How To Make a Stock Investment

How to start often depends on how much money you have to work with.  The more money you have, the more options you have.  Some firms will only work with “high net-worth clients.” The amount varies among firms, but that usually means someone who is worth at least one million and up.  You’ll have plenty of offers to help you invest.

But if you’re just starting out, what do you do?  Usually the best thing to do is to invest regularly in a good mutual fund.  Find a fund with a good return over the last 5 – 10 years.  Don’t invest in those funds that have just been terrific for the last year or so.  You should view this as a long term investment and plan accordingly. 

There are plenty of companies out there who will be happy to let you start an account and make a regular deposit to it.  If you are buying a mutual fund, usually you can invest that money as soon as it’s deposited to the account.  That helps your money start working right away.  Don’t worry about the daily ups and downs of the market.  Look at a down day as a great time to buy your stock on sale!  It’s the same principle as buying an article of clothing.  You don’t decide not to buy that great suit or dress just because the price went down, you are happy that it went on sale and you got more for your money!  As long as you chose a solid investment, buy more when it goes down.  You lower your average price and get more for your money.  That doesn’t mean you should keep buying an investment JUST because it went down.  It should still be a sound investment!  You want to make sure you are buying or selling something because of company fundamentals, not because of daily fluctuations in the stock market. 

You can buy an individual stock when you are just starting out, but the old adage “don’t put all your eggs in one basket” applies here.  It’s hard to diversify when you are just starting out.  That is why a good mutual fund is so helpful.  The diversification is already done for you and you can usually buy fractional shares.  That means that if you contribute $50.00, and that would purchase 3.628 shares of your chosen mutual fund, you can do that.  Most stocks aren’t sold on a fractional share basis.  If you have $50.00 to invest this month, and the stock you want to buy is $75.00, you’ll need to wait until next month to be able to make a purchase.  In addition, your investment will go up and down based solely on that one stock.  With the diversification that a mutual fund offers, the ups and downs are based on a number of different stocks and bonds.  This often lowers the overall risk and volatility of your investment.

Regardless of what you choose to investment in or how much money you have to start, the best method is often to make regular contributions and stick with it come rain or shine!  It may be easier to set up an automatic monthly deposit.  Whatever you choose, just continue to invest and stick it out.


Share this article!

Follow us!

Find more helpful articles: