While investing in the stock market may seem complicated, it is an important component that can help you achieve financial independence. The best part about investing in stocks or funds is that you can benefit from the power of compounding interest, which means the sooner you start investing, the more you stand to make. Let’s take a look at the steps that you’ll need to follow to buy your first stock(s) or mutual fund(s).
Open An Account With A Broker
To invest in stocks or mutual funds, you need to have an investment account. You can do this online through a broker’s website. Since most brokers have now stopped levying trading commissions, you need to check whether they offer all the resources and tools you require. Make sure to also check whether the broker’s platform is easy to navigate for a novice investor and is mobile-friendly.
Fund Your Account
Once you’ve chosen a broker and opened an account with them, you’ll need to decide whether you want to open an investment account that is taxable or a tax-advantaged account. Remember that in the case of tax-advantaged accounts like an IRA, you cannot invest over $5,500 annually. If your investment capacity is over this amount, it’s best to open a taxable account. Once you pick the type of account you want to open and key in your personal information, you’ll need to fund your account. This can be done by transferring money electronically to your investment account.
Choose The Type Of Investment You Want To Make
You can invest in the stock market by purchasing individual stocks or investing in a mutual fund. To keep your risk at a minimum when investing in stocks, you should buy stocks across different industries and asset classes. If you don’t have the required capital to do this, you should consider investing in a mutual fund. In mutual funds, the money you invest is diversified across many companies by the fund manager, who pools in money from other investors as well.
Decide What Stocks Or Funds To Invest In
Next, you’ll want to do your research and pick the stocks you want to invest in and decide how many shares to purchase in each stock. With mutual funds, it’s best to choose a fund that matches your retirement age. These target-date offerings automatically tweak the investment mix as you become older to make it more conservative.
Invest
If you are investing in mutual funds, you’ll want to decide whether to place a market order or limit order and enter your orders with the broker. Similarly, for mutual funds, you’ll want to enter the amount of money you’d like to invest and buy into the funds.
Once you’ve made your investments, it’s time to sit back and relax. While it may be tempting to check the performance of your funds or stocks every day, make sure to not sell if your stocks drop in value or cash out if the stocks or funds are doing well. To build wealth with your investments, it is necessary to stay invested for the long haul.