If you are a money conscious individual, then I would bet that you have thought about dabbling in the stock market more than a hundred times. Why not? You have your finances under control and have savings in the bank, but somehow you want to test just how financially savvy you can be. So you now want to try your hand at the stock market.
Investing in the stock market can be a little daunting if you have no prior experience. To help you buy that first stock in your soon-to-be large portfolio, I'm outlining a guide on how to start investing in the stock market.
1. Educate yourself. Start your love affair by reading up on the stock market and some self-help guides in investing. Familiarize yourself with common terms and jargon used by stock market brokers and investors. While you're at it, check out stockbrokers and other financial institutions, private or public, that are connected with the stock market.
2. Set financial goals and objectives. Answer this question: what do you want to get out of stock market investing? Perhaps you want to double your money in a year or so, or make a nice nest egg for your retirement. Put your short-, medium-, and long-term goals in writing and use it as a guide to formulating your own investment strategy.
3. Do your research. By this time, you have an idea on what stock(s) you would like to purchase. Read the quarterly and financial reports of those stocks. Check if the stock's annual performance has been consistent for the last several years. To get updates on those stocks, check out their pages in Yahoo! Finance and Google Finance.
4. Buy your first stock. Now that you have sufficiently armed yourself with knowledge, it is now time to test how much you have learned. Since this is your first buy, start small. You can invest as little as $25 in Dividend Repurchasing Plans (DRPs) and Direct Stock Purchase plans (DSPs). You do not need a broker to purchase these kinds of stocks so you will save on commissions. When you are feeling more confident about your investments, then you can start buying more stocks. If you plan to start big, it might be better to get an agent. The downside to this is you will have to pay commissions. But if you plan to make large investments, an agent can be a big help.
5. Diversify your portfolio. It is never a good idea to put all your eggs in one basket when it comes to stock investing. Always look out for good deals. Do not limit yourself to popular stocks. There will always be some start-ups that have great potential and you can realize higher returns by buying shares of their stock.
6. Wait. Your purchases, depending on how conservative you were in your investing strategy, take time to yield good returns-unless something happens drastically. Do not dump a stock the moment its price lowers. Get more information before selling any of your stock.