Many of us know that investing is important, but where should you buy stock, and how do you get started?
Many beginning investors start with an online brokerage that’s credible and easy to use. An online broker enables you to purchase stocks (and other securities) via an online platform. You don’t usually get personal financial recommendations from these services, unlike traditional, full-service brokers. However, they’re often easy to access and don’t charge commissions. Be sure to check the specific details before you sign up.
Bankrate offers this list of popular online brokerage options in the U.S. as of January, 2022. It’s a good starting place for your research.
When buying stocks, you can:
- Purchase single equities according to how you feel about a company’s future; or
- Buy exchange-traded funds (ETFs) or mutual funds that trade on a basket of equities.
Let’s dive in! Remember that these tips are just a starting place, and you should consult a professional for your specific situation.
Buying Stocks 101
Potential investors might ask: “where am I buying stocks from?”
That’s a good question! You will be purchasing stocks through a brokerage service on regulated exchanges like the NYSE and NASDAQ,
The great thing about a brokerage account is that an online broker can tell you at a glance how your funds are doing. They will also track your cost basis and dividends for tax purposes, in order to help you manage your gains and make your money grow.
Start Investing Early
Why start investing early? Two reasons: inflation and long-term goals.
Whether you’re earning dollars or any other national currency in terms of income when the worth of that currency diminishes, so does the value in your bank account — but not your brokerage account!
To beat inflation on the stock market, small investors practice short-term and long-term investment strategies with stock trading, so that as inflation occurs, the investor grows their money in the market to “beat” the inflation.
Starting Early for Retirement
At the end of a long working career, you’ll want to have something to show for it, and it takes time to build retirement funds.
Diversifying Your Stocks
One of the key rules that most investment professionals will talk to you about is diversification, which simply means that you need to make different investments and not just have all of your investments in one place.
Any single stock price can go wildly up and down at any time, which is why having diversified stocks — in sectors like technology, transportation, commodities, retail, or energy — is usually a good idea.
Where to Buy Stocks: Penny Stock Strategies
Maybe you don’t have a lot of money to invest, but there are still options available to you. For instance, small investors can really benefit from penny stocks.
A penny stock is defined as a stock that’s worth less than one dollar per share. This makes them affordable when compared with a blue-chip stock that is worth hundreds of dollars per share.
There’s another benefit to smaller value stocks too: getting in on the ground floor. Sometimes, penny stocks are for companies just starting out—or going through a major reorganization.
When buying stocks, it’s important to consider where a company is in its lifecycle. Some small-cap or penny stock companies will be giants in the future, and if you can pick the ones that succeed, you could be ahead of the game.
Where to Buy Stocks: Investing in Innovation
Some people would say you’ll never go wrong with investing in innovation. That’s not to say that you should rush out and purchase every cryptocurrency or new technology you can get your hands on. You need to do your research.
The good news is that some of the work has already been done for you if you’re interested in cutting-edge or up-and-coming investments. Certain investment firms look specifically for “disruptors” to standard industries that might represent promising investments for the future. These funds look for the latest in robotics, genomics, cloud technology, and more.
These new innovators are put into exchange-traded funds, or other baskets, so that potential investors can get in on the ground floor with just a few clicks.
Such funds are also doing some important work of diversification. If you’re interested in “innovation investing,” check out the major players and recent results from the Innovative ETF Channel. This might be a little more advanced for new investors, so it’s also worth asking for advice from trusted sources.
What Is Profit-Taking?
Profit-taking is an essential idea that needs explanation.
In many cases, your initial stock purchases will grow in value, but they might not grow quickly (or simply). They may cycle up and down.
For example, maybe the value doubled in two years. Many people would say that’s a pretty good outcome.
But will it double again? Perhaps not. Profit-taking means taking that money and reinvesting it somewhere else for more gains. It simply means taking what you’ve gained and continuing to actively invest.
Stock Investing and Risk
Investing in stock always has risks, of course. Research can increase your success. When you really know a company and know where it’s going, you may decide to hold that company’s stock for the long term.
Look at the history of one very famous investor — Warren Buffett, the “Oracle from Omaha.” He built a small business empire into a mammoth trading desk by always investing in brands that he believed in.
When you believe that there are real reasons for stocks to go up, you can often profit from a sound investment.
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