How you feel about investing in stocks depends on how comfortable you are with taking risks.
You may love the idea of playing the stock market if youre OK with taking chances.
Who doesnt dream from time to time about getting rich by picking the next Apple?
The truth is, putting your money in stocks is rarely a way to get rich overnight.
But its also unlikely to leave you broke if you take the smart approach.
Stick with us for a few minutes and well show you how to invest in stocks the right way.
Youll learn how you’ve got the option to achieve your goals without putting your savings at risk.
What Is a Stock, and How Do Stocks Make Money?
When you buy stock in a company, you become the owner of a tiny fraction of it.
Each unit you own is called a share.
If the company is successful and makes money, you make money too.
No Interest Til Almost 2027?
If the company doesnt do well, you could lose money.
Thats because during bankruptcy, shareholders get paid only after creditors and bondholders have been paid in full.
What Are the Best Stocks for Beginners to Buy?
There are several ways to invest in the stock market.
Here are some options forbeginning investorsif youre looking to start investing in stocks.
Picking individual stocks is tricky even for seasoned investors.
By the time ordinary people hear that a companys stock looks promising, the price has already surged.
So youve missed out on the big growth.
Then, they panic when the news is bad and sell when prices are low.
If youre determined to pick your own stocks, its essential to invest in adiversified portfolio.
Many investors recommend never having more than 5% of your portfolio invested in a single company.
That means youd need to own stock in at least 20 companies across various industries.
Buying a mutual fund works differently than buying stocks.
Stocks are traded on stock exchanges, but you cant buy a mutual fund on the stock market.
But most ETFs are passively managed index funds; only a handful are actively managed.
That passive management style results in lower fees.
Theres no up-front cost to buy one beyond the cost of a single share.
Most people dont have gobs of cash to spare when they start investing.
Here are some ways to get started.
If you dont, youre leaving free money on the table.
Youre allowed to trade stocks using an IRA but we wouldnt suggest doing so.
You dont want to gamble with your retirement funds.
As you get older, youll allocate an increasing percentage to bonds and a lower percentage toward stocks.
The2020 Roth IRA contribution limitsare $6,000 if youre under 50 or $7,000 if youre over 50.
Many online brokerages offer commission-free trades, though we dont recommend frequent trading.
You build wealth in the stock market by holding onto your investments long term.
Once you open and fund your account, you buy stocks by placing an order.
you’re able to also use whats called a stop order to protect your investments.
Heres how it works: Suppose you paid $20 a share for Stock A.
That way, you could lock in a 25% profit and move on.
Check out our picks for thebest micro-investing apps.
How Can I Learn More About the Stock Market?
Want to learn more about the stock market before you roll investing?
One of the best ways to get started is simply to follow the news.
(But keep in mind: Thestock markets performancedoesnt reflect how the overall economy is doing.)
you’ve got the option to also keep track of individual stocks youre interested in.
One good resource isYahoo!
When a stock youre following goes up or down, read up on why.
Two options we like areHowTheMarketWorksandWall Street Survivor.
Even the best investors never stop learning how to invest in stocks.
That time will pay off as you slowly build your wealth.
Robin Hartill is a certified financial planner and a senior editor at The Penny Hoarder.
She writes the Dear Penny personal finance advice column.
Send your tricky money questions to[email protected].
