—and they should be if you’re going to start experimenting with the stock market in a do-it-yourself manner—and you have the risk tolerance for it, you can make more volatile investments at any age.
Choosing Your Stocks
There’s a lot that goes into choosing different stocks, but in a nutshell, you should diversify, but you don’t have to diversify that much if there’s a good reason not to. If you’d like to focus on a particular industry that you know a lot about, you can still have stocks scattered across different companies. You will need to teach yourself how to evaluate stocks. It’s generally a good idea to start with a somewhat staid, reliable portfolio and build from there, jumping into the volatile end when you’ve got a better handle on things.