Guide to Investing in Stocks
Investing in stocks is a way to make your money grow over time. By regularly putting money aside to invest, you can see its value multiply over the long term. That's why it's important to begin as soon as you have the money to do so—the longer your time horizon, the better. This article takes you through how much you need, what stocks to choose, and the other basics of investing in stocks you need to get started, all in 10 steps. Whether you have thousands set aside or can invest a more modest $25 a week, you have enough to begin.
KEY TAKEAWAYS
- You can earn more money by working longer hours, getting a raise or finding another job, or turning your money into a growth tool by investing in stocks and letting it work for you.
- Investing carries the chance of losses. But there are ways to lower your risk, though you can't get rid of it altogether.
- New investors have never had so many resources for expert advice.
- You can seek out articles, books, and courses to educate yourself; use robo-advisors, automated apps and platforms, or financial specialists to manage your portfolio; or personally manage your own stock investments.
10 Step Guide to Investing in Stocks
Begin by reflecting on what you want to achieve financially. You might have short-term goals like saving for a home or a vacation or have long-term objectives like securing a comfortable retirement or funding a child’s education. Your objectives will depend on your life stage and ambitions. Younger investors tend to focus more on growth and long-term wealth accumulation, while those closer to retirement typically prefer income generation and capital preservation.
The more precise you can be about your goals, the easier it will be to sort out the best means to get you there. Here are some tips:
- Be precise about your objectives: Instead of general goals like “save for retirement” or “I don’t want to have to worry about money one day,” set specific objectives like “accumulate $500,000 in my retirement fund by age 60.”
- Set your investment horizon: Determine how long you have to achieve each goal you set. You will have longer and shorter timelines for different purposes. In general, the longer you can give yourself, the less risk you’ll need to take on, and the more viable your objectives will be.
- Evaluate your finances: Be realistic about how much you can allocate toward your investment goals. This includes looking at your savings, regular income, and any other financial resources you can put to work as you begin. We’ll come back to this.
- Rank your goals: Most of us have several goals at once, like saving a down payment for a house, paying for a wedding next year, or preparing for retirement. Prioritize these and balance them according to their importance and urgency.
- Review and adapt to changes in your life: The phrase financial planning is best taken as a verb, not a noun since goals aren’t set in stone, and planning your finances is an ongoing project. You might fall in love or out of it, have many children or none of them, or realize your life’s work is best done in a different place in the country. Life changes, and so will your financial objectives. Regularly review and adjust your goals accordingly.
Excerpt Retrieved from Investopedia.