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Entering the stock market for the first time can be quite daunting and confusing. You’ll likely hear all sorts of tips and advice from friends and family who are already involved in investing in stocks. Their advice could be good, or it could be bad; they could have just gotten lucky, or they may have invested in stocks that go nowhere.
Listen to their advice, but then do what’s best for you. Consider these tips for beginners entering the stock market, and you’ll be able to make an informed decision regarding your investments.
Don’t expect to suddenly get a winning portfolio overnight. First, determine the reasons you want to invest in the stock market. Do you want to have funds for future retirement, or do you want to be able to cash out in 6 months to a year? Do you want to save for a home or college? Or do you want to be able to leave your children an inheritance?
Determine your goals, and you’ll know better what types of investments you should make. You could trade stocks, or open a retirement account like a 401(k) or a Roth IRA. You could open a brokerage account and let a robo-advisor tweak your portfolio. It’s very easy to get started with an online investment site, and many of them have guides to walk you through your first trade. Check out our list of the best online investment sites here.
Knowing how much you’d like to have will also help you determine what you need to invest. However, keep in mind that nothing is ever certain when it comes to investments, so be prepared to possibly fall short of your goals. Which brings us to risk …
Some investments are riskier than others. Know your risk tolerance, and you’ll be better equipped to stay away from riskier investments that fall outside the range of what you are willing to lose. Research investments to see how risky they may be. If you have set a long-term goal for a retirement fund, you can choose a less risky investment that pays over the long-term. But if you want a good amount of cash back within a year, you may be more comfortable with a riskier investment that might pay out.
The stock market isn’t the place to let your emotions rule. Don’t let someone you know get you all excited about a particular stock that you rush blindly into investing. Do your own research. Additionally, don’t let your insecurities about a particular stock you have invested in cause you to make a hasty decision. Again, research and understanding of the market is key.
It may be wise to sit down with an investment advisor that you feel comfortable with, and go over all the basics first. There’s a lot to learn about the stock market, and it would be better to have a broad understanding of the different types of stock market order types and investment accounts before you take any action.